Just how much money should you have in your bank accounts?
If you were lucky you had parents that said something like “You should save money for emergencies.” or gave you some financial advice. However, I suspect many people have become adults with virtually no financial advice or education.
That’s not too much of a big deal when you are in your twenties and are just trying to make enough money to survive. Hopefully, most people will at some point transition from financial survival to planning for the future.
Just in case you aren’t a math nerd:
Median indicates half the people are below this and half the people are above this.
Mean or average indicates if you add everyone together and divide by the number of people you get a value that gives you the average. The problem with just looking at averages is that just a few extremely rich (or poor) people can throw off this number resulting in a distorted view. Thus we really want both numbers to give us a decent idea of how typical people are actually living.
How do you compare to other Americans? Don’t get too hung up on exact numbers, surveys and other forms of measurement aren’t always very accurate.
First let’s look at income. Median income in 2022 was $54,000 a year. Average income in 2022 was $71,000. So if you make less than $50,000 per year you are in the bottom half. If you are making more than $70,000 you might be considered as doing okay. Keep in mind this depends a lot on your age range (the young and the old make less money). So if you are 35 to 54 years old (these are your prime earning years), then factor this up a by 10% or so. 17% of Americans made more than $100,000 in 2020.
My bias is from making a good living my entire life. Fortunately one of my customers hired me into upper management at the age of 24. So I’ve done “well” even if I do feel “broke” (it seems to me like everyone makes more than I do – of course ten years ago I took a $50,000 pay cut for my current position thus for the past ten years I’ve felt like I’ve made a poor income). Personally I’ve experienced a few financial catastrophes that have devastated what otherwise would have been a good lifetime of earnings. Cry me a river, but I know that many other people have experienced catastrophes too. That personal information is to help my readers understand just how much our own personal experiences can influence our viewpoint!
First of all, we know that the wealthiest 0.1% have a huge amount of our total wealth. I’m not looking at them (they aren’t likely to be reading my articles!).
In 2019, the median bank account balance was $5,300, with the average bank account balance being $41,600. This tells us that a huge number of people have almost no money in the bank and a few people have probably some very large amounts in their bank accounts.
Keep in mind that any money sitting in a bank account is losing value (due to inflation) so you don’t want a lot of money just “sitting around” but at the same time you want some savings “for the future” and to handle emergencies. The typical advice being three to six months worth of earnings.
So using simple numbers let’s say your income is $60,000 a year or $5000 per month. So your emergency cash savings should be about $15,000 to $30,000. That should allow you to deal with life’s ups and downs.
Let’s not overlook the obvious, the easiest way to stay poor is to spend more than you make! Just because you have money, doesn’t mean you should spend it! Cutting back on expenses can seem impossible, too many of us think we can’t live without something. Well, you probably can and you’d be surprised how a few small cutbacks help! Do you have more than one streaming video service you are paying for? Is your cell phone plan far more expensive than you actually need? Are you burning money by eating out?
Now there are two different aspects of wealth:
Maintaining wealth
Growing wealth
For growing wealth, you want investments. By their nature, investments are risky. You might lose money! Anyone that has had a lot of money in the stock market for the past year is painfully aware of this now.
Yes, you can build wealth in bank accounts as long as you can save more cash from your income than your bank accounts lose due to inflation. This is not a good strategy for building wealth.
How much does a typical American have in investments? This is where most people apparently are lacking! Only 53% of families owned stock in 2019. Of those people the median value was $40,000. So if your stocks value is above $40,000 then you are doing better than most people. Perhaps an even better way to build long term wealth is buying a home.
Image courtesy of RawPixel.com
Only two out of three people own a home. Let’s assume you own a home and you are building your investments (mostly stocks). If you don’t have a home yet, keep in mind that maintenance costs and repairs are far more than you would imagine! Plan for it! Keep a serious amount of cash on hand to fund this!
For maintaining wealth you want something that isn’t very risky, something that will retain value. You might think that would be cash in the bank, but cash in the bank is always losing value (due to inflation). Gold on the other hand has for the entire history of civilization retained value (even if the current exchange rate to some other currency bounces around and is wacky at times). In general though, as with investments, you don’t want to buy gold at a “high” (it will typically change $20 to $50 per ounce up and down every day). The challenge of course is knowing what is a “high price”. People freak out when wars break out and then precious metals prices will peak (like they did at the outbreak of the war in Ukraine) but future crisis concerns can repeatedly make more and more spikes, the trick is to know what a reasonable value is for the current economic conditions.
Gold is not an investment. You aren’t going to make a fortune buying and selling gold. However if you can perfectly predict the changes there is some opportunity for good growth. But it’s really important to understand the primary value of gold is to retain wealth.
So how much gold should you have?
Gold sits somewhere between ready cash in a bank account and investments. You don’t want to have to sell your stocks when the market has crashed. Wisely purchased gold can be fairly readily converted to cash when and if necessary.
Gold is great to own when civilization is collapsing (right now). But gold isn’t particularly great to have when times are booming (1950 to 2000). My opinion is that boom times are gone for now (probably for the next ten to fifty years). So it seems wise to have a significant amount of gold now. Perhaps 25% to 50% of your long term investments.
So if you are smack dab in the middle of Americans, but you are doing well and actually own a home and have some stocks. Let’s use some imaginary numbers:
Cash in the bank – about $10,000
Own your own home (even if you are still paying a mortgage on it)
Investments (stocks, bonds, etc) – about $50,000
If you are in roughly that situation, you may want to consider building a stockpile of gold (I recommend using Glint) worth about $20,000 to $30,000.
If civilization stops collapsing, then you probably want to stop building your gold stockpile. As long as civilization continues to collapse you probably want to put the majority of your savings / investment into gold and keep building wealth.
What about silver? In a “SHTF” scenario, then having silver would be very, very valuable. I do recommend keeping a few thousand dollars worth of silver on hand. But the premiums on buying and selling silver are very high so it is a terrible item to “trade” or build wealth in.
Do you have a different viewpoint? What are your opinions? Please comment! Let’s put our heads together and help each other manage the turbulent times we are in and prepare for the future.
Wealth & Savings
https://usafacts.org/topics/wealth-savings/
Median and Average balances
https://www.valuepenguin.com/banking/average-savings-account-balance
Average American Savings
https://www.firstrepublic.com/insights-education/a-look-at-the-average-americans-savings
Average Income
https://www.firstrepublic.com/insights-education/how-much-does-the-average-american-make
I like all this . Many of us have zero clue how to financially be okay. I think you should write for the ones who aren't working at all or working so little. What's a simplified easy to know or to do for people who are majorly struggling.