How Much Money Should I Have Saved by 21? (In Reality)


There’s no shortage of articles on the 50-30-20 rule, where you’re supposed to allocate 50% of your income on essential expenses, 30% on non-essential costs, and the final 20% on savings.

But like most rules, it looks easier on paper than it is in practice, especially if you’re only 21 years old.

So how much money should you have saved by 21 years of age?

By age 21, you should try to start saving 20% of your income per the 50-30-20 rule. But if that’s not doable for you, it’s okay to adjust your financial goals accordingly. 

Throughout this article, I’ll give you some concrete figures on how much money you should have saved by age 21 and I’ll go on to talk about how much money the average 21-year-old has.

So if you were like me as a 21 year old and you’re a little concerned about your financial future, read on to learn more about how and where you should save your money as you enter into your twenties.

Related Financial Geek Article: How Much Money Should a Teenager Save?

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How Much Money Should a 21 Year Old Have Saved?

Let’s say your annual salary is $22,620, which is the average for 16 to 19-year-olds in the workforce. Let’s also suppose your income goes up to $29,962 by the time you’re 20. If you’re following the 50-30-20 rule, how much should you have in your savings account once you turn 21?

A 21-year-old should have $24,088.40 in savings. That assumes the person has been working since they were 16, earned $22,620 per year up to their 19th birthday, increased their salary to $29,962 by the time they’re 20, and followed the 50-30-20 rule. 

But if you feel 20 grand is an unrealistic savings goal, you’re not alone. Many young adults don’t even have near this amount, so how are they supposed to have that much? 

How Much Money Does an Average 21 Year Old Have?

“Twenty-four grand? I don’t even have a quarter of that!”

I’ll bet you thought something along those lines when you saw the numbers I crunched earlier.

And if so, you’re not alone. But don’t worry.

The average 21-year-old has less than $1,000 in savings. Almost half (46%) have no savings whatsoever, according to a 2017 survey by GoBankingRates. Per the Federal Reserve Survey of Consumer Finances’ 2019 data, savings are increasing but still fall short of the 50-30-20 target.

You may not want to be the next Jeff Bezos. But you still need enough money to tide you over once you’re too old to work.

Related Financial Geek Article: 6 Harsh Consequences of Not Saving Money

How Can a 21 Year Old Earn and Save Money?

I’m not going to tell you that saving money is easy. You may have to give up on a few things depending on your current income and expense levels. But if you’re willing to secure your financial future by any means necessary, then read on.

A 21-year-old can earn and save money in the following manner: 

  • Calculate your current income and expenses.
  • Check which costs you can cut.
  • Work from home.
  • Maximize discounts and promos.

Let’s go more into depth on how 21-year-olds can earn and save money.

Calculate Your Current Income and Expenses

Before you formulate any savings schemes, it’s crucial to assess your current financial situation honestly.

To do that, follow these steps:

  1. Check your tax return. If you’re eligible to file a tax return, take your income after deductions and taxes as indicated on your return.
  2. Check your bank statements. If you’re still using your parents’ debit or credit cards, ask them for a copy of their statements and pick the expenses that belong to you.
  3. Check receipts and other proof of expenses. If you don’t put every cost on your debit or credit card (you pay in cash), collect as much documentation as you can about the ones that don’t show up on your bank statement and add those to your total expenses.
  4. Deduct your expenses from your income. The result equals your current savings.

Are you satisfied with your current savings? Not surprisingly, most people aren’t, so you’ll need to further refine your saving efforts.  

Check Which Costs You Can Cut

Saving doesn’t always mean depriving yourself of the “fun” stuff. Here are some ways you can cut down on expenses while still maintaining a high quality standard of living.

  • Buy budget-friendly meals from cheaper restaurants with good reviews.
  • Get the newest video game only after you’ve read enough praise about it.
  • Switch to a cheaper streaming service for your entertainment needs (or use your parents like I do).
  • Buy clothes only when your old ones become worn out or don’t fit you anymore, or buy secondhand.  

Related Financial Geek Article: 8 Tips for Moving Out (of Your Parents) With No Money

Work From Home

Do you have extra time but don’t want to work another job where you have to stand for hours behind a counter? If you have skills like writing, graphic design, or computer programming, you can find work from home jobs on websites like:

  • Upwork: Upwork claims to be the largest freelancing marketplace in the world. You can get pretty much every job you can do online from there. However, many people don’t like this site, as they can’t control their earnings, so play at your own risk.
  • Guru: Like Upwork, Guru offers a wide gamut of online work. You may have to obtain verification to get better-paying jobs. 
  • Flexjobs: If you want to make sure your employer is legitimate, Flexjobs is the way to go. The site offers countless remote work opportunities from reputable companies.
  • ProBlogger: If you’re a decent writer, ProBlogger is a job board that you can search and apply for jobs for free. And, you’re in better control of your income, because everything you make, you keep.

Maximize Discounts and Promos

If you’re like most teenagers, you probably shop online.

You can use an app like Honey to help you find ways to save money. The app automatically detects promos, discounts, and cash back opportunities that you can then use to put a few more dollars back into your account after shopping.  

Where Should a 21 Year Old Save Their Money?

Saving doesn’t only involve increasing your income and decreasing your expenses. There are actually ways to make money work for you instead of the other way around.

If you’ve read my blog before at all, you know how I feel about investing and compound interest. I think it’s the best way for a middle class earner to become a millionaire.

But it takes time, and lots of it.

In other words, as a 21 year old, if you invest 10% of your income over the course of your working years, say from 21-65 years old, and you earn an average of a 7%-10% return over that 45 year period, you will be able to retire very, very comfortably.

So while I never really like to give out specific investment advice on where to invest money, I’d highly recommend any 21 year old out there to learn more about how they can properly invest and grow their money for retirement.

Conclusion

Don’t lose hope if your current savings is below 20% of your yearly income. But with that said, you should still save to the best of your ability to ensure that you’ll retire with little to no financial worries.

As always, thanks for reading.

Geek, out.

Time to Start Saving?Our RecommendationsStart Saving Today
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Betterment

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Noel

Noel is the founder and main contributor for his blog - Noel's passion for personal finance has helped him amass over 600k readers to his Financial Geek blog.

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