The average American savings: How does your savings account compare? (2024)

When it comes to personal finance, saving money ranks right up there with buying essentials and paying bills in terms of importance. Savings account contributions should be part of your monthly budget, just like the rent and power bill.

Building up your savings has numerous benefits — the most important of which is financial security. Here are some other reasons saving money is important:

• You give yourself more freedom and flexibility to make financial decisions, whether it’s buying a new car or paying for an important medical procedure.
• You can take calculated risks on investments or other money decisions that can grow your wealth.
• Your money will grow thanks to monthly interest earned and the effect of compounding.

Here’s a closer look at the savings habits of Americans to see how your own compare and how you can ramp up your efforts.

How much does the average American have in savings?

In its 2022 Survey of Consumer Finances, the Federal Reserve estimated that the average transaction account balance was $62,410, which included savings and checking accounts, money market accounts, call deposit accounts and prepaid debit cards.

However, the median balance was much lower at $8,000. That figure probably provides a more accurate picture because it represents a middle value in which half the balances are higher and the other half are lower.

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.

How much should average Americans save every month?

Before getting into how much the average American should save each month, it’s useful to know how much they spend.

Average expenditures for all households in 2022 were $72,967 a year or $6,080.58 a month, according to a 2023 report from the U.S. Bureau of Labor Statistics. This means the average household needs to earn at least that much to pay the bills.

When it comes to how much you should save, it depends on the purpose of the savings account.

Emergency fund

The amount you should save for emergencies depends on your monthly bills. For example, suppose you spend a total of $5,000 a month on housing, utilities, internet service, phone plans, student loan debt, car payments, groceries and other essentials. In this case, your emergency fund will be based on $5,000 worth of expenses.

It’s generally advised to save three to six months’ worth of expenses in an emergency fund. With our example, your emergency fund should ideally be $15,000 to $30,000.

It’s best to keep your emergency savings in a liquid account so you can access them quickly and without penalty when you need them. This means a savings or high-yield savings account is usually better suited for an emergency fund than a certificate of deposit (CD) because you won’t have to worry about fees if you need to withdraw cash.

Retirement savings

A good goal to shoot for when it comes to building a nest egg is to save 10%-15% of your pretax income for retirement. If your monthly income is $4,000, for example, then aim to put $400 to $600 a month toward retirement savings.

This is where a 401(k) plan comes in handy because if your employer offers a matching contribution, then you can hit your retirement savings goal more easily. The average American spends about 20 years in retirement, and you’ll need about 70%-90% of your pre-retirement income to maintain your standard of living.

Other savings

Beyond emergency funds and retirement savings, you might also want to save for a wedding, honeymoon, house down payment, home renovations, dream vacation or college fund.

The first thing you should do is put these items in order of importance and focus on which one you want to pay first. From there, your monthly income and expenses will dictate how much you save.

If you want a handy formula to follow, some financial advisers recommend the 50/30/20 rule. Under this rule, at least 20% of your income should go toward savings. Another 50% should go toward necessities, while the remaining 30% should go toward discretionary items.

Strategies to help build savings

There is no one-size-fits-all strategy to build savings because so much of it depends on how much money you earn and how many debts/expenses you have. Somebody earning $40,000 a year and carrying no debt may find it easier to save money than someone earning $120,000 a year if the latter person is loaded down with debt.

But there are some basic steps everyone can take to build savings:

1. Make a budget and stick to it: Saving money requires discipline and sacrifice — which means making a monthly budget and not veering away from it. If your goal is to save $1,000 a month to build an emergency fund, then you need to itemize that $1,000 in your budget and stick to it. This might mean forgoing certain luxuries you can live without.
2. Set up automatic savings transfers: One of the most effective ways to build savings is to set up an automatic transfer into your savings account each month, similar to automatic bill payments for recurring expenses.
3. Open a high-yield savings account: High-yield savings accounts give you the ability to earn a much higher return on your money than you would with a traditional savings account. For example, some high-yield accounts offer an annual percentage yield (APY) of 5.00% or higher, while some traditional savings accounts might only pay 0.01%. That difference adds up in a hurry. You’ll typically find the highest rates at online banks.
4. Invest in CDs: Certificates of deposit can be an effective way to build savings because they let you lock in a fixed interest rate for a set period. If your goal is to buy a house in five years, then opening a 5-year CD with a large deposit can help you get there — especially if the CD pays much better than average rates.

Factors influencing the average American’s savings

Numerous factors can influence the average savings, but the two biggest are earnings and expenses. With everything else being equal, people with higher incomes can contribute more to savings than those with lower incomes. The same holds for expenses — if two people have the same income, the one with lower expenses has more money to put into savings.

Some other factors to consider beyond income and expenses. Data is from the Federal Reserve’s 2022 Survey of Consumer Finances.

• Age: Younger people typically have less savings than older people because they have not had as much time to build their savings. Also, they usually earn lower salaries and often have to put a lot of their income toward major expenses, such as a new car or student loan debt. The average person younger than 35 has $20,540 in savings, while the average person 65-74 years old has $100,250.
• Household size: Marrying and having children can have a dramatic effect on your ability to save money. The average savings balance of a single person under the age of 55 is $19,320. For a single person with at least one child the average is $16,800. Couples with no children have the highest average balance, at $103,140. Couples with at least one child have an average of $73,890.
• Education level: The higher your education level, the better your chances of growing savings. The average savings balance of those with a college degree is $116,010, while those with a high school diploma have an average of $23,380.
• Homeownership: People who own homes tend to save more than those who rent. The average savings balance for those who own homes is $85,430, and for those who rent, it’s $16,930.