“Emergency funds, retirement, debt payoff, college costs – overwhelming is an understatement when it comes to how we should prioritize our savings. We know we should be saving, but where and how much?”
According to Forbes, saving for your kids’ college funds shouldn’t be in the top-three priorities. What are the three things you should tackle before other financial needs and wants?
Putting away for retirement
Paying off debt
Then, you can begin to focus on other financial things, such as college funds and early mortgage payoff.
You never know what might come up, which makes savings for a rainy day important.
Emergencies come up. “But a lot of Americans aren’t ready for them financially, according to new research from the New York Federal Reserve.
“The average American age 40 or under says there’s nearly a 50% chance they would not be able come up with $2,000 next month if there were an emergency.”
“Overall, Americans said in October there was a 34% chance they couldn’t come up with that amount of money if they had to. That’s down from a 42% chance in 2013 when the New York Fed first started asking the question in its Survey of Consumer Expectations. But it’s still up from 32% in February.” (Gillespie, Patrick. “Many Americans Don’t Have Enough Emergency Cash. CNNMoney. Cable News Network, 7 Dec. 2016. Web. 12 Dec. 2016.)
In a Bankrate survey, half of Americans are saving 5% or less of their income, with only a quarter saving 10% or more.
That’s far below the recommended 15% savings that Bankrate recommends — only about 1 in 7 Americans are saving that much.
The middle class appears to be doing the most saving, with 35% of income earners of $50,000 to $74,999 annually saving more than 10%. Those in the $75,000+ annual wage bracket are a close second, with 32% saving 10% or more of their income.