Prioritize your savings
Guidelines to help you build toward your goals
A healthy savings plan starts with a focus
With many competing personal goals, it can be difficult to know where to allocate your savings. This hierarchy from Bank of America can help.
- Create an emergency fund
Most families should strive to have at least 6 months of expenses as an emergency fund in an easily accessible, low-risk regular savings account or money-market savings account.
- Pay down high-interest, non-tax-deductible debt
Paying down credit cards, private student loans and other high-interest debt can help you minimize the interest you pay.
- Save for retirement
Contribute to your employer-sponsored 401(k)—and start as early as you can.
It pays to start early
Investor A enrolls in employer-sponsored 401(k) at age 26. Investor B waits until age 36.
Starts saving now
Savings at retirement $624,779
Waits 10 years
Savings at retirement $421,093
Assumes 5% annual rate of return compounded once a year at the end of the year.
Assumes a $35,000 salary starting at age 26 and salary increases of 3% each year with inflation.
Assumes both investors contribute 6% of their salary at the start of the year and receive a 50% employer match on the first 6% of contribution.
- Save for short-term goals
These fall roughly in a one- to five-year time frame—items such as a down payment for a house, a new car or a dream vacation
- Save for your children’s college education
If you have children, you’ll no doubt want to save for their education—but that shouldn’t come at the expense of your retirement savings. If you are on track to meet your retirement goals, investigate college savings plans.
Choose the savings plan that's best for you
All plans are personal, but considering these alternatives can help you create a strong and customized savings strategy.
Bank of America