How Much Money Should I Be Saving in My 20s?

Current Team | May 17, 2022

If you’re in your 20s, experts recommend that you should save anywhere from 10% to 25% of your income. For many, that just isn’t feasible. If so, you can save as little as 5% and build from there.

Saving Money in Your 20s

According to most financial experts, young adults in their 20s should be looking to put 10% of their income into their savings accounts. This is because people start to establish lifelong habits in their 20s as they make big life decisions—where to live, who they choose to spend time with, and what career path they choose.

Setting goals for yourself will put you in good stead to make sure you can enter your 30s in solid financial health.

Building an Emergency Fund

How can you go about saving 10% of your income? One way to start is to build an emergency fund—a secure account that is kept aside for unexpected expenses.

Things happen, and those things often have a price tag on them (a plane ticket for a family emergency, an unbudgeted medical expense, your car breaking down, or rushing your pet to the vet). An emergency fund is a kind of insurance policy for your finances. You can avoid dipping into your savings or going into debt because you’ve been putting money away in your emergency fund.

How much you put into your emergency fund (and, in the longer term, how much you save in your 20s) is determined by a number of factors: how stable your job is, how well it pays, any debts you have to pay off, and whether you live alone or share your finances with another person (single-income household or a double-income household, for example).

When thinking about how much money you should be saving in your 20s, your emergency goal should be based on three to six months’ worth of living expenses. As you begin budgeting for this, create a safe savings goal that puts away at least 2% of every paycheck into your emergency fund for six months.

As you begin to develop other healthy financial habits, you can increase that amount by up to 2% every six months. This way, when an emergency does hit, you’ll have enough money in your emergency fund to see it off, and you won’t have to rebuild your emergency fund from scratch.

Planning Ahead

When saving money in your 20s, you should also think about saving money to make a down payment (the portion of the purchase price that you pay up front, before making monthly installments) toward a significant expense, like a car or a place of your own.

A down payment can be a lot of money (usually 20% of the overall purchase price). But the larger the down payment, the fewer monthly installments you have to cover. This puts you significantly closer to that goal than someone who takes a zero down payment option (meaning they effectively pay $0 up front) and ends up paying much more than the overall price through bigger installments.

If you have a big payment you need to make, you can save for the down payment and the monthly installments. Both are significant financial commitments, but making a strong down payment will save you a lot of money in the long run.

This is true even if you don’t intend on getting your own place or your own car until you’re in your 30s. A shared living arrangement or public transit will save you a lot of money when you’re in your 20s, especially if you’re dealing with issues of job stability and the costs of urban living. You can use those savings to plan for your 30s.

Even if getting your own place or your own car is not on your radar, start saving now. You will be in a very strong position to make a large purchase when you are ready.

How Much Should You Save?

Look for other ways to save money in your 20s. You can download a budget app to your phone to track your spending or keep a handmade spreadsheet to monitor your income and expenses. You can bundle services together, cut a few things out, and negotiate a different billing cycle with your service providers.

Lifestyle changes can go a long way too. Cooking at home will always save you more money than if you order in a lot. Use digital coupons to save money on your weekly groceries.

Saving money is not always an easy thing to do. If saving 25% of your paycheck is a struggle, start with just 10% or even 5%. The important thing to do is to get into the habit and mindset of saving money. Set up an online savings account, so you can easily (and automatically) send money from your checking account into your savings.

With Current, you can use our Savings Pods to easily set money aside for a big purchase, like a used car. You can even earn interest on the money you put into your pod and set up round ups to help reach your savings goals without much effort.

Small, incremental savings become smart savings. This can lead you to finish your 20s and enter your 30s with some real savings. And this means you’ll have more options for better living and a higher quality of life.