How Much Money Should You Have Saved at Every Age? Here Are Good Guidelines From Graham Stephan

If you want to know whether you're saving enough, these guidelines will help.

Many of us have wondered if we're saving enough money, and it's a question that doesn't have an easy answer. It depends on quite a few factors, including your income, your expenses, and how old you are.

Even though there's no perfect answer, this is still an important topic. By having reasonable targets to aim for, you can get an idea of whether you're saving enough or if you may need to make some adjustments. Graham Stephan has gone over this in a video, and he provided some helpful guidelines, broken down by age, that can work for everyone.

20 years old: One to two months of living expenses

Since 20 years old is very early into adulthood, it's normal not to have much money saved yet. Stephan recommends setting a goal of saving one to two months of living expenses at this point. For example, if you spend $1,000 per month, then aim for $1,000 to $2,000 in savings. Make sure you have it in a high-yield savings account, too, because those offer much more interest than your typical bank account.

This will be your first emergency fund, so you have money available for unexpected expenses. Over time, try to get this up to three to six months of living expenses for more of a financial cushion.

30 years old: Your annual income

A common guideline for 30 year olds is to have one year's salary saved, and Stephan is in agreement. He did clarify that if you left school with some debt, this goal could be either doable or a stretch, depending on how much money you're making. On the other hand, if you don't have debt and you get right to work, a higher target of one-and-a-half to two times your yearly salary could be achievable.

40 years old: Three times your annual income

Stephan says that ideally, your 40s should be when your finances start ramping up. You'll be near the peak of your earning potential, and if you've been investing consistently, those investments should start growing more and more. His suggestion is to have at least three times your annual income saved at this point.

He also says to have five to seven times your annual spending saved. It's important to plan for how much money you'll need in retirement, and looking at your annual spending is a good way to do that. For your retirement savings to last you without running out, you'll need anywhere from 25 times to 33 times your annual spending, so it's good to start focusing on this now.

50 years old: Five to seven times your annual income

Many sources of personal finance advice recommend having five times your annual income saved at 50. Stephan believes that's good, but it could also be somewhat on the low side depending on how much you'll be spending in retirement. To be on the safe side, he recommends trying to get closer to seven times your annual income in savings by this age.

60 years old: At least 10 to 12 times your annual income

This is another time when Stephan doesn't completely agree with the conventional wisdom, which is to have eight times your annual income saved. He thinks that 10 to 12 times your income is a better goal, and one that's easily achievable with the right approach. If you save 10% of your income starting at 30 years old and get a 7% average annual return, you'll hit this mark and have more financial security.

How to use these savings guidelines

Stephan provides good guidelines and explains why he chose each one. However, these are only rough targets to aim for, and they're not going to fit everyone's financial situation. Plenty of people don't have this much saved, so don't feel badly if you're behind the recommendation for your age.

Guidelines like these are useful because they give you an idea of how much to save so you can be financially secure in retirement. If you're not reaching these targets, it's just a sign you may want to reevaluate your current financial habits to prioritize saving more.