The Federal Reserve study of average US Savings Balance (by Age and by Income) shows that 30% of all Americans don’t have enough cash in savings to cover even a $400 emergency. And Bankrate’s most recent survey shows that nearly one in five Americans have no money saved at all to cover an emergency expense.
American households had an average bank account balance of $41,600 in 2019, according to the statistics from the Federal Reserve. The median bank account balance is $5,300 according to the same data. Bank account balances in the conducted analysis include checking, savings, and money market accounts held by American households.
It should be noted however, that the median bank account balance figure provides us a clearer picture of the savings of American households because the average balances are skewed by outliers at the top end that have large balances. Additionally, the data shows that the average bank account balance varies widely based upon other factors such as income, age, race and ethnicity, education, and employment status.
As expected, Income is the strongest predictor of bank account balance, with Americans in the top decile of income having average bank account balances over 27 times higher than Americans in the lowest quintile. Having more income makes it easier to save money and therefore the income factor has a direct correlation with the amount of the average bank account balance (see table below).
Age shows a strong correlation with bank account balances, as the accumulation of savings over the length of time gives people the ability to build up a high savings balance. The average bank account balance rises with age, peaking in the 65-74 age range, before declining for those 75 and older as they draw down their funds in retirement.
| Age Group | Median Annual Household Income | Median Bank Account Balance | Average Bank Account Balance | Minimum Suggested Savings For Emergencies (3-6 mo)* |
| <35 | $47,736 | $3,240 | $11,250 | $11,935-$23,870 |
| 35-44 | $88,858 | $4,710 | $27,910 | $22,215-$44,430 |
| 45-54 | $92,221 | $6,400 | $48,200 | $23,055-$46,110 |
| 55-64 | $75,686 | $5,620 | $57,670 | $18,922-$75,684 |
| 65-74 | $56,632 | $8,000 | $60,410 | $14,158-$28,3114 |
| 75+ | $37,335 | $9,300 | $55,320 | $9,334-$18,665 |
*Minimum Suggested Savings For Emergencies is based on the Median Annual Household Income listed here.
Summary
The data shows that for many American households a higher savings balance is needed to be prepared for unforeseen emergencies. It is typically suggested to have three to six months of expenses in an emergency account. At the very least, aiming to have $1,000 handy in a savings account for unexpected expenses is recommended.
Financial planners recommend a quick and easy way for you to budget your money following a 50/30/20 rule, where after-tax income is allocated as: 50% to “needs,” 30% to “wants,” and 20% to savings. Of the 20% savings, a minimum of 10% is recommended for Retirement savings (such as 401K, IRA etc). The remaining 10% is recommended to be saved in a FDIC Insured High Yield Savings account.
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Sources:
- Federal Reserve Board, Survey of Consumer Finances, 2019
- Advisorsmith.com
- Statista.com
