What percentage of income do you think young people should be saving? Because from what I see, this is the age of freely available personal finance advice, and more people seem to be following it at whichever age they stumble into stable income. Sure, there would be splurges here and there, but as far as I can tell, people are saving well.
As much as you can in my opinion. I know someone who’s been saving 50+% of their income since they started their career 10–15 years ago (software engineer, well paid so they can afford to save that much, etc).
As a result, they don’t take shit from anyone. They don’t have to. They can afford to say « no » to overtime and spend time with their family. They can afford to quit when it sucks too much with no hope of improvement rather than destroy their health.
It’s a good position to be in.
They still live a good life. They just didn’t buy a new car ever three years, or brand new 700$ smartphones or computers but rather used ones that are a couple years old, packed their lunch instead of eating out at work, etc.
> "What percentage of income do you think young people should be saving?"
As much as they possibly can. 16% is thin considering the salaries software developers commonly get.
The awareness that you don't have to tolerate the bad parts of your job one second longer than you feel like is the most liberating feeling in the world. It allows you to do the right thing instead of the most career-expedient thing at the workplace and to try out jobs you wouldn't dared to take a risk on before.
Aside from that, right now the money is good for developers but there is no guarantee that situation will last or your skills will continue to be valuable. Remember when COBOL was a ticket to a stable career? Remember when Flash development jobs were everywhere? A lot has changed over the past fifty years and there's no sign of that slowing down. If you zig when the job market zags, you may find yourself relying on your own savings earlier that you expected.
I would add: "As much as they possibly can in tax-advantaged accounts, and then more!" And it turns out, you can save a shit ton in a tax advantaged way.
Let's look at 2020 limits, and assume a married couple, under 50, with one person earning as a software engineer:
$19,500 max contribution to a pre-tax 401(k). Many companies match. You should contribute all $19.5k, not just what you can to get the full match. If you're over 50, do the $6,500 catch-up.
But that's not all. The IRS limit on combined employer/employee contributions is $57,000. So if your employer allows it, contribute the remaining $37,500 post-tax and then convert it to a Roth IRA to at least get the earnings and withdrawal tax advantage (commonly known as the "mega-backdoor Roth").
$12,000 to an IRA (or Roth), $6,000 from both you and your spouse. If you like Roth but are beyond the income limits for the Roth, do the "regular backdoor Roth".
$7,100 to a family HSA. If your company offers it, do it. It's triple tax advantaged when used for health expenses.
Although they are old-school and don't yield much, US savings bonds can be a decent way to fill up an emergency fund. They are exempt from state taxes, and interest may be excluded from Federal income tax when used to finance education. There are a few to choose from, I particularly like the Series-I bonds. The government limits individuals to $10,000 per year for a total of $20,000 for a married couple.
So, if you are a very high earner, and are fortunate enough you can max all of these, you can save $96,100 per year, with some kind of tax advantage. There is probably more that I'm not thinking of. You should probably do all of these before you even think about looking at fully-taxed investments like your retail stock broker.
Its different for everyone but I'd say 10% minimum which is still more that the US average.
This is a bit oversimplified but savings rate is the one factor to how long it takes to become financially independent. Most people will want to enjoy life a bit but a high paying thrifty SWE could theoretically save 80% of their income and retire (or be financially independent and work on whatever they want) in about 6 years.
I think it’s hard to save a percentage of your income when your income is low.
If I’d been saving 10% of my income until 4 years ago (some 16 years of work), I would have more than tripled the savings in the last 4 years. Instead, I saved a higher percentage for only the last 4 years, and have a substantially higher amount.
Create a spreadsheet! I did this 25+ years ago to get my own customized answer to this question. One row per quarter (4 rows per year). Each row takes previous row's balance, adds % ROI, adds contributed savings to get the next row's balance forecast. Not a complicated spreadsheet. As each quarter passes, replace the forecasted/calculated balance with your actual savings balance.
Don't hard-code the % ROI and quarterly contribution in each row; put them in cells at the top. You can then play with % ROI and quarterly contribution values to see how much you'll have when. Take each rows balance and divide by (85-age) to get a conservative estimate of annual income if retired (conservatively assumes future ROI == inflation).
Fyi, I'm a 59 yo who knew ageism in hiring was coming and is so happy that my otherwise foolish self came up with a basic plan 25+ years ago to know if he was on track or not (and managed to stay well ahead of it). Helped with spending decisions too: if I was ahead, I'd buy that motorcycle; if not I didn't.
I don't know how true that is. Of the ones we hear from/about, how many were acting discriminatory 25 years ago? I think we'd have heard from one or two at least, writing confessional blogs or tweetstorms or whatever, but I can't recall reading anything like that.
No, see they are gonna be retired by 38. See, this line they drew extrapolating their stock and salary since starting work in 2012 will keep going up and up...
Depends if parent means a single stock (like the one given as salary) or a more diversified portfolio. While on aggregate the stock market had a rather stable growth, this is not the case of individual assets.
That’s because GDP is very tied to population growth, which essentially stoped in Japan and the EU. It still happens in the US due to immigration, but once that stops, then we will stall out as well.
Hope that they are saving and investing, instead of splurging on Teslas and Mission District cribs.