If you’re a millennial, there’s a good chance that you grew up in a time of economic uncertainty. Unless you managed to grow up during the housing or dot-com bubbles, this generation is probably the first one that experienced prolonged joblessness and stagnating wages. In order to help millennials reach financial independence earlier than previously possible and prevent them from becoming financially dependent on their parents, many financial institutions have identified 21 as being an age when people should start thinking about building their savings. In this article, we will answer some of the most common questions about how much money you need to save by 21, how much time it might take and what types of investments are best for achieving this goal.
How Much Money Should I Have by 21?
The amount you need to save by 21 depends on a few factors, such as your current earnings and the amount of money you have available to put away. If you are currently employed, you should have a good estimate of how much you will be making by that age. If you are planning for an advanced degree or have prior savings experience, you can increase your savings goal by a significant amount. However if you are planning to quit your job and become a full-time student, you should first reduce your goal by a significant amount to avoid running out of money before getting a degree. If you don’t currently have a savings goal, you can start with a relatively low amount and increase it over time. The table below outlines the amount of money you will need to save by 21 if you have the following assumptions: You have an annual salary of $50,000 You currently have $10,000 saved You will be saving 10% of your salary You will be 25 when you start saving This percentage increases to 15% if you are currently in school You will be in debt for 10 years after graduating You will be earning $75,000 once you are debt free.
What Types of Investments Are Best for Savings by 21?
Regardless of your age, having a large amount of money in the bank is not a good idea. Instead, your money should be invested in a variety of different assets that can generate a reasonable return while keeping your money safe. Investments such as stocks and government bonds generally have a moderate risk of losing value, but also a moderate return. Investments that have a high degree of certainty, such as cash, generally have a lower return but no risk of loss. When it comes to a savings goal, the types of investment you choose should closely follow the goal you have for your money. For example, if your goal is to fund your children’s education, you might want to invest in higher-yielding investments like stocks. On the other hand, if you have a more immediate goal, like paying off your debt, you might want to choose a safer investment like cash that has the potential to generate a higher return over a shorter period of time.
Is it realistic to save an amount equal to your annual salary by 21?
There are many factors that determine whether you will hit your savings goal by 21, but one of the easiest ways to estimate whether you will make it is by trying to reach it now. That way, you will have a good idea of whether you have the willpower to increase your savings once you get there. If you are currently saving 10% of your salary, you will need to increase that amount by 25% by 21. 8 In order to do this, you will need to start saving as early as possible, preferably before you are even aware that you will be saving by 21. Once you have that amount saved, you can continue to increase your savings rate every year until you hit the 25% needed to reach your savings goal.
How long will it take to save for this goal?
There are a number of factors that will affect the amount of time it takes for you to save enough money for your goal. One of the most important factors is how much money you start with. If you have a large amount of money saved now, you will be able to make more progress on your savings goal. That said, it is also important to remember that your savings rate will increase as you approach 21 and get closer to your goal. There are also some seasonal factors that can affect how quickly you reach your savings goal. For example, if you live in the south during the summer when people are on vacation and are less likely to be working, it might take longer to get to your goal. Similarly, if you have a birthday coming up that you want to celebrate, you might want to adjust your savings goal to account for this.
Conclusion
Saving for your future is not a challenge you should take lightly, but it is also not something you should put off until later in life. Once you start, you will be able to see your savings grow, which can be an extremely satisfying feeling. This article will give you a great overview of how much money you need to have saved up by 21, what types of investments are best for savings and will help you get started by providing a timeline for when you will have enough money in the bank.