Any amount of money put into savings can be a good thing. It enables you to take full advantage of compound interest and, in some cases, tax advantages if invested in a retirement account.
One of the ways to gauge how well you’re doing is to consider how you stack up to other Americans. While there are many methods to determine this, consider the following measures specifically.
Here’s how to tell where you stand financially based on your savings compared to the average American.
Make Money: 8 things to do if you're barely scraping by financially
1. You have a high-yield savings account
Do you use a high-yield savings account? The average interest rate on a regular bank savings account in December was 0.61% annual percentage yield (APY), according to Bankrate. But a high-yield account may pay as much as 4%.
The rate of interest is variable and can change often. But putting your savings or emergency fund into a high-yield account will earn more money . Look for an account with a low minimum investment to earn the highest annual percentage yield.
Own a car? Here's 7 warning signs you're paying too much for car insurance. 2. You’re contributing to retirement accounts
Are you putting money into your savings for retirement specifically? Doing so gives you a big boost because of the tax advantages of these accounts, as well as planning for your future.
In 2020, 58.1% of baby boomers had a retirement account. According to U.S. Census Bureau data, Gen X members followed with 56.1%, and just 49.5% of millennials had a retirement account.
3. You have an emergency fund
An emergency fund can be one of the most important tools to avoid borrowing for unexpected expenses, but not everyone has one.
Having an emergency fund means putting money into a savings account that’s accessible if you need it but that’s untouched unless there is a true emergency need. It can help you recover from a financial shock.
Enjoying our content? Click the Follow button above to see more from us.
4. You’re paying less in credit card interest
How much interest are you paying on your credit card debt? According to data from Bankrate, the average credit card interest rate in November was 20.72%.
Among all cardholders, 47% carry debt from month to month, according to a Bankrate survey. If you don’t carry a credit card balance, you’re doing better than nearly half of all cardholders.
And that interest rate on credit cards is among the highest for all types of borrowing.
5. You no longer have a mortgage balance
Owning your home without carrying a mortgage may mean you’ve worked hard for years to pay down the debt . It also means you are one of the few people in this position.
According to U.S. Census data, nearly 40% of homeowners in the U.S. owned their homes outright in 2022. That’s up from 7.9% in 2012. Not surprisingly, most of those who are mortgage-free are nearing retirement age.
6. You know how much you need to retire
Have you thought about and created a plan for retiring? Many people are working hard to meet their daily financial needs and don’t think much about something that will happen decades from now.
If you’ve done the math and know how much you need in the bank to reach your financial goals, you’re doing better than many Americans.
There’s no surefire dollar amount that works for everyone, but you should be maxing out your retirement savings each year to be sure you’ll have enough to retire.
Get Out of Debt for Good: Try these 6 clever ways to crush your debt 7. You own your home
If you own your home instead of renting, you’re doing better than many Americans. Data from the National Association of Realtors found that, in 2021, about 65.5% of Americans owned their home instead of rented, up 0.4% from the prior year.
Owning a home gives you numerous advantages, including a low-cost way to borrow money if you need it using your home equity. Eventually, you’ll pay off the mortgage, meaning that monthly mortgage payments will eventually disappear.
8. You’re using a budget
A budget is a very helpful financial management tool. It lets you know exactly how much money you need each month, how much you’re saving, and how much you're spending on “wants.” Every component of it can help you to reach your financial goals.
One survey completed by OppLoans found that 73% of Americans don’t follow a budget on a routine basis, and about 10% don’t maintain a budget at all.
9. You’re paying off your credit cards routinely
Here’s another way you’re standing out: You pay off your credit card balance in full each month. Using credit isn’t bad, especially when it helps you manage your money in one space.
The next level of success comes from having a cash back credit card that you pay off each month. You’re using the credit card issuer’s money without paying interest and earning some cash back. But you must pay the balance in full every month, or you’ll lose money.
Grow Your $$: 11 brilliant ways to build wealth after 40
10. You’ve been saving money most of your working life
The sooner you start putting money into savings, the better. That gives it time to build and grow in value, especially considering long-term compound interest.
While funding a retirement account at a young age is ideal, any type of savings account can be beneficial to use to get started on building wealth now.
11. You maximize your retirement contributions every year
In 2024, the allowable limits for contributions to tax-advantaged savings plans were $23,000 for 401(k) or 403(b) plans or $16,000 for SIMPLE plans. Are you putting that much into your savings each year?
If you are over 50, you can make an additional catch-up contribution of $7,500 for 401(k) and 403(b) plans or $3,500 for SIMPLE plans. If you’re hitting the max each year, you’re getting the biggest bang for your buck.
12. You use college savings plans to fund your children’s costs
Another way to put yourself in a better financial position is to utilize the tax breaks from college savings plans, like 529 plans.
Not only does this offer you a way to pay for your child’s or grandchild’s college tuition at a more affordable rate, but it also gives them the ability to start their adult life without a significant amount of debt on their shoulders.
Are you a homeowner? Discover 8 savvy money moves to stretch your budget
13. You own stock or other investments
Look beyond retirement savings and accounts to other types of investments you have. Are you putting money into stocks and bonds? Do you own real estate that provides an income stream? You could be in a smaller group of people that do.
Less than 60% of Americans say they own some type of stock, and some do that through their retirement accounts.
14. You have an HSA
A health savings account (HSA) is a way to help you cover costs related to your health care beyond what your insurance pays, including out-of-pocket expenses. Yet, according to the Center on Budget and Policy Priorities, only one in six people have one.
Contributions to an HSA are tax-deductible, and the earnings and withdrawals are tax-free if used for qualified medical expenses.
Unlike a flexible spending account (FSA), HSA money has no deadline for when it must be used. You can save now and use the funds to cover expenses in retirement. To open an HSA, you must be insured in a high-deductible health plan.
15. You have a plan to pay down high interest rate debt
Most Americans have some debt, whether good debt like a mortgage or bad debt like credit cards. What puts you in a better place than some is that you’re working to pay it down. Even if you have a lot of debt, planning to get out of it sets you on the right path.
Getting out of debt isn’t simple, but having a payment strategy, like the snowball or avalanche method, shows you’re trying to pay off your debt for good.
Bottom line
Are you feeling like you’re not hitting all the marks here? You’re not alone, but that doesn’t mean you can’t make big changes now that will help you build wealth and a better financial future.
Now may be the perfect time to tackle just one of these areas to put yourself on a better financial path for the future. You can start by paying down your debt, then use the extra money you’ll have to invest in a high-yield savings account.
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt . Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
Local News
Comments / 0