Is $20,000 a good savings account?
Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
It's easy to see why you'd think a $20,000 emergency fund would be more than adequate. But if your expenses are higher than average, that may not cut it. So spend a few minutes adding up your essential bills to see what your personal spending amounts to monthly.
Savings account balance | Percentage of respondents |
---|---|
$1,001 to $5,000 | 22% |
$5,001 to $10,000 | 8% |
$10,000 to $20,000 | 7% |
Over $20,000 | 14% |
For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency. For checking, an ideal amount is generally one to two months' worth of living expenses plus a 30% buffer.
Saving $20,000 in one year is a lot. Simply looking at this number can feel overwhelming, so Catie Hogan, head of curriculum and founding financial coach at Parthean recommended breaking it down into more digestible chunks. “Saving $20,000 per year is about $1,667 per month or about $385 per week,” she said.
Although $25,000 isn't infinite, it's certainly not insignificant — anyone earning less than six figures gets sufficient emergency savings with cash to spare. If those with $40,000 salaries scaled down to a more modest four-month emergency fund, they'd have $11,680 left over to play with.
In terms of savings accounts specifically, you'll likely find different estimates from different sources. The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
The median transaction account balance is $8,000, according to the Federal Reserve's Survey of Consumer Finances (SCF), with the most recently published data from 2022. Transaction accounts include savings, checking, money market and call accounts, as well as prepaid debit cards.
By age 25, you should have saved about $20,000. Looking at data from the Bureau of Labor Statistics (BLS) for the fourth quarter of 2023, the median salaries for full-time workers were as follows: $712 per week, or $37,024 each year for workers ages 20 to 24.
How much money should I have in my bank account?
The general rule of thumb is to try to have one or two months' of living expenses in it at all times. Some experts recommend adding 30 percent to this number as an extra cushion.
There's nothing wrong with keeping $10,000 in a savings account. But it might not earn you the highest yields. CDs and brokerage accounts could be better homes for your cash in some situations.
FDIC and NCUA insurance limits
This insurance protects your money if the financial institution you bank with goes out of business or otherwise can't afford to let you withdraw your money. So, regardless of any other factors, you generally shouldn't keep more than $250,000 in any insured deposit account.
How much interest does $20,000 per year in a savings account? If you put your money in a traditional bank that earns 0.01%, you'd have $20,002.00 by the end of the year. In a high-yield savings account that earns 0.60%, you'd have $20,120.
Having $30,000 saved up in the bank at 25 is a great financial milestone. The best course of action for these funds depends on the individual's personal circ*mstances, financial goals, and risk tolerance.
Another reason to put your $20,000 into a high-yield savings account is that the account will be secure. Even if your bank fails, savings accounts are insured by the FDIC for up to $250,000 per depositor, per account, so you won't have to worry about losing your money if the worst-case scenario happens.
Generally, having at least three to six months of living expenses can offer a safety net if you experience job loss or a medical emergency. For example, if you have monthly expenses of $5,000, aim to save $15,000 to $30,000 in your emergency fund.
Fidelity's guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement. If you're behind, don't fret.
While $40,000 is a good start on the road to building a nest egg, you probably want to retire with a lot more money than that. But it may be more than possible if you commit to saving and investing in a brokerage account consistently for the remainder of your career.
Average savings amount | Share of Americans |
---|---|
$5,000-$10,000 | 9% |
$10,000-$25,000 | 8% |
$25,000-$50,000 | 5% |
$50,000+ | 20% |
Where should you put $25,000 in savings?
If your $25,000 is your only savings, you need to be sure it is in non-risky securities, like a high-yield savings account. Ideally, you want an emergency fund covering three to six months of income if you have a stable career and low debt. You'll need more if your paychecks are irregular or you have higher bills.
A high-yield savings account may make a perfect home for your $25,000 emergency fund. These accounts usually come with FDIC or NCUA insurance on balances up to $250,000, which is well over the $25,000 mark. So, even if something happens to the financial institution you open the account with, your money will be safe.
How much do Americans have in savings? Overall, Americans have a median of $5,300 and an average of $41,800 in savings, according to the Federal Reserve.
In 2022, 23 percent of Americans had no emergency savings. Because building savings takes time, McBride recommends people automate contributing to their savings accounts as much as possible.
Age Range | Average Retirement Savings |
---|---|
Under age 35 | $30,170 |
Ages 35-44 | $131,950 |
Ages 45-54 | $254,720 |
Ages 55-64 | $408,420 |
References
- https://www.fool.com/investing/how-to-invest/how-to-invest-50k/
- https://www.fool.com/the-ascent/buying-stocks/articles/im-retiring-with-just-50000-in-savings-am-i-doomed/
- https://www.cbsnews.com/news/is-5-interest-on-a-cd-good/
- https://www.forbes.com/advisor/banking/cds/7-percent-cd-rate/
- https://smartasset.com/investing/how-much-interest-can-50000-earn-per-year
- https://www.sofi.com/learn/content/how-to-insure-excess-deposits/
- https://www.helloplaybook.com/learn/how-much-money-do-you-need-to-live-off-interest
- https://finance.yahoo.com/news/20-000-good-amount-savings-160036732.html
- https://www.koho.ca/learn/what-are-the-three-types-of-savings-accounts/
- https://www.nerdwallet.com/article/banking/high-interest-savings-account
- https://www.cbsnews.com/news/why-you-should-deposit-20000-in-a-high-yield-savings-account-right-now/
- https://www.nasdaq.com/articles/5-key-signs-youre-keeping-too-much-money-in-your-savings-account
- https://www.cnbc.com/select/high-yield-savings-account-vs-a-cd-whats-the-difference/
- https://www.gobankingrates.com/banking/savings-account/how-much-will-1000-make-in-a-high-yield-savings-account/
- https://finance.yahoo.com/news/dave-ramsey-says-amount-saved-130008210.html
- https://www.fool.com/the-ascent/banks/high-yield-savings-pros-cons/
- https://www.clearviewfcu.org/Resources/Learn/Blog/How-Much-Money-Should-I-Keep-in-My-Checking-Accoun
- https://www.fool.com/retirement/how-much-saved-by-25/
- https://www.forbes.com/advisor/banking/savings/7-percent-interest-savings-account/
- https://www.usnews.com/banking/articles/how-much-money-should-you-have-in-savings
- https://www.cnbc.com/select/americans-not-using-high-yield-savings-accounts/
- https://www.cbsnews.com/news/how-much-interest-can-you-earn-on-50000-in-one-year/
- https://ca.finance.yahoo.com/news/much-invest-earn-400-month-010000386.html
- https://www.experian.com/blogs/ask-experian/are-high-yield-savings-accounts-safe/
- https://www.axosbank.com/Tools/Calculators/APY-Calculator
- https://www.cbsnews.com/news/where-should-you-put-25000-in-savings/
- https://finance.yahoo.com/news/4-most-popular-banks-millionaires-150054420.html
- https://www.cnbc.com/select/how-to-use-high-yield-savings-account/
- https://www.bankrate.com/investing/how-to-invest-50000/
- https://www.bankrate.com/banking/savings/savings-account-average-balance/
- https://www.cbsnews.com/news/how-much-is-too-much-money-for-a-high-yield-savings-account/
- https://www.cbsnews.com/news/should-i-move-all-of-my-money-to-a-high-yield-savings-account/
- https://www.fool.com/the-ascent/banks/articles/heres-how-much-20000-earns-in-a-savings-account/
- https://www.fool.com/the-ascent/research/average-savings-account-balance/
- https://www.cnn.com/cnn-underscored/money/average-american-savings
- https://www.cbsnews.com/news/how-much-you-can-make-depositing-10000-into-high-yield-savings-account/
- https://www.usatoday.com/money/blueprint/banking/savings/7-percent-interest-savings-accounts/
- https://www.forbes.com/advisor/banking/pros-and-cons-of-using-a-certificate-of-deposit-cd-for-your-savings/
- https://www.businessinsider.com/personal-finance/6-percent-interest-savings-accounts
- https://fortune.com/recommends/banking/should-you-open-certificate-of-deposit-now-or-wait/
- https://www.creditdonkey.com/savings-calculator.html
- https://www.raisin.com/en-us/blogs/difference-between-high-yield-savings-accounts-and-cds
- https://talkmarkets.com/content/how-much-money-do-i-need-to-invest-to-make-3000-a-month?post=431352
- https://www.unfcu.org/financial-wellness/50-30-20-rule/
- https://www.forbes.com/advisor/banking/cds/are-cds-worth-it/
- https://time.com/personal-finance/article/money-market-vs-savings-account/
- https://www.fool.com/retirement/2023/12/19/3-ways-to-grow-100000-into-1-million-retirement/
- https://fortune.com/recommends/banking/savings-account-calculator/
- https://www.businessinsider.com/personal-finance/taxes-on-savings-account-interest-high-yield-savings
- https://www.investopedia.com/high-yield-interest-impact-on-taxes-8414834
- https://www.forbes.com/advisor/banking/savings/raisin-review/
- https://www.lendingclub.com/resource-center/personal-savings/understanding-average-americans-savings-by-age
- https://www.cbsnews.com/news/will-high-yield-savings-accounts-still-be-worth-it-if-rates-fall-heres-what-experts-say/
- https://www.cbsnews.com/news/why-you-should-deposit-15000-into-a-high-yield-savings-account/
- https://panaceafinancial.com/resources/are-high-yield-savings-accounts-worth-it/
- https://www.kiplinger.com/taxes/how-savings-account-interest-is-taxed
- https://www.ramseysolutions.com/retirement/can-you-retire-on-1-million
- https://www.fool.com/the-ascent/banks/articles/heres-why-a-20000-emergency-fund-might-fail-you/
- https://smartasset.com/checking-account/money-market-vs-high-yield-savings-which-is-best
- https://smartasset.com/investing/best-ways-to-invest-25000
- https://www.cnbc.com/select/how-much-money-should-you-have-in-a-high-yield-savings-account/
- https://fundingsouq.com/ae/en/blog/what-happens-to-50k-over-20-years/
- https://smartasset.com/checking-account/how-much-interest-does-250000-pay
- https://finance.yahoo.com/news/6-things-shouldn-t-savings-110025262.html
- https://www.cnbc.com/select/pros-and-cons-high-yield-savings-accounts/
- https://www.usnews.com/banking/articles/how-many-bank-accounts-should-i-have
- https://brainly.com/question/28955714
- https://fortune.com/recommends/banking/average-savings-account-interest/
- https://www.cnbc.com/select/myths-about-savings-accounts/
- https://money.com/what-is-a-high-yield-savings-account/
- https://smartasset.com/checking-account/chase-vs-wells-fargo
- https://www.nasdaq.com/articles/7-things-you-must-do-when-your-savings-reach-$25000
- https://finance.yahoo.com/news/much-money-millionaires-put-checking-120013872.html
- https://www.cbsnews.com/news/how-much-100000-earns-in-a-high-yield-savings-account/
- https://www.bankrate.com/banking/savings/emergency-savings-report/
- https://www.usnews.com/banking/articles/do-you-pay-taxes-on-savings-account-interest
- https://www.fool.com/the-ascent/banks/articles/is-10000-too-much-to-keep-in-a-savings-account/
- https://www.touchdownmoney.com/how-to-turn-10k-into-100k/
- https://fortune.com/recommends/banking/best-savings-accounts/
- https://www.preferredbank.com/personal/products-and-services/expanded-insurance-protection
- https://www.nasdaq.com/articles/8-easy-ways-to-save-$20000-on-your-salary-in-one-year
- https://www.newsweek.com/vault/banking/savings/7-percent-savings-account-interest-rates/
- https://www.jsb.bank/resources/saving-should-be-your-biggest-expense
- https://www.experian.com/blogs/ask-experian/where-to-put-savings-in-recession/
- https://www.fidelity.com/viewpoints/retirement/how-much-do-i-need-to-retire
- https://www.fool.com/the-ascent/banks/articles/heres-what-happens-if-you-deposit-more-than-10000-in-cash-into-your-bank-account/
- https://www.cbsnews.com/news/why-you-should-deposit-10000-into-a-high-yield-savings-account-now/
- https://www.synchronybank.com/blog/median-retirement-savings-by-age/
- https://www.nerdwallet.com/article/banking/how-much-should-i-have-in-savings
- https://www.quora.com/What-should-a-25-year-old-do-with-30-000-saved-up-in-the-bank
- https://fortune.com/recommends/banking/what-is-high-yield-savings-account/
- https://www.investopedia.com/how-many-savings-accounts-should-i-have-7775519
- https://www.experian.com/blogs/ask-experian/pros-cons-high-yield-savings-account/
- https://www.zippia.com/advice/american-savings-statistics/
- https://finance.yahoo.com/news/genius-ways-1-000-month-105500970.html
- https://www.debtfreedr.com/how-to-turn-100k-into-a-million/
- https://hfsfcu.org/education/what-is-apy/
- https://medium.com/@dontworkanotherday/how-to-turn-50k-into-100k-tips-to-double-50k-cac46fbf5558
- https://www.experian.com/blogs/ask-experian/alternatives-to-high-yield-savings-accounts/
- https://www.fool.com/the-ascent/buying-stocks/articles/im-40-with-40000-in-retirement-savings-am-i-doing-all-right/
- https://www.cnn.com/cnn-underscored/money/6-percent-cd-rates
- https://www.oneazcu.com/about/financial-resources/saving-budgeting/which-savings-account-will-earn-you-the-most-money/