Saving & Budgeting Archives | The Financial Geek

Before we run we must learn to walk and before we learn to walk, we must learn how to crawl. That is an analogy I like to use when people ask me about savings. Establishing good savings habits can be the first step toward being financially stable and perhaps one day, financially free. Before you head into the world of investing, you’ll want to have saved a significant amount of capital. So that begs the question: is 100K in savings a lot? Let’s be honest, no matter what country you are in, $100K in savings is a significant nest egg to have. Even in cities with an expensive cost of living like New York, sitting on $100K in cash is a comfortable position to be in. No matter what you use that money for, you would be in a great position to grow your wealth in the future. So what should you do if you are able to save $100,000? The world is your oyster! Having $100,000 in savings is a great start to changing your life for the better. For those of you who are in this beneficial position, let’s take a look at what you can do with it. And for those who want to get there one day, let’s discuss how long it might take you to get there! Is 100K Savings a lot? Let’s start by putting this amount of money into perspective: In 2022, the average annual household income for Canadians was about $75,000. So if you are able to save $100,000 or more, you would be sitting on more than one year of annual income for the average household in Canada. A general rule of thumb that people have followed over the years is to have emergency savings of about three months' worth of living expenses in case anything ever happens. You’ll never know when your roof needs to get fixed or your car breaks down. Obviously, you would hope you would never need to have an emergency cost of $100,000. Still, it feels good to sleep peacefully at night knowing you have enough in the bank to cover anything that comes your way. So if you haven’t realized it yet, $100,000 in savings is a lot. But while it is great to be able to save that much, I don’t recommend that you leave it in your savings account. There are plenty of ways to put that money to work to build your net worth. Let’s take a look at what you can do with 100K in savings! Just Starting Out? Read about what it means to have just $30,000 in Savings What Should I Do if I Have 100K in Savings? The obvious answer is to put that money into some assets that can multiply your savings. This article is not about investment advice. I’ll let you do your own research to find out which assets are best for you. Take into account things like your personal risk tolerance, your investing horizon, and any upcoming costs. What would I do if I had 100K in savings just sitting there? Depending on where you live you can probably use it as a pretty decent downpayment on a piece of property. If you live in an expensive city like Toronto or Vancouver, maybe putting that savings into a high-dividend paying ETF is a better idea. You can earn a decent yield on a fund that pays you monthly distributions. If you’re feeling riskier, you can build yourself a really nice stock portfolio with $100,000. Keep in mind that investing in stocks can take a bit more time, and short-term volatility can cause you to incur some unrealized losses. Investing in the stock market is never a sure thing, but it is one of the best ways to build your wealth over the long term. Can I Retire with 100K Savings? Although 100K in savings is a lot, I wouldn’t recommend trying to retire on it. Unless you have other investments or a great pension, $100,000 will not get you very far in retirement. Even assuming that you won’t need to pay a mortgage in retirement, just your daily living expenses will quickly whittle away that nest egg. Now, I’m nowhere near retirement age, but I would love to do things like travel when I am finished working. Is 100K savings a lot of money? Yes! Is it enough to enjoy your retirement to the fullest? Not even close. So just because you saved $100K, it doesn’t mean you can start thinking about quitting your day job! How Long Will It Take to Save 100K? This really depends on the person. Are you saving the bulk of your salary or income? Very few people are able to save 100% of their income. Let’s just say you had the income of an average Canadian household. Ideally, about 50-60% of that goes to living expenses. What you do with the remainder of your income is up to you. Younger people should be trying to set goals, especially before they take on large amounts of debt like a mortgage. Have a savings target for key age milestones like 21, 25, and 30. Let’s just say you saved 25% of your household income each year. For an income of $75,000, that is about $18,750. So if you put that 25% aside each year and had no additional expenses, it would take you about five and a half years. If you want to do things like travel, I would assume that the 25% might be lower. Remember, the more you spend, the longer it will take to reach your savings goals. Related Financial Geek Article: Budget vs Savings: What's the Difference? The Bottom Line: Is 100K Savings A Lot? Absolutely! It is a great start to building your net worth for the rest of your life. It isn’t, however, an adequate amount of money to consider retiring with. Savings of 100K will open doors to growing your wealth at an even faster rate. The first step to reaching this goal is to develop smart saving and spending habits! Thanks for reading, I hope you learned a thing or two! Geek, out.