Building Your Savings Account: An Age-by-Age Guide

DATE: Oct 20, 2017 
AUTHOR: Leah Ingram

Are you worried that you're not building your savings as fast as you should? You're not alone.

A 2016 NerdWallet savings survey concludes that most Americans share your worry, even though 70 percent of those surveyed are actively saving for retirement. The financial worry doesn't end there. USA Today states most Americans have less than $1,000 in a savings account.

Okay, so that's the bad news. Like many others, you may not be saving as much as you should be. But here's the good news: you can start building your savings today, and it doesn't have to hurt. Here is a decade-by-decade breakdown of how you could and should be saving.

Savings in Your 20s

It's hard to think about saving for your future when you're just starting out in your career, but experts agree that the earlier you start saving, the more money you're likely to end up with decades later. Shoot to put away 10 percent of your income into a retirement account. Remember to check what you can do pre-tax and post-tax with your financial advisor or accountant. Also, keep in mind that if you start saving in your 20s, you might be able to turn $10,000 into more than $1 million by the time you're 70, based on past performance of the markets. This seemingly miraculous mathematical computation is courtesy of long-term market performance and the value for stocks and funds, and courtesy of compounding interest to a small extent (the interest you earn on your initial deposit plus the interest you earn every year after that including from additional deposits). However, interest levels in bank savings accounts have been very low for a number of years, generating little interest income. The Motley Fool shows how a modest amount of money can grow over time. So if you have one goal before you turn 30, it's to get at least $10,000 and preferably more put away for retirement in suitable investments.

Savings in Your 30s

If you've paid off all of your student loans, this gives you some flexibility to ramp up your savings. A good goal during your 30s is to work toward putting 25 percent of your income into savings each month. You can set up an automatic deduction from your paycheck so that you don't even have to think about it each pay period. It's a painless way to put money away. You can't spend money you never touch. Also, remember this: if you're able to put pre-tax dollars toward a retirement account, you'll be building your account while reducing your taxable income. Be sure to discuss your strategies, situation and any tax implications with your accountant or financial advisor, as there are regulations on how much you can contribute annually to retirement accounts.

Savings in Your 40s

This is the decade when you may start thinking about how you're going to pay for your children's college education. In doing so you may think about cutting back on retirement savings. Don't. You or your children can borrow money to pay for college, but you can't borrow money to pay for retirement. If you don't have a financial advisor yet, now would be a great time to hire one to make sure you're still on target with your retirement goals.

Savings in Your 50s

If you've played your financial cards right, you're close to paying off your mortgage, you probably don't have any car loans to worry about anymore, and you've got a handle on your consumer debt. Do you think you can eke out 1 to 2 percent more in savings each year? While money that you save in your 50s has less time to grow than the money you saved in your 20s, you're never too old to continue building your savings.

Savings in Your 60s

All of this time that you've been working and saving for retirement. Ideally, you are able to continue your good work of working and saving so you can make it to retirement. That will be the time when you can reap the rewards of all the savings you made since starting your career years and years ago.