How Much Does the Average 21-Year-Old Have Saved?
Explore typical savings for 21-year-olds, key factors influencing their financial standing, and common ways they manage their money.
Savings levels for 21-year-olds in the United States vary significantly. While statistical averages provide a general benchmark, they don’t fully capture the diverse personal circumstances shaping a young adult’s financial standing. This overview explores typical savings amounts for this age group and key factors influencing accumulation.
Understanding Typical Savings Amounts
Financial data for 21-year-olds is often reported within broader age brackets, such as the “under 35” group. Insights from the Federal Reserve’s Survey of Consumer Finances indicate average savings account balances for this demographic range from $11,200 to $20,540.
It is important to distinguish between “average” (mean) and “median” savings figures, as the median often provides a more representative view by mitigating the impact of exceptionally high or low outliers. For individuals under 35, the median savings in transaction accounts, which include checking and savings accounts, ranged from $3,240 to $5,400. These figures highlight the considerable variability in financial positions among young adults.
Factors Influencing Savings Levels
Several factors contribute to the wide disparities in savings levels among 21-year-olds. Employment status plays a significant role, as full-time workers generally have more disposable income than those working part-time, attending school, or unemployed. Income levels from entry-level positions often provide limited financial flexibility after covering basic living expenses.
Educational background and student loan debt also heavily influence saving ability. The average student loan debt, including private loans, can be as high as $42,673 per borrower, with federal student loan debt around $39,075. Such debt obligations can significantly reduce disposable income, making it challenging to allocate funds towards savings and delaying consistent saving habits.
A young adult’s living situation is another determinant of saving potential. Those living at home with parents often incur lower expenses for housing, utilities, and food, freeing up more income for savings. Roughly 45% of young adults are completely financially independent. Many who live with their parents contribute to household expenses, with 65% paying for groceries or utilities and 46% contributing to rent or mortgage. Conversely, individuals living independently face the full burden of housing costs and other associated bills.
Geographic location dictates the cost of living, which in turn impacts savings. The average annual cost of living for a U.S. household was $77,280 in 2023, though these costs vary widely, with some major cities exceeding twice the national average. Living in a high-cost urban area typically requires a larger portion of income to cover necessities, leaving less available for savings compared to living in a region with a lower cost of living.
Financial literacy and personal habits are important in shaping savings outcomes. A strong foundation in financial literacy helps young adults make informed decisions about budgeting, spending, and avoiding excessive debt. Without this understanding, individuals may struggle with money management, hindering savings accumulation. Financial education can positively impact long-term behaviors like building an emergency fund and saving for retirement.
Parental or family support can substantially influence a 21-year-old’s savings trajectory. Nearly half of parents with adult children provide some form of financial assistance, with Gen Z adults receiving an average of about $1,515 monthly. This support, which often covers expenses like housing, cellphone bills, or tuition, can enable young adults to save more of their earned income.
Common Ways Young Adults Save Money
Young adults use various financial instruments to manage and grow their savings. Traditional savings accounts are a primary choice for many, offering a secure and easily accessible place to store liquid funds for short-term goals or unexpected expenses.
Establishing an emergency fund is a critical component of financial stability for young adults. Financial experts commonly recommend setting aside enough money to cover three to six months of essential living expenses. These funds are typically held in interest-bearing savings accounts or money market accounts, which offer liquidity and minimal risk. The purpose of an emergency fund is to provide a financial safety net for unforeseen events, such as medical emergencies, car repairs, or periods of unemployment.
Beyond immediate needs, many 21-year-olds consider long-term savings vehicles, particularly retirement accounts. Roth IRAs are a popular option, allowing individuals to contribute after-tax dollars, with qualified withdrawals in retirement being tax-free. For 2024, the maximum contribution limit for those under age 50 is $7,000, subject to income limitations. Another common retirement savings vehicle is a 401(k) plan, typically offered through an employer. Employees can contribute a portion of their pre-tax income, up to $23,000 in 2024, and many plans include employer matching contributions.
Some young adults also explore general investment accounts, such as brokerage accounts or platforms offering robo-advisors, for longer-term wealth accumulation. These accounts allow for investment in assets like stocks, bonds, or mutual funds, aiming for growth beyond what traditional savings accounts offer. The choice of savings vehicle often aligns with an individual’s financial goals, risk tolerance, and access to employer-sponsored plans.