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Pulling the Pin Towards Saving for Change

Shannon Davis


Why Aren’t We Saving More Money?


Saving money is one of the most important aspects of financial stability, yet many of us struggle to meet ideal benchmarks. In the United States, the average savings rate per household is around $3,500 annually, roughly 7% of income (Bureau of Economic Analysis, 2023).


For Millennials, the numbers are even more revealing: By age 30, they have saved an average of $15,000 and maintain emergency funds covering about three months of expenses. In contrast, Baby Boomers at the same age had saved approximately $35,000 (adjusted for today’s dollars) and had six months' worth of income in emergency savings (Pew Research Center, 2022).


What Should You Be Saving?

Determining how much to save depends on your unique financial goals, lifestyle, and family

circumstances. However, general savings guidelines can serve as helpful benchmarks. Experts often suggest that by age 30, you should aim to save around 50% of your annual income. This rule of thumb provides a foundation to build wealth over time and prepare for unexpected expenses.


A study by Fidelity Investments recommends using"milestone percentages" to guide your savings. For example:

  • By age 30: Save 1x your annual salary.

  • By age 40: Save 3x your annual salary.

  • By age 50: Save 6x your annual salary.


These goals may seem daunting, but they are achievable with the right strategies.


Maximizing Workplace Retirement Plans

One of the most effective ways to boost your savings is by taking advantage of workplace

retirement plans, such as a 401(k), 403(b), or 457(b). These plans offer several benefits:


1. Employer Matching Contributions: Many employers match your contributions up to a

certain percentage of your salary. This is essentially "free money" or your retirement.

For example, if you contribute 5% of your salary and your employer matches that, you’ve

effectively doubled your savings rate.


2. Tax Advantages: Contributions to traditional retirement plans reduce your taxable

income, allowing you to save on taxes while building your nest egg. Roth accounts, while

not tax-deductible upfront, grow tax-free and provide tax-free withdrawals in retirement.


Pro Tip: A 2023 Vanguard report found that employees who maximize employer contributions

accumulate 50% more savings over their careers than those who don’t.


What If You’re Falling Behind?

If your savings aren’t where you want them to be, don’t panic—it’s never too late to start making changes. Here are some actionable strategies:


  1. Work Longer: Delaying retirement by even a few years can significantly increase your

    savings and reduce the number of years your money needs to last.

  2. Adopt a Frugal Lifestyle: Cutting back on non-essential expenses—like eating out or

    upgrading gadgets—can free up funds to save more.

  3. Explore Side Gigs: The gig economy offers flexible opportunities to boost your income,

    from freelancing to driving for a ride-share service.

  4. Find Support: While the advice to "marry better" might be a joke, having a financially

    supportive partner can make a significant difference in achieving long-term goals.


As personal finance expert Suze Orman says, “Every single penny you save adds up. It all

counts.


Final Thoughts

Saving money isn’t always easy, especially with rising living costs and financial uncertainty. But by following savings guidelines, maximizing workplace retirement plans, and making small lifestyle changes, you can set yourself on the path to financial security.


Remember, the key is consistency. Start small if needed—even saving $50 a month can grow

into thousands over time thanks to the power of compound interest. As Albert Einstein famously called it, compound interest is the “eighth wonder of the world.”


The road to financial freedom begins with a single step—so take yours today.


References

1. Bureau of Economic Analysis. (2023). "Personal Savings Rate."

2. Pew Research Center. (2022)."Comparing Generational Wealth Over Time."

3. Fidelity Investments. (2023). "Retirement Savings Guidelines."

4. Vanguard. (2023). "The Impact of Employer Match on Retirement Savings."

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