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How Much Money You Need To Save In Australia At Each Age

How Much Money You Need To Save In Australia At Each Age

This article will go over the average net worth of different Australian age groups, and how much one needs to save at every age to match or exceed this mean. 

20% of the wealthiest Australians own 63% of the entire Australian wealth, with an average net worth of $3.2 million. The bottom 20%, on the other hand, have a median net worth of $35K, which is a paltry 1% share of the total Australian wealth. 

How Much Money You Need To Save In Australia At Each Age

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Therefore, individuals who fall within the top 20% have approximately 92 times more wealth than those in the bottom 20%. 

In this post, we’ll assess Australian net worth based on the age bracket and determine:

  • What an individual’s average net worth should be based on their age 
  • Where you fall on the net worth spectrum
  • What steps to take if you’re falling behind

It’s never a great idea to compare yourself with others since, with regard to finances, each person’s situation is unique. However, comparing gives you a benchmark to reflect on or objectives to strive for if you aim to become financially independent. 

Additionally, it gives you specific steps to take if you’re trailing behind your financial goals. 

Whether you’re a fresh graduate, well into your career, or simply carving your path through life, it’s essential to keep in mind that it’s never too late to begin saving or check to see if you’re headed in the right direction. 

How To Determine Your Net Worth

How Much Money You Need To Save In Australia At Each Age

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Computing one’s net worth isn’t difficult. It’s much simpler than you think. All you require is to calculate the value of every asset you own. This includes:

  • Non-financial assets like homes and their contents, land, and cars
  • The value of any businesses you  own
  • Other financial assets like savings, superannuation accounts, and shares

Then tally the value of any outstanding loans or debts to determine your total liabilities, which might include:

  • Mortgages
  • Credit card debt
  • Investment loans
  • Other study and personal loans
  • Debts from other households

To determine your net worth, subtract the liabilities from your total assets. The value you get is what’s considered your net worth. The value can either be positive or negative.

If the value is negative, don’t worry too much about it. Most people usually have a negative net worth at the start of their careers owing to student loans, purchasing a new home, or they may just have begun saving for the future. 

20 Years Old

How Much Money You Need To Save In Australia At Each Age

The median (average) net worth at 20 years is -$2,430. If you’re a 20-year old Australian with a $0 net worth, you’re doing better than most people your age. At this point in your life, it’s normal not to have a savings account.

The reality is, at this age, you’re probably still in university, and you’re paying for it using HELP (formerly called HECS). Even if you have a temporary job, it’s unlikely you earn enough money to carter for your entire tuition costs and living expenses. 

That’s why the average net worth for 20-year-old Australians is -2,430. Keep in mind that this is the median and not the mean. The mean net worth refers to the value of an individual’s assets in the 50th percentile. 

The median is a better approximation of an individuals’ net assets since the top percentiles entirely blow out the mean with high net worths, which drags up the mean. 

Nevertheless, this doesn’t mean that you ought to be comfortable having debt at 20. This is the best time to foster sound financial habits that’ll let you get ahead of the pack. If you are in your 20s, ensure you have ticked off or are in the process of ticking off the following:

How Much Money You Need To Save In Australia At Each Age

  • Lower expenses as much as you can: This doesn’t mean that instant noodles should be a staple in your household. It means that you should try to save money when shopping as much as possible. 

For instance, ensure that you use cashback sites such as Shopback and Cashrewards when shopping online, and always ensure you look around for the best price. It’s okay to purchase items you need, but it’s not okay to pay 20% more since you didn’t conduct a quick google search. 

  • Try as much as possible to avoid taking out bad loans: If a loan isn’t giving you a positive ROI, it isn’t worth taking it out. This, however, excludes home and student loans. You should keep off bad debts, including credit card debt, car, and personal loans. 

If you can’t avoid taking out a bad loan, ensure you repay it as soon as possible. If you’re investing your cash into an expansive index fund or in real estate, you can expect between 6-12% profits on your investment. To get this type of return, you’ll have to risk your money for a specific time on an investment product. 

When you have a loan with high interest, repaying it quickly is akin to receiving a guaranteed instant profit on your cash regardless of your loan’s interest rate. Therefore, repaying a 20% interest rate on a credit card debt is almost the same as receiving a 20% guaranteed return on your cash without any risk. 

Thus, if a loan’s interest rate is 5% or more, the best thing would be to throw as much cash at the loan to repay it as fast as possible. Thus, you’ll be getting the same return a significant investment would make after paying taxes on it.  

If you’re 20 years of age and don’t have any obligations, the first prudent thing to do is set up an emergency fund, which is some cash you put aside to be used ONLY in emergencies. This is typically around 3-6 months’ worth of living expenses. Keep this money in a separate high-interest savings account. 

Once you’ve done everything mentioned above, you should learn how to invest and start investing small amounts. You can check out micro-investing platforms and passive EFTs to start with. 

30 Years Old

How Much Money You Need To Save In Australia At Each Age

The median (average) net worth at 30 years of age is $31,025. At this age, the median is much lower than the mean value. In Australia, the mean net worth for 30-year-olds is $79,2000. 

The median value, $31,025, is approximately half the average salary in Australia. Most financial guides suggest that at 30, individuals should aim to have a net worth that’s equivalent to their 1-year salary. This is a reasonable goal to aim for. 

Most importantly, though, if you are 30 years you should:

  • Have repaid all your high-interest debts
  • Aim to have a high savings rate

Even though having a huge salary is excellent, having a high saving rate will significantly impact the growth of your net worth. In 2020, a survey conducted by money.com.au established that over half of Australians save less than $250 per month. 

This doesn’t seem bad. If you dig deeper, you’ll find that this value is too low to survive when times get tough. 2018 ABS data indicates that the average Aussie earns $110 per week, which amounts to $57,000. After-tax deductions it’s about $3,800 per month. Saving $250 per month translates to a savings rate of 6%. 

This article is mainly centred on averages but if you’re looking to retire early — an achievable benchmark even for those earning an average wage is to save half of your earnings (50% savings rate). 

How Much Money You Need To Save In Australia At Each Age

If you save an average of $1900 per month instead of the standard of $250 a month, after 20 years compounded at an average of 8% every year, the difference would be $1,119,139 vs $47,255. A massive difference (of approximately 1 million dollars over 20 years) is achievable for anyone willing to delay gratification now to achieve financial independence in the future. 

However, you’ll need to invest regularly in the market to achieve these figures. The best way to do this is through a broad market passive catalogue EFT, which historically has returned 8-10% in the long term. 

Lastly, if you’re making over $90,000 per year, ensure you get health insurance by the time you’re 31. Otherwise, a 2% lifetime health cover loading may be applied to your private health insurance for each year you haven’t had insurance once you take it out. 

This premium cover caps out at 70%. Still, as you can get private hospital insurance cheaper than the fine medicare surcharge, there’s no reason to pay the loading premium or medicare levy. 

40 Years Old

How Much Money You Need To Save In Australia At Each Age

At 40 years old, the average (median) net worth is $97,425. Reports from ABS (Australian Bureau of Statistics) indicate that this is when your salary should be highest. You’ve had adequate time to get experience in your field of interest, and your salary will reflect it. 

Since your salary is at its highest, this is the best time to grow your net worth. The best way to grow your net worth is to increase your savings rate. Most financial guides suggest your net worth should be three times your salary. However, there’s no reason you can’t make your net worth 5X your salary. 

For example, if you save approximately $500 per month (13% of the average Australian salary after-tax), beginning from $0, after 20 years of passive investing at a return rate of 8%, you would have a return of $294,510. Ensure that if you’re starting at $0 in your savings, make it a habit always to save 13% of your salary after tax. 

Although it isn’t for everyone, if you are interested in real estate, try to buy a home by 40. Most mortgages have a 30-year repayment term; this will give you adequate time to repay them. While the percentage returns of real estate may not be better than shares, and real estate’s best years are far behind us, there are still some excellent reasons to consider investing in it.  

How Much Money You Need To Save In Australia At Each Age

The primary reason is to get large leverage amounts at low-interest rates. Although the percentage profits may not be stocks, the dollar returns usually will be. Additionally, owning a house comes with tax benefits, and you’ll have stability. 

If you are interested in early retirement, this is the best time to begin maxing your super contributions every year. Any amounts you contribute towards super are only taxed at 15%; therefore, this can be a worthwhile risk-free annual saving if you have a high marginal tax rate. That’s a no brainer in that you have no intention of retiring early before the superannuate preservation age (the age one can access their super funds).

Nonetheless, the essential thing to do once you reach 40 is to assess whether you’re still on track to reach your retirement goals. You can do this by going over your average yearly spending. 

For instance, if you spend $40,000  annually, assuming a 4% safe withdrawal rate, you’ll require to have saved $1M to last you indefinitely. If you’re more economical and spend only $20,000 annually, you’ll only need $500,000 held in a retirement fund. You can tally this easily by just multiplying your expenses by 25. 

50 Years Old

How Much Money You Need To Save In Australia At Each Age

The median (average) net worth by age 50 is $194,850. The compound interest takes over and contributes more towards your net worth compared to your savings rate. For instance, if you’ve invested $200,000 with an 8% return rate, in one year, it’ll have grown by $16,000. Most people aren’t investing or saving over $16,000 in one year. 

At 50 years, you should ensure you max super contributions as it’s a risk-free profit wheel, and you’re close to accessing it. Since you’re close to retiring, consider moving your super allocations and investments into defensive assets like cash and bonds. 

This is also when you want to ensure that you don’t have any pending bad loans and you’re well on your way to clearing any good debt such as mortgages. 

If you aren’t on track to hit your retirement objectives, you should find ways to minimise living expenses, like moving to a more affordable place. Ideally, in your 50s, you should be at a place where you can afford to leave your job without any stress comfortably. 

60 Years Old

How Much Money You Need To Save In Australia At Each Age

The median (average) net worth at this age is $290,975. At 60, the recommendations and strategies are similar to when one is 50. Repay all your loans fully, shift investments to conservative options, think about retiring, and max super contributions. 

How To Determine Your Retirement Age

If you wish to get a rough idea of when you’ll be able to reach financial independence and retire, you can try using an online retirement calculator. These calculators usually create investment charts and schedules to help you determine when you can retire based on your planned investments. 

Bottom Line

How Much Money You Need To Save In Australia At Each Age

Don’t fret if you aren’t hitting these goals and averages. Everyone has different circumstances and retirement objectives. Networth isn’t important. Learning how to live within your means is essential for financial freedom. 

As long as you start early, with budgeting and making the most out of compounding interest via investing, in 15-20 years, you can retire as early as 45, even if you earn an average salary. 

Anyone can achieve this goal, and it isn’t a must you make a lot of money or follow some expert’s advice on how to make thousands of dollars passively by purchasing their ebook. Watch your spending habits, save as much as you can and take steps to begin investing for the long term using EFTs and index funds. 


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