By the time you're 25, you probably take accrued at least a few years in the workforce, so you may be starting to recall seriously about saving money. Just saving might still exist a challenge if y'all're earning an entry-level salary or you have significant educatee loan debt.

By age 25, you should have saved nigh $20,000. Looking at data from the Bureau of Labor Statistics (BLS) for the first quarter of 2021,  the median salaries for full-time workers were as follows:

  • $628 per week, or $32,656 each year for workers ages 20 to 24
  • $901 per week, or $46,852 per year for workers ages 25 to 34

Financial advisors often recommend saving twenty% of your income for retirement, emergencies, and major purchases. If you only celebrated your 25th altogether, accept earned the median salary of $32,656 for your historic period grouping for each of the past iii years, and are saving the recommended twenty%, then you lot should have about $20,000 in the bank.

Your bodily earnings and work history may vary significantly, of course. If you're nowhere nigh that number, don't panic. Saving xx% of your coin is not realistic for many 25-year-olds. Even if yous're backside on saving, you yet have plenty of time to catch up.

A woman holds her retirement savings in a jar.

Prototype source: Getty Images.

What'due south a realistic savings rate at historic period 25?

The truth is that saving money at age 25 might not be that much easier than saving money at age 21. If you spent the past three years earning the median salary of $32,656, your budget is probably pretty tight. More than probable, saving 20% of your salary is impossible -- unless someone else helps with your expenses.

If you actually accept $twenty,000 saved at age 25, you're way ahead of the national average. The Federal Reserve'due south 2019 Survey of Consumer Finances institute that the median savings account balance was $5,300 across households of all ages, not only xx-somethings.

If you don't have much extra money after paying your bills, don't focus likewise much however on saving 20% of your income. Your real goal is to learn to alive on less than you lot earn and save the residue.

How to save coin at age 25

Even if you can only save v% or 10% of your income, that's nonetheless a adept first if you can commit to increasing that percentage as your income goes upwardly. Follow these tips to boost your long-term savings rate:

Build your emergency fund commencement

Your get-go priority is to save three months' worth of living expenses in an emergency fund. That's coin that you continue in a savings account, not the stock market place, so that yous can rapidly admission information technology if you demand it.

Somewhen, you should accept half dozen months' worth of emergency savings. Simply once you're at 3 months, y'all tin can focus on another financial goal, likewise. For instance, you could put half of your extra money toward emergency savings and the other half toward investing or paying off debt.

Pay off credit cards before student loans

Unless yous have private student loans with unusually loftier involvement rates, you're probably paying the most interest on any credit carte du jour debt you're carrying. Focus on paying off credit cards first and then tackle those student loans.

If yous take federal loans, have advantage of the automatic forbearance that's in effect through Jan. 31, 2022, due to COVID-19. Put your loan payments toward credit cards and private student loans that are all the same accruing interest.

Fifty-fifty if you don't have other debt, consider putting the amount you'd currently be spending on federal student loans into a savings account. Since your loans aren't accruing involvement during this automatic forbearance flow, it makes sense to concur off on paying them. It'south besides possible that cancellation of some federal student debt will eventually occur.

Budget for health insurance

If y'all're withal on a parent's health plan under the Affordable Care Act, consider yourself warned. You need to budget for and obtain your own coverage by age 26. First planning for the extra expense now by shopping for an affordable healthcare plan or applying for jobs with companies that offer wellness insurance.

When you don't have health insurance, 1 unexpected trip to the ER can bleed your savings and exit you with significant debt. If only for financial reasons, don't fifty-fifty consider going without wellness insurance coverage.

Collect your employer's 401(k) match

Ane of the fastest ways to build retirement savings is to take advantage of a company 401(k) lucifer if your employer offers ane. Even if your employer only matches 25% or fifty% of your contribution, that's still essentially a 25% or 50% return on your investment for the year.

Fifty-fifty if your employer doesn't lucifer your contributions, or you lot're cocky-employed, make every effort to invest for your retirement. An individual retirement account such as a Roth IRA is a good choice since withdrawals in retirement, when your tax bracket is likely college, are non considered income. The money as well grows tax-free in your IRA until it is withdrawn.

Take on a side hustle

If you're serious nearly upping your savings game, or take a big goal like achieving financial independence and retiring early on, so you might not want to wait effectually for pay raises from your employer. A side hustle, which can be anything that generates extra greenbacks, is a groovy style to increment your savings.

A side hustle may not be doable for anybody, merely if you tin can spare the actress time, information technology's definitely financially worth it, especially when y'all are immature. The younger y'all are, the more powerful the effects of compound interest are on the value of your portfolio.

Save more as you earn more than

Even if you're not making the big bucks now, the best thing y'all can practice to make sure your savings rate increases with fourth dimension is to offset planning today for when you brand more money. Keep your expenses low and determine what'south most important to y'all.

As your income increases, it'southward OK if your expenses rise, as well. Your costs but demand to increase at a slower pace than your income. Set a goal of saving a sure and increasing percentage of your pay with every enhance you go. If y'all can live beneath your means and avoid lifestyle inflation, so you are well-positioned to brand your savings balance soar.

Expert Q&A

The Motley Fool caught up with retirement expert David John, a senior strategic policy advisor at the AARP Public Policy Establish.

David C. John, MA, MBA, AARP Senior Policy Advisor

David C. John, MA, MBA, AARP Senior Policy Advisor. David's areas of focus are retirement savings, pensions, annuities, international pension and retirement savings systems, and PBGC.

The Motley Fool: In 2019, the average retirement business relationship savings for American households was $65,000 with the average American under 35 having $thirteen,000 saved for retirement. Why do y'all think this average is so much lower than what experts typically await Americans to have?

David John: The brusk answer is admission, participation and portability. Far as well many Americans are non offered a payroll deduction retirement savings business relationship at work. That is the most successful manner to relieve for retirement. And far as well many retirement plans don't utilize automated enrollment and escalation, the most successful mode to boost participation and ensure that people are saving enough. Finally, it is likewise hard to move retirement savings from task to job, so many people only cash out their accounts when they leave an employer.