Hey guys, it's Ashley. If you're watching this video, you are already doing better than most people because most people don't have any savings and aren't planning to start saving anytime soon. 12 of Americans have no savings whatsoever. 25 of Americans have less than 100 dollars to their name and if you include the don't know and prefer not to say 60 of Americans have saved less than one thousand dollars.

The distribution in the UK is slightly different, but the result is the same: 59 of this side of the pond have less than one thousand pounds in savings and the paycheck. The paycheck report put together by Lending Club and payments earlier this year said that 60 of the United States consumers left paycheck to paycheck I.E Not saving money. So how much money should you have saved by what age? Well, I'm going to break this down and explain in numbers how much you have to save. You might actually be surprised because the amount that you have to save might be less than you think, but you also have to remember that there is an element of it.

depends because most of you watching are based in the US or in the UK, but some of you will live in big expensive cities like London or New York where you have to remortgage your house just to go out for dinner and some of you will live in rural Mississippi or in Durham in the north of England where things tend to be a little bit cheaper. Some of you might live in much cheaper countries so you've got to adjust the numbers for where you live and where you will want to live later, because ultimately, that's where you will be spending those savings. You also have to ask yourself the question of what are you saving for and one obvious answer is retirement because the state pension isn't going to get you far if it exists. At All By the time you retire, and if you want to not have to choose between eating and heating your house in the winter, you might want to save up some of your own money too.

But you also don't want to live your whole life just saving for when you rolled. You don't want to live today in order to fund your life tomorrow as the primary objective, because when you get there when you get to that old age and you've been spending your entire life saving, you might wish that you lived a little when you were younger and your joints worked a little bit better. So you really want to save enough to live off your savings and retire well whenever you feel like it. So let's start at the beginning.

You're 22. Maybe you've just finished. College University Whatever. You are probably broke because you are in a load of debt and have been busy studying or partying to actually earn any money at all.

And you know what? That is. Absolutely fine. That's where most people start. Nobody has a big pile of savings age 22 and you are doing a okay.

But if you want to build up your wealth over time, there is one super important lesson that you must learn in your 20s about debt. After you got into the initial pile of debt. with your college education and whatever else that entails, you want to never take on more debt except in two specific situations. Because carrying debt is an anchor to Europe ability to save money for your ability to build wealth.

Instead of putting money into your savings pile, you're paying interest. You're paying fees, You're paying refinancing fees, monthly debt repayments, and you don't want to be doing those things. The two exceptions to this ruler: One: Everyone's got to live somewhere and you will at some point want to buy a house. And unless you hit the big time quickly or have Rich parents or something, you will need to get a mortgage and that's perfectly fine.

Owning a property is great. It gives you a lot of benefits over renting. I'm not going to go into that. That's a separate topic for another video.

but don't make the mistake of thinking that your house is part of your savings because a lot of people seem to be misguided seem to think that the place that they live the roof over their head is an investment. This is the mentality that's been borne out over the last couple of decades. The place you live is not an investment. it is a liability.

You will have to pay every month to live there. Every month you have to Fork out money and you have to pay taxes. You have to pay fees, you have to pay maintenance and things will break all the time. And I would not Bank on property prices going up forever relative to wages as it has been because that's unsustainable.

But yes, buying a house is often a good idea for other reasons, and borrowing to do it is just fine. especially if you're watching this video. Maybe I don't know. Five years time when interest rates are not going up every single month.

In buying a house, the debt acts as leverage. You can buy a lot more house than the amount of money that you have for the deposit, and Leverage is one of the least understood but most powerful. Tools in finance. And the other reason that you might want to borrow money is to grow your income.

This is also a perfectly good reason to get into debt if you just decide to do it. Sometimes you might want to borrow money for learning new skills. For example, maybe doing some kind of additional training, maybe doing more education so you can get a job that pays more. Some of you might start your own business, maybe your own side hustles, and for that, you might also need to put in a bit of initial Capital continuously putting in more money to get the business going to grow the business.

If your business idea is good and it works out, borrowing money to fund it can also be a very powerful example of Leverage because the business may be producing so much revenue after that initial outlay that you will get an exceptionally good return on your money. But you know what? Going on fancy vacations, spending me on your means going out and dropping a few hundred on a Friday and a Saturday those are not examples of using leverage to your advantage. So if you're going down that road, you're going to be one of the 60 people who have no savings. But by the time that you get to 30, two things should be happening.

If all goes well, you should be well on the way to repaying your student debt. and you should have worked on increasing your earnings to a point where you can actually save money. Maybe you got some promotions, maybe you found a couple of different jobs, and this is the bit where you need to know how much money you should have saved. Well, here is the thing that you need to think about saving money is not just taking a proportion of your money that you earn every month and putting it away in a dark vault.

In fact, if you take that money and stick it in a regular savings account or a bank account or whatever your money is going to be losing value over time because of inflation because savings accounts will pay you less interest than they might buy wishing money loses value every every year. On average, the real power of saving money is in making more money with the money that you have already saved. and you can do that by investing your money instead of sticking it in a bank account. You don't need to be Warren Buffett To make money investing, you don't need to be Uber smart because the stock market Overall, but it's 95 of all investment fund managers and probably something like 99 of retail investors.

So you can just go and stick your money into the S P 500. and the data says that you are likely to outperform 99 of your friends. Trying to pick stocks on the S P 500 has given an annual return of somewhere around 10 per year over the last hundred odd years, and you know past performance is not necessarily an indication of what's going to happen in the future, but over time it has been surprisingly consistent. and there are good reasons for that.

If you take the average inflation rate to be around two and a half percent, that means that your money is earning you seven and a half percent the difference between 10 percent and that 2.5 inflation every year after you take account of inflation. And here's a crazy bit if you save 100 or 100 pounds every month and you do it for 50 years, you will have put away that 100 600 times once every month. So the total that you've put in would be sixty thousand dollars. Not all that much over a lifetime.

But if you then invest that money every single time that you put it in and you just get that 7.5 return per year on average above inflation that we just talked about. then in 50 years time, instead of having sixty thousand, you're going to have 603 000. That's a bit of a difference. Now, your investing returns will not look smooth like this because the stock market is a series of ups and downs and there's obviously more risk because your money is invested.

But if you put your savings to work instead of keeping a Sat in a bank account, your savings can be worth 10 times as much. I Have a list of my favorite investing accounts with low fees that I personally use unlike in the UK in the US and around the world. Please check out the video description for the full details. Some of them even give you free shares or a sign up bonus just for trying them out so you can pick up some free stock just for deciding which one you like best which is even better than free.

If you want to make money on your savings, go and check out those links in the description. So how much should you have saved by age 30? Well, two things. first, you're probably a bit busy paying off your student loan, so you won't have had a huge amount that you could put away. Just remember that the earlier you start investing, the longer you have for that money to stay invested and compound that interest.

But then there's another thing to think about. How much money do you want to have in retirement? Screw that. How much money do you want to have to live to not have to work ever again? Well, a lot of Finance literature will tell you that you can draw four percent from your Investments every year and even with the stock market going up and down and being volatile, your total investing part should on average not go down over time so you'll be taking your money out. but the savings don't go down even after inflation.

The truth is the inflation boom that we're seeing and some of the risks in the markets. Some of the boom and bus Cycles are more severe than the assumptions that go into that four percent rule, but it's not a million miles off. And just to keep the numbers simple, let's call it the three percent rule. So every year you can take three percent of your savings to be safe to live off and your savings will still appreciate in value.

Next question is, how much do you need to live? Well, You'll have to answer that one yourself because we're all different. But it's a good idea to pay off your mortgage before you get there before you give up your job and become forever retired without having a salary coming in. But let's say you want to live a little. Maybe pay your bills, travel, support your family, do whatever you want, but you're older.

you don't have that mortgage, so let's call it fifty thousand dollars a year. If you want to collect fifty thousand dollars a year before taxes, that's three percent of your portfolio, then the total portfolio needs to be 1.7 million dollars. Okay, we're getting somewhere, but by the time you're 30, you don't have 50 years to earn that money anymore. You don't want to work until you're drop dead at 80 unless you really want to.

So let's be a bit more pragmatic. and let's say that you're going to retire around 70. So you have 40 years to collect your 1.7 million dollars. If you've not saved anything yet, you'll need to save 590 dollars every month starting from 30 to get there, assuming the S P 500 holds up for that.

7.5 per year return on average for most people, 590 dollars every month is quite a lot, but let's say that you started early and right from your first job before you were 30. Your investors say 200 per month since you were 22. Every time you got paid, 200 got taken out of your paycheck and you just stuck it into your investment account and the rest you did whatever you wanted with. If you did that, then to get to fifty thousand dollars a year instead of having to save 590 every month from the age of 30, you would only need to save 430 a month.

Still quite a bit, but considerably less now coming to age 40.. And let's say you were busy. You know, like sixty percent of the people who don't have any savings, you had things to do in your 20s and 30s. You had places to be, you had your student loan to repay.

You had kids. And kids cost a lot of money. You bought a house that was a bit more expensive than your other options, so you didn't save anything. And if you've got no savings by the time you're 40, if you want that fifty thousand dollars a year, when you're 70, you'll need to start saving 1 300 a month.

So you can see how quickly the situation gets crazy. 1 300 every single month into your savings is a lot. But as a family, if you really work on it, you might just be able to do it. You might just be able to squeeze it.

It is still doable, because here's what happens if you don't do it. If you don't do it and you wait until 50 to start investing, you'll have to save three thousand One hundred dollars a month to get to the right amount by the time you're 70.. But here are two cool stats that will absolutely blow your mind. Let's say that you want to pay exactly the same amount every single month for 50 years to get your 1.7 million dollars.

So you can take either fifty thousand dollars a year without having to deplete your actual cash buyer to do that. You need to contribute 280 dollars a month, so the likelihood is you probably will have more money when you're a bit older than when you're 20.. So paying the same amount every single month doesn't make very much sense. You know you will usually have a better paying job you'll have maybe have paid off your student loans, etc.

etc. So let's say that instead every year on average your salary increases by 2.5 percent the rate of inflation, and at the same time you also get another 2.5 increase. On top of that, Because you progress from your early stage jobs to your later life jobs you know you get promote emotions, You get pay reviews, you get a better job, and so on, and so on. So your monthly payments towards your saving go up by five percent every year because you can afford it because that's how much your salary is increasing by.

If you start with a hundred and thirty dollars a month and do that for 50 years, with that five percent increase, you will get to your 1.7 million dollar. Target And that's 1.7 million dollars in today's money. Not in some future money. Because remember, we have already taken out the 2.5 rate of inflation when we used the 7.5 rate of growth that we're using in the calculation.

So 130 dollars a month going up by five percent every year gets you Fifty thousand dollars a year for forever. 50 years later. And if you double it and start with 260 dollars, that becomes a hundred thousand dollars a year. Just remember, money doesn't grow on magic trees, but it does grow in your investing account.

So be sure to check out those accounts in my description.