Everyone knows it’s important to save, but in a world where that’s so difficult—especially for people living paycheck to paycheck—how can you tell what’s enough? One way to gauge your progress is by comparing yourself to your peers.

If you have less than the average savings for your age range, this could be a sign that you’re not allocating your paycheck optimally. While there may be times when you can’t save, here’s what to know about the best ways to do it.

Understanding Savings

Savings broadly refers to any money that a person retains from their paycheck after consumer spending, including individual or household expenses and obligations. This surplus can be put toward any number of life goals. Although savings can be further grown through investing, this would entail putting the money at risk of loss.

As such, the use of the term “savings” in this article will generally refer to cash or cash equivalents (i.e., deposits in a bank or credit union) that offer low returns but are almost entirely safe from loss (except due to inflation).

Money kept within a financial institution is typically deposited into one or more deposit accounts, including but not limited to savings accounts, checking accounts, and money market accounts (MMAs), each of which has its own advantages and limitations. Keep in mind that, even though there is a deposit account with “savings” in the name, money stored in any kind of bank account can still be considered savings.

Savings accounts are also known by the name “transaction accounts” by the Board of Governors of the Federal Reserve System. Transaction accounts include checking, savings, and MMAs; money market funds (MMFs); call or cash accounts at brokerages; and prepaid debit cards. They do not include retirement accounts, as these are considered a separate category.

In some cases, a person’s bank account(s) will accrue interest on their savings, causing their balance(s) to slowly grow—“slowly” being the operative word here, as the amount of return is often so minuscule that little change will be seen even over a substantial length of time.

Even higher-interest savings accounts don’t pay as much as other types of investments. As such, if an individual wishes to grow their savings for a long-term goal like retirement, they will not just have to regularly allocate a portion of their income specifically for savings but eventually allocate a portion of their savings to higher-earning but riskier investment products.

Of course, at the onset of their career paths, people (at least those with little to no generational wealth) will start out with little in the way of savings, particularly those with low-paying entry-level jobs. As an individual gets older and moves up in the working world, they should be earning more, allowing their savings to grow—ideally peaking as their retirement nears. After leaving the working world, savings will start to decrease as people spend more than they receive in retirement income.

That’s the theory. How do people’s savings patterns work out in real life?

Average Savings by Age Group Breakdown

Below are the six age groups used by the Federal Reserve Board to measure mean transaction account balances by age, as part of the organization’s Survey of Consumer Finances.

Although this data doesn’t capture the savings data of every single person in the United States, it functions as a representative sample that helps highlight financial trends that can help economists assess needs and individuals evaluate where they stand compared with peers. Additionally, two age groups—Less Than 35 and 45–54—reported all-time-high savings in 2019.

• Less Than 35: The average transaction account balance for respondents younger than 35 was $11,250 in 2019, which is the lowest amount among the six age groups. The Less Than 35 category has also reported the most consistent transaction account balances since the first survey in 1989, with the only real outlier being a dip in 1995. This is one of the hardest age groups to get a clear picture of regarding mean savings, as it includes teenagers as well as young adults who could have more than 10 years in the workforce.
• 35–44: The average transaction account balance for respondents 35 to 44 years of age was $27,910 in 2019, the second-lowest amount. Like the Less Than 35 group, the 35–44 category has also reported relatively steady transaction account balances over the years, albeit with more noticeable upward growth and a dip every two to three survey periods. Although 35- to 44-year-old respondents presumably enjoyed higher wages than the prior age group, they were also likely facing greater expenses, potentially including increased childcare costs, higher taxes, and a mortgage.
• 45–54: The average transaction account balance for respondents 45 to 54 years of age was $48,200 in 2019, the third-lowest amount. Following a drop after the initial survey in 1989, the 45–54 category has experienced strong upward savings growth over the years barring two dips, the largest of which nearly dropped below the 35–44 mean balance in 2013. Respondents who were 45–54 years old were the least likely to still be paying off their student debt (as federal loans generally take 10 to 30 years to repay), but those with children also may have been putting their own savings toward financing higher education for their children.
• 55–64: The average transaction account balance for respondents 55 to 64 years of age was $57,670 in 2019, the second-highest amount. The account balances of the 55–64 age group kept a close pace with those of the 65–74 category, overtaking both the latter group and the 75 or Older category in 1998 and 2010. These frequent spikes may have been a result of 55- to 64-year-old respondents putting more money toward their savings as their retirement ages were rapidly approaching.
• 65–74: The average transaction account balance for respondents 65 to 74 years of age was $60,410 in 2019, which is the highest amount out of all six groups. In addition to keeping pace with the savings of the 55–64 category, the 65–74 age group has also overtaken the 75 or Older category since 1995, excluding the former’s small dip and the latter’s large spike in 2004. By this age, as respondents were leaving the workforce and entering retirement, this group’s account balances would be reaching their peak levels.
• 75 or Older: The average transaction account balance for respondents ages 75 and older was $55,320 in 2019, the third-highest amount. Account balances for the 75 or Older category have arguably been the most erratic, given that they started out on top in 1989, fell until 1998, reached their peak in 2004, plummeted to their second-lowest amount in 2007, mostly recovered by 2013, and have since been relatively stable. As people in this age group are mostly no longer receiving income (outside of Social Security, pensions, etc.), their savings would naturally diminish over time, hence the mostly lower balance compared with the other older age groups.

Average Transaction Balance by Age
Age	Average Transaction Balance
Below 35	$11,250
35-44	$27,910
45-54	$48,200
55-64	$57,670
75 and Over	$55,320

The good news: The percentage of respondents with transaction accounts has been trending upward over time. When the survey was first conducted in 1989, most age groups reported figures from 85% to 91%. The only exception was the Less Than 35 category, which was a little more than 5% below the next-lowest age group.

However, this gap would close by 2016, with this also being the only year when the Less Than 35 age group had a higher percentage than another category. The remaining five groups would rise and fall until 2013, after which all six spiked in 2016 and then leveled out. The 75 or Older category has typically held the highest or second-highest percentage of transaction account holders, aside from a notable drop in 1998. As of 2019, all six groups were above 97%.

How Much Should You Keep in Savings?

Exactly how much money one should squirrel away in savings is a tricky question, as everyone’s financial circumstances are different. While few people would balk at the idea of having too much in savings, the best choices are more complex. It’s inadvisable to keep more than the $250,000 amount insured by the Federal Deposit Insurance Corp. (FDIC) in any one insured bank in case it fails. And, at a certain point, excess funds could be better put to use outside of low-interest deposit accounts.

When building your savings, the first priority is to ensure that you’re setting aside enough for an emergency fund. In the event that you should lose your job, rack up a large hospital bill, or need to finance a major repair for your car or house, having enough set aside can help you stay afloat. Of course, how much you need in your emergency fund is also variable, as people with different lifestyles, debts, and dependents will naturally need different amounts to recover from a crisis.

After accounting for your emergency fund and your regular expenses, the smartest thing to do with any money that might be left over is putting it toward investments that can help you further grow your wealth, including investment vehicles like a house.

While retirement is typically the ultimate savings goal for most people, thinking of “savings” and “retirement savings” as two separate things is a good mindset to have. After all, since your collective savings can be spent at any time, it’s harder to think of them as being intended for a specific, far-off purpose (which can unintentionally cause you to spend money that you might need in the future without realizing it).

Similarly, since money can’t be retrieved from most retirement accounts before the end of an early withdrawal period without incurring withdrawal penalties, it isn’t as liquid as savings traditionally are. Plus, it’s generally a good idea to still have money in savings once you’ve retired, as invested retirement assets are more subject to market volatility. In a bad market year, it’s good to have cash to avoid liquidating too many equities at an unfortunate time.

The Bottom Line

The main takeaway from the Federal Reserve data is that it’s crucial to start saving as soon as possible. No matter what age you are, it’s never too late to begin saving; you may just have to work quickly to make up for lost time. As such, it also might be worth it to consider cutting unnecessary expenses, finding a means of earning additional income, and researching potential retirement accounts to find one that best suits your needs.