Too many millennials (ages 23 to 38) are in the dark when it comes to their savings. Nearly half (48%) don’t know how much they have in their personal savings, according to data from Northwestern Mutual’s 2019 Planning & Progress Study, which polled more than 2,000 U.S. adults.
It’s important to be aware of how much you’re saving so you know if you’re on track for a comfortable retirement or to reach your other financial goals, such as buying a home.
“As you age, the importance of understanding your personal finances continues to make a larger and larger impact,” Emily Holbrook, senior director of planning at Northwestern Mutual, tells CNBC Make It. “You have less time to recover from any losses or mistakes that you might make.”
How much should young people have in the bank? There’s a lot of room for debate, but Fidelity, the nation’s largest retirement-plan provider, provides some goals to aim for:
- By 30: Have the equivalent of your annual salary saved
- By 35: Have the equivalent of twice your annual salary saved
- By 40: Have the equivalent of three times your annual salary saved
In addition to retirement savings, experts also recommend saving up an emergency fund of three to six months’ worth of living expenses.
For many people, this advice can be overwhelming. But it’s key to remember that what’s important is getting started at all. As a first step, Holbrook recommends that millennials leverage the resources available to them. “If they’re established in the workplace, really making sure that they have a firm understanding of their 401(k) plan,” she says.
Remember, if you’re in your 20s or 30s, you still have decades to save for retirement. “The younger you are, the more time you have to make up for lost time,” Meghan Murphy, a VP at Fidelity, previously told CNBC Make It.
Start by putting away whatever you can. If you can only save $30 a month, do that. Then aim to work your way up to contributing 15% of your income to savings.
“It’s something to work toward over time,” Murphy says. “Always make sure you’re getting that company match [on your 401(k)], then try to increase your savings by 1% annually until you reach that 15%.”
If you’re nearing 40 and only have a small amount put away, don’t panic. At this point, “the best thing you can do is to set a goal,” Murphy says. “It may not be, ‘I’ll have three times my income by the time I’m 40,’ but maybe it’s ‘I’m going to do what I need to do to have twice my income.’”
And if you aren’t sure where to start, don’t be afraid to ask an expert. “There is a wealth of knowledge available through employers, through financial experts, checklists and simple ways to help people start thinking about it,” Murphy says.
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