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Family savings is something you’ve probably thought about on more than one occasion. It can be tricky to save anything while you’re busy making sure your family has what it needs day-to-day. Aside from providing a house, clothing, and daily meals, you may also need to pay for higher education for your kids, next year’s family vacation and more. With all those considerations, how do you figure out how much your family needs to set aside in savings?

In the short-term, you want to have enough money saved up to pay for six month’s worth of expenses. That’s your emergency fund. But having extra money set aside for entertainment, retirement, a down payment on a home and other essentials and nonessentials is important too.

How Much Family Savings Do You Need?

Once you have your emergency fund, how much money your family needs to save comes down to what your family goals are. How will you pay for your next car? What if your current car needs a new transmission? Do you want to travel? Do you dream of a second home or vacation home for you and your significant other to enjoy?

These are all questions you want to ask yourself when budgeting for your family savings.

An Emergency Fund Is Your First Goal

When it comes to saving up for emergencies, the average American family needs approximately six months’ worth of living expenses set aside. This amounts to as much as $30,686 based on the median household income of $61,372 reported by the U.S. Census Bureau in 2018.1 Unfortunately the median American household falls short of that at just $11,700 in savings.2

To decide how much you need in your family emergency fund, consider how much you owe towards your bills each month. Include the amount of your rent or mortgage payment, utilities, car payments, insurance, groceries and anything else that requires money each month.

Once you have a total, multiply the number by six. That final number is what you want in savings so you’re prepared for life’s emergencies. That might come in the form of a job loss, an injury, accident or unexpected health problem.

Once you have an emergency fund set up, you can start saving for that family vacation, the down payment on a home or your next car, the big screen television or anything else on your “wants” and/or “needs” list. You also want to ensure you have enough for unplanned, but not every day, expenses—like that new transmission in your car or a new fridge or furnace.

Saving for a House, a Car or College

It can be tricky to decide how much to save for specific goals, like a new house. The price of the item you’re saving for makes a big difference. Some universities cost more than others, while a home may be pricier depending on its location, the size of your down payment and other factors.

While you want to research these items yourself to see how much they cost individually, there are some basic bits of information that apply to certain purchases. A conventional fixed-rate home loan, for example, typically requires a 20% down payment. Say you’re thinking of purchasing a home that’s listed at $500,000, you need a down payment of $100,000.

Cars cost a lot too. Your current car may or may not have a good resale or trade-in value. So while you add to your emergency fund, consider setting aside money for a car or car down payment to help offset the cost of your next car loan.

College, while it doesn’t require a down payment, requires you cover tuition each quarter or semester unless your kids have grants or a scholarship. You may also need to cover room and board and other costs. You want to research the colleges or universities your kids are considering and put together a list of costs you need to cover.

If your children are young and you have years left, that’s good, because you can start saving now. It’s also a good reason to save more. The cost of college is rising eight times faster than wages.

If your kids are close to starting college, hopefully, you have some funds set aside already. Whether you do or don’t, financial aid, such as student loans, can help cover costs.

Saving for Other Essentials and Even Nonessentials

Beyond the normal essentials of emergencies, housing, transportation and education, you want to save for other items—whether essential or not. This can include car repairs, home remodels, family vacations and more.

To set aside money for these items, you want to research certain things, such as when and where you’re likely to get the best hotel rates and airfare if a family vacation is your top priority. Or what the average kitchen remodel costs if that’s your goal. And you likely want a good chunk set aside for car repairs or home repairs, just in case. That funding needs to be in addition to your emergency fund that’s intended to cover daily living expenses for six months, not unexpected repairs.

When determining how much you need, consider that more is better. You can’t have too much set aside, but it’s totally possible, you could end up with too little.

Let Your Savings Make More Money for You

Another important element to consider is the interest rate your family savings account earns. You can earn more money on your savings with a high-interest savings account than you can with a standard savings account. Money in savings accounts accrues interest monthly instead of annually, so where your money is placed makes a difference. A higher interest rate equals more money in your pocket.

The HSBC Direct Savings account, for instance, offers a 2.25% interest rate. That’s more than double the rate of a standard account. The Marcus by Goldman Sachs High-Yield Online Savings Account and the Barclays Online Savings Account offer similar rates of 2.25% and 2.20% respectively.3

Let’s say you have $10,000 stored in an account. With a standard savings account with a .10% APY, you earn $100 a month in interest. However, putting your money into one of the above-mentioned accounts at a higher interest rate lets that $100 grow to $225. That’s an extra $125 each year. After 10 years, you have almost $1,250 more than if you were to leave the money in a standard savings account at the current national average APY of .10%.4

You want to research banks and financial companies further if you’re interested in examining interest rates, but there are savings account options available that pay you higher interest rates than others.

Saving for Retirement

Keep in mind, retirement savings are not part of your family savings. At least not the family savings covered in this article.

The Economic Policy Institute estimates that nearly half of American families have nothing saved for retirement. While some families enjoy working and hope to keep their jobs for the rest of their lives, others have nothing saved because they haven’t thought about it or keep putting it off. You want money set aside for your golden years when you no longer want to commit to an 8-to-5 job.

Consider taking advantage of a retirement plan offered by your employer or individual plans—or both.

Final Thoughts

To find out how much money your family needs in savings:

  • Start by calculating what you need in your emergency fund
  • Add funds to cover unplanned expenses beyond the costs of daily living—like car repairs, a new fridge, etc.
  • Pick a savings goal for essentials and nonessentials—like your next car, your kids’ college educations, a down payment on a house and a family vacation
  • Ensure you’re also saving for retirement
  • Consider taking advantage of health and other insurance plans to protect your finances and your savings

And when you’re ready to start your emergency fund or want your current savings account to earn more money for you, look into available high-interest savings accounts to get you started earning money for a financially secure future. You need money to survive, but more importantly, you need it to live.

Happy saving! Happy living!


1 Census.gov, “Redesigned Questions May Contribute to Increase,” www.census.gov/library/stories/2018/09/highest-median-household-income-on-record.html, Sept. 2018.

2 CNBC Make It, “Here’s how much money Americans have in savings at every income level,” www.cnbc.com/2018/09/27/heres-how-much-money-americans-have-in-savings-at-every-income-level.html, Sept. 2018.

3 Based on the available savings rate for the Wells Fargo Way2Save® Savings account as of April 2019.

4 National savings rate average from the FDIC.gov website as of 3/18/2019, www.fdic.gov/regulations/resources/rates/historical/2019-03-18.html

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