Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.
A recent survey by ING showed that 27% of Americans admitted to having no savings — that’s zero dollars set aside for medical emergencies, car repairs and life’s other unexpected expenses.
“The average American isn’t saving enough,” said Ken Tumin, founder and editor of DepositAccounts, a LendingTree subsidiary. “There’s too much debt and not enough commitment to saving.”
Numbers like these are disconcerting, but they don’t tell the whole story. How much is in the average American savings account? Does that include retirement savings? And for those of us who might be lagging behind in savings, how do we improve? Let’s take a closer look.
How much does the average American have in savings?
Answering the question of how much the American has in savings depends on how you define savings. According to data from the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), Americans actually have an average of $183,200 in savings as of June 2019. That number includes all bank accounts and retirement accounts, though. Although this sounds promising, across all households, 29% of Americans have less than $1,000 in savings.
Average American savings
How much do Americans keep in each type of account, on average? As of June 2019, the numbers break down as follows:
|Type of Account||Average Balance Among All Households|
|Certificates of deposit (CDs)||$6,220|
|Money market accounts||$9,430|
|Retirement accounts (IRA, 401(k), etc.)||$149,790|
It’s important to note that not all households included above have all types of accounts, so households without a specific type of account bring down the average. For example, households without money market accounts would have a zero balance, which would bring down the average balance for money market accounts.
If households without any form of account holding savings are excluded from the averages, here’s what the balances look like:
|Type of Account||Average Balance of Households With at Least One Type of Savings||Average Balance Among All Households|
|Certificates of deposit (CDs)||$8,520||$6,220|
|Money market accounts||$12,210||$9,430|
|Retirement accounts (IRA, 401(k), etc.)||$205,020||$149,790|
Of course, those numbers still include people who may not have all those accounts. Some may have checking and savings without any CDs or money market accounts. Some might have checking and a retirement account.
The averages for each type of account increase even more by just including households who have that type of account:
|Type of Account||Percent of Households Who Own This Type of Account||Average Balance of Households Who Own This Type of Account||Average Balance of Households With at Least One Type of Savings|
|Certificates of deposit (CDs)||7%||$95,600||$8,520|
|Money market accounts||18%||$74,970||$12,210|
|Retirement accounts (IRA, 401(k), etc.)||52%||$287,736||$205,020|
Checking accounts stayed flat, as every household in this analysis that had at least one type of savings account also had a checking account. The numbers grow significantly from there, though. For example, the average CD balance among those who have CDs is $95,600, but just 7% of households own a CD.
Median American savings
The numbers are significantly lower when looking at account medians. The median is the midpoint of all the account balances; half of the accounts have a higher balance, and half have a lower balance. For example, the median money market account balance is $12,680. Half of all households with money market accounts have more than $12,680, and half have less. Here are the median balances for each account type:
|Type of Account||Percent of Households Who Own This Type of Account||Median Balance of Households Who Own This Type of Account||Average Balance of Households With at Least One Type of Savings|
|Certificates of deposit (CDs)||7%||$25,280||$95,600|
|Money market accounts||18%||$12,680||$74,970|
|Retirement accounts (IRA, 401(k), etc.)||52%||$75,480||$287,736|
Average American savings: Who is saving?
Is it just the wealthiest Americans who have more than the average $183,200 in savings? Surprisingly, no. Households in the top 20% based on annual income do make up the majority of those with above-average savings (59%). Households in the bottom 80% make up 41% of those with above-average savings, though.
When we look at savings across generations, millennials have the lowest amount saved — an average of $25,000 — while baby boomers have the highest — an average of $280,000 — according to the Federal Reserve and FDIC data. Gen X falls in the middle with $128,000 saved, on average.
This probably has less to do with generational attitudes and more to do with age. The oldest millennials are just approaching 40, the oldest members of Generation X are in their mid-50s and the oldest boomers are 73. Compound interest takes time to work and incomes are typically lower when you’re earlier in your career, so boomers have had far more time to set money aside than millennials.
How much you should have in savings
Given that the average savings account balance varies widely, and a lot of people don’t have any savings at all, how much should you have in savings? Conventional wisdom says you should set aside 10% of your income for retirement, but this might still fall short of your savings goals, especially if you want to build up an emergency fund in addition to your retirement savings (and you should).
A better rule of thumb might be the 50/30/20 rule. This rule recommends budgeting 50% of your income for fixed expenses, like your mortgage, insurance and debt payments. The next 30% would go toward discretionary expenses, like dining out and vacations. The final 20% would do into your savings. This includes your emergency fund and your retirement.
This rule might be a challenge if your fixed expenses exceed 50%. In this case, you could make an effort to lower your fixed expenses through paying down debt or downsizing until it hits the 50% mark.
Another strategy is to work backward from your savings goals. For example, Tumin recommends having six to 12 months of income saved for short-term goals and emergencies. If you bring home $5,000 per month, then you should aim for $30,000 in accessible savings, such as a high-yield savings account. If you want to have six months savings within two years, then you would divide $30,000 by 12 and set that amount aside each month, which comes to $1,250 per month, or 25% of your income.
Ultimately, the amount you should have in savings depends on your situation. If you have an unstable job, you should have more for times when your income dips. If you own a home, you should have more, as unexpected repairs tend to be pricey. If you plan to retire early, you’ll need to set aside more than someone who is planning to retire at 70. Ten percent is a good minimum guideline, but 20% or more will help you achieve your savings goals sooner.
How much you should have in an emergency fund
Tumin recommends setting aside an emergency fund of at least six months of your current income. “In my previous career, I witnessed many coworkers being laid off during recessions,” he said. “An emergency fund of at least six months is very helpful if you experience this.”
If you’re young, single and not a homeowner, you might be able to get away with less (at least three months of income would be good, though). If you’re married, you have children, you own a home or you have frequent medical bills, you might want to save more (at least six months of income). If you’re self-employed, you might want to save even more (as much as nine to 12 months of income).
6 painless ways to save more money
Are you looking to boost how much money is in your savings account? Here are some relatively painless ways to do it:
- Direct deposit.If you have the option, have a portion of your paycheck directly deposited into your savings account.
- Automatic transfers. In addition to, or instead of, direct deposit, set up automatic transfers from your checking account to your savings account. These don’t need to be big transfers; if you’re new to saving start with a $1 or $2 per day or $10 per week.
- Use a budgeting app. Mint and YNAB are just two of many apps that can help you get a handle on your spending. Once you know what you’re spending, you’ll know where you can trim and how much you can save.
- Put raises into savings. Did you get a raise at work? Put the increase to work by putting into your retirement savings or short-term savings account. Direct deposit works best for this too.
- Try a shopping app. Rakuten and Ibotta offer cashback from online purchases. Acorns automatically invests spare change from your transactions and invests it. These apps help you spend less and save more.
- Earn more interest. Instead of just using the savings account at your local bank, shop around for the best interest rate. Every little bit helps.
Where you should keep your savings
When it comes to short-term savings, you want to keep your money somewhere it’s both easy to access and earning interest. High-yield online savings accounts provide quick access to your money at competitive interest rates. The interest rate at brick-and-mortar banks is typically less than 1%; online savings accounts, meanwhile, can often offer 2% or more.
CDs also offer higher interest rates than a typical savings account — for example, many 12-month CDs from online banks pay 2% or more in interest. In return for higher interest, though, you lose some liquidity, and there may be an early withdrawal penalty if you withdraw the money before the CD matures.
Money market accounts also offer higher interest rates than a standard savings account. The challenge with money market accounts, though, is that you’ll likely need a heftier opening deposit. The exact amount varies by bank, but it can be $5,000 or more.
If the average American household has $183,200, where do you stack up? If you’re ahead of the game, that’s great. If you’re lagging behind, start small. Increase your savings slowly and look for the best interest rates you can. Every little bit adds up.