Gen Z has faced challenges entering adulthood, including the impact of the COVID-19 pandemic, inflation, rising homeownership costs, and political uncertainty. Given these circumstances, it is important to have a financial safety net in place. But how much should you aim to save?
For middle-class Gen Z individuals earning between $40,000 and $60,000, the recommended savings goals include establishing emergency funds, contributing to retirement savings such as a Roth IRA or 401(k), setting aside short-term savings for specific goals like travel or a new laptop, and possibly investing in brokerage accounts.
Emergency savings should ideally cover three to six months’ worth of expenses and be kept in a high-yield savings account for urgent situations like car repairs or medical bills. Retirement savings should target around 15% of your income, although starting with 5% is a good initial step. A common guideline is to have your annual salary saved by age 30, which includes investment growth.
Short-term savings are for upcoming expenses like moving or travel, and setting specific goals can help you plan accordingly. While the median net worth for individuals under 35 is around $39,000, it is essential to focus on your personal financial journey rather than comparing yourself to others. If you haven’t saved much yet, know that many in your age group are in a similar situation, and the key is to start building your savings habit gradually.
Start saving now, even if it’s just a small amount. Putting aside $25 a week can add up to $1,300 a year, which could be used to create your first emergency fund or begin a Roth IRA. Take advantage of opportunities that give you a head start, such as contributing enough to your 401(k) to receive the full match from your employer – essentially, free money.
Building savings on a middle-class income doesn’t require major sacrifices. Simple habits can make a big difference: automate transfers to savings, use a budgeting app to identify overspending, negotiate lower interest rates on debt, cancel unnecessary subscriptions, and opt for dining in instead of eating out.
Remember, there’s no specific savings target for Gen Z individuals, but focusing on building emergency savings, contributing regularly to retirement, and setting aside money for important expenses is a good start. By following these steps, you are on the right track to financial security.
For more financial tips and news, visit GOBankingRates.com.
