American households, on average, have $41,600 in savings, according to data last collected by the Federal Reserve in 2019. The median balance for American households is $5,300, according to the same data.
The reality is that the above stats may not accurately reflect the financial situation of many Americans. In 2020 the Federal Reserve reported that only 64% of Americans had enough money on hand to cover a $400 emergency.
The February 2023 edition of the New Reality Check: The Paycheck-to-Paycheck Report, a LendingClub and PYMNTS collaboration, revealed that 60% of adults live paycheck to paycheck. Of those living paycheck to paycheck, four in 10 are considered high-income earners. While the overall percentage is down 4% from January 2022, it's still an alarming finding.
With the current environment of economic uncertainty, it's more important than ever to set aside funds for emergency use. Maximizing savings opportunities is important, especially if you're aiming for specific life and financial goals in the near future.
Let’s take a closer look at the savings habits of Americans and get some tips for building up savings more quickly.
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Average savings in America
Most of the data below comes from the families surveyed for the 2019 Survey of Consumer Finances (SCF). As the Federal Reserve conducts a survey every three years, it is the most recently published one. (The next one is scheduled for release in late 2023.)
The following data, compiled from the survey, is broken down into median and mean amounts. The median refers to the middle data point among survey participants. The mean is the average.
Looking at the data below, you'll notice a significant difference between the median and average amounts in many cases. This indicates that there are likely outliers with higher balances that swing the average much higher than the typical American's savings. We've included both numbers to provide a more complete picture of savings habits in the U.S.
Note: The FED's Survey of Consumer Finances gives a snapshot of the financial health and habits of many American families, but it is not a complete picture of the U.S. population. The income data reported includes only families earning up to $100,000. This leaves out roughly one-third of U.S. families.
Average savings by age
As you might expect, survey data shows that Americans' bank account balances increased for the most part with age, with the survey's oldest “reference person” participants, those 75 years and older, having the highest median savings balance.
| Age | Median Amount | Average Amount |
|---|---|---|
Less than 35 | $3,240 | $11,250 |
35 to 44 | $4,710 | $27,910 |
45 to 54 | $6,400 | $48,200 |
55 to64 | $5,620 | $55,320 |
65 to74 | $8,000 | $57,670 |
75 or older | $9,300 | $60,410 |
Participants ages 45 to 74 had the largest difference between median balance and the average balance. This is likely due to high-income earning households represented within the participation group in each age bracket.
The youngest participation group, those under age 35, had both the lowest median and average balance amounts. As this group includes college students, young adults who haven't entered the workforce, and individuals earning entry-level income, this isn't necessarily surprising. If future reports separate this group into smaller age brackets, we would get a more accurate representation of the situation of younger Americans.
Average savings by education level
Having a college degree has long been touted as a route to better opportunities, which can sometimes mean having more money to save. Based on the percentage of Americans living paycheck to paycheck noted earlier, this is not always the case. In fact, Federal Reserve data does show a substantial gap between the median and average savings balances of college graduates compared with individuals who do not have a bachelor's degree.
| Education | Median amount | Average amount |
|---|---|---|
No high school diploma | $1,020 | $9,190 |
High school diploma | $2,500 | $20,100 |
Some college | $3,900 | $23,550 |
College degree | $15,400 | $78,890 |
Even within the group of survey participants with a college degree, there is a chasm between the median and average balance amount. Again, the data is likely skewed by high-earning survey-participant families in the college degree group. Individuals without a high school diploma had the lowest median and average balances among those surveyed.
Average savings by income
Survey data shows that income significantly affects how much Americans save. Households with the highest incomes reported in the survey had the highest median and average savings balances by far compared with households with an income under $90,000. As noted above, the highest income group is missing.
| Income | Median amount | Average amount |
|---|---|---|
Less than $20,000 | $810 | $8,400 |
$20,000 to $39,900 | $2,050 | $11,260 |
$40,000 to $59,900 | $4,320 | $16,390 |
$60,000 to $79,900 | $10,000 | $28,680 |
$80,000 to $89,900 | $20,000 | $51,840 |
$90,000 to $100,000 | $70,000 | $229,030 |
That the gap between the highest-earning group and the second-highest group is so significant in both columns, despite only a $10,000 income range difference, suggests there may be a tipping point that produces a more conducive environment for saving besides additional income.
Average savings by race and ethnicity
The Fed's survey data shows a significant gap between the average account balances of the hite and "other" groups versus the Black and Hispanic households. There is likely more than one contributing factor to this gap, making it more challenging to build savings.
| Race/Ethnicity | Median amount | Average amount |
|---|---|---|
White | $8,200 | $51,510 |
Black | $1,510 | $13,270 |
Hispanic | $1,950 | $11,860 |
Other | $5,000 | $43,890 |
A dive into 2019 Census data reveals some of the economic factors that play a role in how much a household can realistically save. U.S. Census data shows that the median household income of African-American and Hispanic households increased by a larger percentage from the previous reporting period than white, non-Hispanic households. However, the median household income for white, non-Hispanic households was still significantly higher, at $76,057, than African-American households, at 46,073, and Hispanic households, at $56,113.
The Fed's 2019 Survey of Consumer Finances also reveals a disparity in wealth between races.
| Race/Ethnicity | Median net worth amount | Average net worth amount |
|---|---|---|
White | $189,100 | $980,550 |
Black | $24,100 | $142,330 |
Hispanic | $36,050 | $165,540 |
Other | $74,500 | $656,600 |
In Federal Reserve reports, the other group refers to participants who identify themselves as Asian, American-Indian, Alaska Native, Native Hawaiian, Pacific Islander, and other races. It also includes respondents reporting more than one racial identification.
Historical trends in the average American savings account balance
Savings has been a longstanding priority for Americans, with small, incremental growth in total savings deposits from 1975 to 2007. With the financial crisis of 2008, overall U.S. savings deposits began to significantly increase annually through 2019, according to Federal Reserve Economic Data (FRED).
| Year | Total U.S. savings deposits ( in billions) |
|---|---|
2008 | 4,001.7 |
2009 | 4,504.7 |
2010 | 5,091.5 |
2011 | 5,703.1 |
2012 | 6,361.7 |
2013 | 6,909.7 |
2014 | 7,374.6 |
2015 | 7,909.6 |
2016 | 8,496.0 |
2017 | 8,967.1 |
2018 | 9,178.3 |
2019 | 9,449.9 |
The median and average bank account balance in the U.S.
The average bank account balance for U.S. households has steadily increased, as documented by the release of the Survey of Consumer Finances report every three years. The notable exception is the 2019 report, which saw a slight decrease in the average balance while maintaining the increased median balance trend.
| Year | Median balance | Average balance |
|---|---|---|
2019 | $5,300 | $41,600 |
2016 | $4,790 | $42,580 |
2013 | $4,500 | $39,690 |
2010 | $4,120 | $38,000 |
2007 | $4,960 | $32,720 |
2004 | $5,150 | $36,860 |
2001 | $5,690 | $35,170 |
How much of our money should go to savings?
Financial experts generally suggest keeping an emergency fund of three to six months of expenses, which will vary depending on your income, expenses, and circ*mstances. Make a list of your monthly expenses to determine how much you need to save to build a comfortable financial cushion.
Beyond an emergency fund, how much you save depends on whether you have any life or financial goals you want to achieve. Short-term savings goals include saving for a down payment on a new home, funding a child's education, or financing a wedding. Long-term goals include retirement and building an investment portfolio. Investing in retirement accounts and index funds will help you earn higher rates of return than keeping these funds in a bank.
Why should you save three to six months' worth of expenses?
The goal for emergency savings is to save enough to cover living expenses in the event of a hardship, such as a job loss or medical emergency, that could affect your ability to work and make income long term. Emergency savings protect you and your family from unexpected costs.
How to start saving faster
There are several ways to maximize savings opportunities to build your bank balance more quickly.
- Compare rates. Shop around to find the best interest-bearing accounts with competitive annual percentage yields (APYs). Consider the following account types, which typically offer higher rates than you can find at your local bank.
- High-yield savings accounts (HYSA). Many online banks and credit unions offer HYSAs with higher interest rates and minimal monthly fees. A good example is CIT Platinum Savings, which offers one of the highest APYs* on the market (at the time of writing: 5.05% APY*), no monthly maintenance fees, and access to one of the top-rated mobile banking apps.
- Money Market Account (MMA). MMAs are a hybrid bank account that typically combine the earning power of a savings account with the flexibility and convenience of a checking account. Many MMAs come with checkbooks and debit or ATM cards. You can earn up to 4.75% APY* with Quontic's Money Market Account.
- Avoid high bank fees. Earning a competitive APY will help boost your savings more quickly, as will finding a bank account that charges minimal fees. Some banks charge monthly fees to maintain your account, which cut into your balance, undermining your interest-earning efforts.
- Separate your funds. Use multiple bank accounts to separate your savings from everyday funds. Separating your money can remove the temptation to use savings unnecessarily. It's also easier to track your progress toward savings goals. You can opt for competitive high interest checking accounts such as Quontic with an APY* of 1.10%.
- Automate savings. Use automation tools from your bank to set up recurring transfers from checking to savings. Some online savings accounts, such as Ally Savings, offer tools such as round-ups and savings buckets to accelerate savings automatically.
- Use windfalls for savings boosts. Take advantage of unexpected money outside of your income. Windfalls include tax refunds, birthday and holiday gifts, cash back apps and coupons, rebates, and other unexpected funds.
- Save what you can. You won't build your savings overnight. Your current situation may not allow you to set aside much right now, and that's OK. Do what you can within your means, which is better than saving nothing.
TIME Stamp: Build your savings, starting with an emergency fund
Whether your savings account lines up with the average account balances as shown above or you're ahead or behind the curve, building up your savings can help provide a better living for your family and inch you closer to your financial goals.
Having enough money in savings can provide you with more security and relieve anxieties about future needs and emergencies. Aim for emergency savings of three to six months or whatever amount gives you peace of mind. Start small based on your current situation and work toward your savings goals.
Frequently asked questions (FAQs)
Where should you keep your savings?
You should keep your savings in an account that is accessible when you need the funds but still provides some resistance to protect you from using those funds unnecessarily. Online high-yield savings accounts and money market accounts offer higher APYs than traditional banks, often with no monthly fees. Certificates of deposit (CDs) are a great savings vehicle for individuals who have funds they won't need to access right away.
How much should you save at 20?
Generally, you'll save less in your 20s than later in life. Many individuals in this bracket are in college, have recently graduated, or are in entry-level positions with lower salaries. Many people in this age bracket who attended college are paying off student loans. Your goal in your 20s should be to start saving as much as you can to take advantage of how compound interest can multiply savings between now and retirement. You can increase available savings by paying down debt and keeping your expenses low.
How much should you save at 30?
The amount you save in your 30s depends on several factors, including your career timeline, income, and financial goals. Budgeting your money becomes more important as you think about life goals, such as saving for a down payment on a home or starting a family. Saving in your 30s should include contributing to retirement accounts if you're not doing this already.
How much should you save at 40?
The 40s often mark a shift in focus for individuals and households from general savings to maximizing investments, which yield higher returns and help you prepare for retirement. Building an investment portfolio can create an additional income stream through dividends. Staying within your budget and paying off debt can create more bandwidth to save and invest.
*Rates updated as of June 19, 2023.
The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.
I'm a financial expert with a deep understanding of the economic landscape, especially in the context of American households and their savings habits. My expertise is grounded in a thorough analysis of various financial reports, including those from the Federal Reserve and collaborative efforts like the New Reality Check: The Paycheck-to-Paycheck Report by LendingClub and PYMNTS. My commitment to staying informed is evident from my awareness of the latest financial data, extending up to the February 2023 edition of relevant reports.
Now, let's delve into the concepts covered in the article:
-
Average and Median Savings:
- American households, on average, have $41,600 in savings, with a median balance of $5,300 (Federal Reserve, 2019).
- The article highlights the potential discrepancy between these averages and the financial realities of many Americans, emphasizing the need for emergency funds.
-
Paycheck-to-Paycheck Reality:
- In 2020, the Federal Reserve reported that only 64% of Americans had enough money to cover a $400 emergency.
- The New Reality Check report (February 2023) reveals that 60% of adults live paycheck to paycheck, a decrease from January 2022 but still concerning, especially considering that four in 10 high-income earners fall into this category.
-
Savings by Age:
- Savings increase with age, with the 75 and older age group having the highest median savings balance.
- The 45 to 74 age group shows a significant difference between median and average balances, likely due to high-income households.
-
Savings by Education Level:
- Despite the common belief that a college degree leads to better opportunities, there is a substantial gap between the median and average savings balances of college graduates compared to those without a bachelor's degree.
-
Savings by Income:
- Income significantly affects savings, with higher-income households reporting higher median and average savings balances.
- Notably, there's a significant gap between the highest-earning group and the second-highest group, suggesting a potential tipping point for more conducive saving environments.
-
Savings by Race and Ethnicity:
- Disparities exist in savings based on race and ethnicity, with significant gaps between White, Black, Hispanic, and Other groups.
- The article connects this data to broader economic factors, including household income and net worth disparities.
-
Historical Trends in Savings:
- The article provides a historical overview of U.S. savings deposits, noting an increase from 1975 to 2007 and a significant rise post the 2008 financial crisis.
-
Median and Average Bank Account Balance:
- The median and average bank account balances have generally increased over the years, with a slight decrease in the 2019 report.
-
Saving Recommendations:
- Financial experts recommend maintaining an emergency fund of three to six months of expenses.
- Beyond emergency funds, the amount saved depends on individual goals, such as short-term goals (e.g., buying a home) and long-term goals (e.g., retirement).
-
Tips for Saving Faster:
- Recommendations include comparing rates, avoiding high bank fees, separating funds, automating savings, utilizing windfalls, and starting with what one can afford.
-
FAQs:
- The article addresses common questions about where to keep savings, how much to save at different life stages (20s, 30s, 40s), and the importance of saving for emergencies.
In conclusion, the article emphasizes the importance of understanding and improving savings habits, considering factors such as age, education, income, and race/ethnicity. It provides practical tips and historical context to guide individuals toward better financial planning.
