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How much money is considered an ideal savings account amount

  1. Jan 1, 2016 #1
    I am 21, still living at home and attend college/work part time. I make above minimum wage and have around $2500 saved up. I am responsible for my car payment, food, gas and other necessities. Is that a decent amount for my age?
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  3. Jan 1, 2016 #2


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    I think that was about how much I had when I graduated from college forty years ago, which would of course be a lot more in today's dollars, probably about $10000. Most of it was a gift from my parents for buying a new car sometime in the future; however, I didn't actually need a car until I finished graduate school so I kept the money until then.

    A common recommendation is to have an "emergency fund" with enough money to cover essential living expenses if you lose your job, while you're looking for a new one. The amount would be (monthly essential expenses) x (estimated max. number of months needed to find a new job). If your parents are still at least partly supporting you, you can take into account how much they are willing to contribute and for how long. Maybe also take into account unemployment payments if you're eligible for them, although I'd prefer to think of those as an "extra cushion."

    Then when you finish school, have a "real job" and are on your own, you can start thinking about also saving seriously for retirement. Work your way up to contributing at least 15% of your salary per month (including any employer match in a 401K plan or whatever). When you get raises, maintain that percentage or even boost it a bit (i.e. don't spend all of your raise!).

    [I'm assuming you're in the US.]
  4. Jan 1, 2016 #3


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    I couldn't agree more. Throughout the years, I have watched many people make the same mistake of not contributing to their 401Ks while they are young. You don't want to suddenly wake up one day in your forties with a couple of kids and no savings. :wideeyed:
  5. Jan 1, 2016 #4

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    You need to start from the other end - figure out what your financial priorities are and plan accordingly. I would imagine they would look like this:

    1. An emergency fund. Vanguard has some information here https://investor.vanguard.com/emergency-fund/ Experts disagree about how much should be in it, but while the argument sounds like "I am smarter than that other expert" what they really mean is "I am making different risk judgments than that other expert." If you are in a volatile field where it takes a long time to find a job, that's higher risk. If you are staying with your parents and they are financially secure - e.g. they have paid off their mortgage - lower risk. If your car is nearly paid for, lower risk. And so on. My guess is $2500 is about three months of expenses, and I personally would find that towards the lower edge of what I would be comfortable with.

    2. Staying out of debt. Once my emergency fund was fully funded, I would not simultaneously save and accrue debt. The average credit card rate is about 15%, and a good savings account is around or just under 1%. It's just math.

    3. Saving for future purchases - or staying out of future debt. I'm not saying you need to save up enough to pay cash when you are ready to buy a house, but I am saying that your life will be easier if you can put 20% down than if you can put 5% down.
  6. Jan 1, 2016 #5
    I'll readily admit that I'm financially illiterate. When I was 21, if I had a positive bank account that meant I didn't have to work and I could party:biggrin:

    The only time I wasn't lazy and partying was when I had no money :confused:

    Then I had to work. But I was a salesman. And the great thing about being a salesman is that, at least in American culture, you'll always have a job somewhere. So I've sold just about anything you can imagine. Think of me as the "Sham-wow" guy. You're gonna love my nuts :biggrin:

    So what's my point? I don't know. Lol. I guess it's that to have $2500 saved up as a 21 year old isn't so bad. I agree with the other commentators that you should nurture this as a seed and be responsible to build that up instead of squander it, lest you end up like me.
  7. Jan 2, 2016 #6

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  8. Jan 2, 2016 #7
    A useful subreddit for these kinds of questions is http://reddit.com/r/personalfinance

    A million threads have been created asking this question and their FAQ is a must read for anyone wanting to live on a budget or be more financially responsible.
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