Many of us struggle to save money, especially when life's temptations get in the way. It's therefore encouraging to see that U.S. adults have their sights set on a number of critical goals. Here are the top things Americans are saving money for, according to GOBankingRates.
Your golden years aren't going to fund themselves, and while Social Security will help foot the bills, it'll only cover a portion of your expenses during retirement, especially if you want to live comfortably. That's why it's crucial to save on your own during your working years, and thankfully, 29% of Americans are focusing on retirement as their primary savings goal.
This year, you can contribute up to $19,000 to a 401(k) if you're under 50, or $25,000 if you're 50 or older. If you don't have a 401(k) through work, you can save up to $6,000 in an IRA if you're under 50, or $7,000 if you're 50 or older.
Even if you can't get anywhere close to maxing out either account type, saving smaller amounts over time will work wonders for your nest egg. Case in point: Socking away just $100 a month over a 45-year period will leave you with $343,000 in retirement funds, assuming you invest your savings at an average annual 7% return during that time.
2. A home
Second to retirement, buying a home is what Americans are targeting their savings for, with 27% wanting to become property owners. There are plenty of good reasons to buy a home, such as the tax breaks and stability involved. And in some cases, a home can be a lucrative investment.
If you're eager to buy a home, aim to save enough for a 20% down payment, as this will help you avoid primary mortgage insurance, or PMI. PMI is a premium that gets tacked onto your monthly mortgage payment, thereby making homeownership more expensive for you.
At the same time, read up on the costs of owning a home. Aside from property taxes and insurance, you'll also need to worry about upkeep, so make sure you can swing those maintenance and repair costs on top of the other expenses you'll face.
Taking vacation might seem like a frivolous goal, but there are actually a number of health benefits involved. Unplugging for several days at a time could be crucial in alleviating stress and avoiding burnout at work.
A good 20% of Americans say they're saving for a vacation, which a far better approach than racking up debt in the course of getting away. And while there's nothing wrong with using some of your hard-earned cash to take a trip, make sure you've tackled your more pressing financial goals first before allocating money to things like hotels and airfares. In a worst-case scenario, there's always the option to take a staycation, which will still give you the break you need.
4. A car
An estimated 20% of Americans are socking away funds to buy a car. Given that many jobs aren't accessible by public transportation, a car is a solid investment in your career and quality of life. But before you spend a small fortune on a new car, consider buying a used vehicle instead. New cars depreciate drastically the second you drive them off the lot, and if you buy a used vehicle from a reputable source, you might slash your monthly car payments in half without incurring too many extra maintenance costs.
The cost of college seems to be going nowhere but up, so much so that Americans now owe over $1.5 trillion in student debt. The fact that 14% of U.S. adults are saving for college is therefore a good thing, as it might lead their children to take on less debt in pursuit of an education.
If you're going to save for college, however, it pays to do so efficiently, and to this end, you should consider opening a 529 plan. These plans offer tax-free growth on your savings so that once you fund your account, you won't pay taxes on investment gains provided you use that money for qualified education purposes. Some states offer tax incentives for funding a 529 as well, so it pays to explore your options and see which plan best suits your needs.
6. Child- and family-related expenses
Having children can throw your finances for a loop, which explains why 13% of Americans are saving to absorb the extra costs that may be in store for them. If you're having a child, you'll need to not only account for expenses like healthcare, food, clothing, and supplies, but also, child care.
Though the cost of child care will vary depending on where you live, infant care in a day care center now costs $211 a week on average, while a nanny costs an average of $580 a week. Saving ahead of time for this expense is therefore a very wise idea.
Saving money is by no means an easy thing to do. The upside? If you're good at it, you'll achieve your most important financial goals without racking up debt or stressing over money in the process.