By the time you're 25, you probably have accrued at to the lowest degree a few years in the workforce, so yous may be starting to call back seriously about saving coin. But saving might withal exist a claiming if you're earning an entry-level bacon or you have meaning pupil loan debt.

Past age 25, you should take saved nigh $20,000. Looking at information from the Agency of Labor Statistics (BLS) for the offset quarter of 2021,  the median salaries for full-time workers were as follows:

  • $628 per week, or $32,656 each yr for workers ages 20 to 24
  • $901 per calendar week, or $46,852 per yr for workers ages 25 to 34

Financial advisors often recommend saving 20% of your income for retirement, emergencies, and major purchases. If y'all but celebrated your 25th birthday, have earned the median bacon of $32,656 for your age grouping for each of the by 3 years, and are saving the recommended 20%, and then you should accept nigh $twenty,000 in the bank.

Your actual earnings and work history may vary significantly, of course. If you're nowhere near that number, don't panic. Saving 20% of your money is not realistic for many 25-twelvemonth-olds. Even if you're behind on saving, yous still accept enough of time to grab up.

A woman holds her retirement savings in a jar.

Prototype source: Getty Images.

What'southward a realistic savings rate at age 25?

The truth is that saving money at historic period 25 might not be that much easier than saving money at age 21. If y'all spent the past three years earning the median salary of $32,656, your budget is probably pretty tight. More than likely, saving 20% of your salary is impossible -- unless someone else helps with your expenses.

If you actually have $20,000 saved at age 25, y'all're way ahead of the national average. The Federal Reserve's 2019 Survey of Consumer Finances found that the median savings account residue was $5,300 across households of all ages, not only 20-somethings.

If y'all don't have much extra money after paying your bills, don't focus likewise much yet on saving twenty% of your income. Your real goal is to learn to live on less than yous earn and salvage the residual.

How to salve money at historic period 25

Fifty-fifty if you can merely save 5% or x% of your income, that'due south still a adept start if you can commit to increasing that percentage as your income goes up. Follow these tips to heave your long-term savings rate:

Build your emergency fund first

Your first priority is to save three months' worth of living expenses in an emergency fund. That'southward money that you keep in a savings account, not the stock market, then that you can quickly access it if you lot need it.

Eventually, you lot should accept six months' worth of emergency savings. But once you're at 3 months, you lot can focus on another financial goal, besides. For instance, you could put half of your extra coin toward emergency savings and the other one-half toward investing or paying off debt.

Pay off credit cards before student loans

Unless yous take private student loans with unusually high interest rates, yous're probably paying the virtually involvement on any credit card debt you're carrying. Focus on paying off credit cards first and then tackle those educatee loans.

If y'all have federal loans, have advantage of the automatic forbearance that'southward in effect through Jan. 31, 2022, due to COVID-nineteen. Put your loan payments toward credit cards and individual pupil loans that are still accruing interest.

Even if you lot don't accept other debt, consider putting the corporeality y'all'd currently be spending on federal student loans into a savings account. Since your loans aren't accruing involvement during this automated abstinence flow, it makes sense to concord off on paying them. It's also possible that counterfoil of some federal student debt will eventually occur.

Budget for health insurance

If you lot're still on a parent'due south health program under the Affordable Care Act, consider yourself warned. You need to upkeep for and obtain your own coverage by age 26. Commencement planning for the extra expense at present by shopping for an affordable healthcare plan or applying for jobs with companies that offer health insurance.

When y'all don't have health insurance, one unexpected trip to the ER tin drain your savings and get out you lot with significant debt. If only for financial reasons, don't even consider going without health insurance coverage.

Collect your employer'southward 401(thousand) friction match

I of the fastest ways to build retirement savings is to take advantage of a visitor 401(k) match if your employer offers one. Even if your employer only matches 25% or 50% of your contribution, that's still essentially a 25% or 50% return on your investment for the year.

Even if your employer doesn't match your contributions, or you're self-employed, make every effort to invest for your retirement. An individual retirement account such as a Roth IRA is a good choice since withdrawals in retirement, when your tax bracket is probable higher, are not considered income. The money also grows revenue enhancement-gratis in your IRA until it is withdrawn.

Take on a side hustle

If you lot're serious nearly upping your savings game, or have a big goal like achieving financial independence and retiring early on, then you might not want to await around for pay raises from your employer. A side hustle, which can exist anything that generates extra cash, is a great fashion to increase your savings.

A side hustle may not be doable for anybody, but if you tin spare the actress time, information technology'southward definitely financially worth it, particularly when you are young. The younger you are, the more powerful the effects of compound interest are on the value of your portfolio.

Relieve more as you lot earn more than

Even if y'all're not making the big bucks now, the all-time thing you can do to make sure your savings rate increases with time is to start planning today for when you make more money. Keep your expenses depression and decide what's well-nigh important to you.

Every bit your income increases, it's OK if your expenses rise, also. Your costs simply need to increase at a slower stride than your income. Set a goal of saving a certain and increasing percentage of your pay with every raise you get. If you can live below your means and avert lifestyle inflation, then y'all are well-positioned to make your savings balance soar.

Expert Q&A

The Motley Fool defenseless up with retirement expert David John, a senior strategic policy advisor at the AARP Public Policy Establish.

David C. John, MA, MBA, AARP Senior Policy Advisor

David C. John, MA, MBA, AARP Senior Policy Advisor. David'southward areas of focus are retirement savings, pensions, annuities, international pension and retirement savings systems, and PBGC.

The Motley Fool: In 2019, the average retirement account savings for American households was $65,000 with the average American under 35 having $13,000 saved for retirement. Why do yous think this average is and so much lower than what experts typically expect Americans to have?

David John: The short reply is access, participation and portability. Far besides many Americans are not offered a payroll deduction retirement savings account at work. That is the well-nigh successful way to save for retirement. And far also many retirement plans don't apply automatic enrollment and escalation, the most successful way to boost participation and ensure that people are saving enough. Finally, it is too hard to move retirement savings from job to job, so many people simply cash out their accounts when they leave an employer.