How Much Money Should I Have Saved By 18? Let’s Figure That Out.

How much money should I have saved by 18? Here’s guidance for estimating the amount of money your teenager should have saved by 18.

People graduate high school around the age of 18 (between 17-19 is typical). And just beyond that high school diploma, GED, or other slip of paper? Comes big changes and transitions.

That’s why the age 18 is an exciting and sometimes-scary one.group of teen girls talking, text overlay "teen talk: how much should money should I have saved by 18?"

I mean…it’s marked as the end of the pipeline for childhood and the onset of (young) adulthood.

And you know what? Young adulthood can be quite expensive.

Think about it – there’s generally a need for a place to live, there might be college/vocational/other education, transportation needs, etc.

There are so many different paths that your teenager can take at around this age that how much you should have in savings by 18 really boils down to what their next phase in life is going to look like.

Not only what it’s going to look like, but what your personal money responsibilities are going to be. Meaning, this is partly a conversation between parents and teenagers.

You and your teenager have to answer questions like:

  • Are you going straight to college?
  • Are you getting an apartment, and is that first apartment with or without a roommate?
  • Are you living at home, and will you be responsible for paying rent or any other costs?
  • Are you going to college, and is there on-campus housing or will you be making other arrangements?

The answer to any one of those questions can vastly change someone’s savings needs (paying $200/month in rent to your parents is WAY different than having to put first month/last month/deposit down on an apartment all by yourself).

Let’s dive into this subject so that you and your teenager walk away with an estimate savings goal based on how much they’ll need for their next phase of life.

Parent-Teenager Conversations that Need to Happen

Parenting is all about slowly shifting responsibilities – money, and otherwise – over to your child as they get more and more capable.

To the point where one day, they become completely responsible for themselves.

Something that doesn’t get discussed nearly as often as I think it should are Money Responsibilities.

Psst: here’s my article on my M&M strategy for raising financially responsible kids, including money responsibilities and money boundaries.  

Where and when does the parent’s money stop, and the child’s money begin?

As in, what are parents responsible for paying for or contributing towards, and what is the teenager responsible for paying for or contributing towards?

As your child nears 18 – the legal age of adulthood – the shift of money responsibilities becomes even greater.

Use the following conversation topic outlines to help you and your teen figure out what will be their money responsibilities moving forward, so that they can better estimate how much money they should have saved by 18.

  • Place to Live: Where will you live after you graduate high school, and who will be responsible for paying for that?
  • Transportation Needs: As you age, you’ll need to get yourself to lots of places (like to classes, or to a job, social events, etc.). Will you need your own car, can you borrow a car, or will you be living in a place with great public transportation?
  • Education Needs: Once your teen graduates high school, will they be pursuing any further education that costs money? Who will be responsible for that, and for how much? Will your teen have any money responsibilities, such as spending money, textbook money, groceries, etc.?
  • Social Needs: Who’s job will it be to cover costs of entertaining themselves and going out with friends once they are 18?
  • Insurance Needs: Who will cover you for health insurance and car insurance? Are you remaining on your parent’s policy, or taking out your own.
  • Handing Over Custodian Accounts: The age 18 (in some states, 21) happens to be when certain assets might need to be handed over to your child. If you’re a custodian on an account – savings, checking, investments, 529s, etc. – then you’ll need to know how to hand over these accounts. You’ll also want to have conversations with your teenager about what money and assets will be coming their way, your wishes for that money (remember – in many cases, the money will become theirs and they can decide how they want to use it), and talk them through what their thoughts are on the subject.

Parents: Remember – it’s all about making up your mind on money resposnibilities and money boundaries, and then communicating your expectations.

Teenagers: Remember – it’s all about getting clear on what your next steps are in life, what they will cost, and talking with your parents so that you know what to expect as far as how much you’ll need to come up with yourself, how much you can count on from them, and any resources that are available for you that you don't already know about (like a custodial savings account, or 529 plan).

Now, let’s get into the nitty-gritty of estimating how much your teen should have saved by 18.

How Much Money Should I Have Saved By 18?

It’s now time to figure out how much money you should have saved at 18 for a relatively smooth transition into young adulthood. 

Pssst: Did you figure out you need a job? Here are some resources you might want to check out: 

Given all of the conversations you’ve just had with your parents, you’ve (hopefully) gotten some clarity on what your money responsibilities will be.

Your upcoming money responsibilities — a combo of both what you’re choosing to do with your life next, as well as what how much your parents are willing to support you – are going to be your “northern star” for how much you should put into savings.

You need to have money to cover:

  • Insurance Deductibles: Any insurance deductibles that you are responsible for, you’ll need to have saved up in an emergency fund. That’s not your entire emergency fund, but it’s part of what you should have to get started. For example, if you and your parents decided you’re responsible for your auto and health insurance deductibles, and you found out you have a $350 hospital deductible to meet and a $500 auto deductible to meet, then you’d want to have $850 as part of your savings just to cover these.
  • Deposits: You’ve potentially got some deposits coming up that you’ll need to pay. For example, you could have an apartment deposit (usually this is the same as one months’ rent), you could have deposits due for your freshman year in college, deposit to start your own smartphone plan (especially if you don’t have established credit), etc.
  • Emergencies: Unless you want to end right back on your parent’s couch (or, in your old bedroom), you’ll need some sort of money to fall back on above and beyond what you need to get your next phase started. That means if you need $5,500 to get your first apartment, textbooks, and insurance deductibles, then you need more than $5,500 in an emergency fund. It’s money that will just sit there until you need it. And while you can hope that you won’t, chances are good that you will. Just ask your parents.

To find an estimate of your particular number, you need to add up what you’ll need from each of the above categories.

Let me give you some examples:

Note: when you’re figuring out how much to save, remember what you are NOT able to cover out of your savings. In other words, in the examples above, there is no spending room for things like going out with friends on the weekend, or groceries. These are also expenses that you’ll possibly need to cover, and it’ll have to come from your paychecks.

Example #1: Going to College, Living in a Dorm

Let’s say you are going to be going to college and living in a dorm. You’ve got a pile of scholarships, grants, and loans that will pay for your tuition + room and board, and your parents are covering around $550/month in tuition (this is approximately what my parents and I did).

Your Money Responsibilities Include:

  • Textbooks each semester (approximately $500)
  • College dorm room deposit ($50)
  • Car Insurance each month ($60)
  • Car deductible in the event of an accident ($500)

How Much Should I Have Saved by 18?

In this case, you would want to have (at a minimum) $1,220 saved up. That doesn’t include any sort of emergency fund (unless you count the car deductible as part of your emergency fund), so that’s why I say this is your minimum.

By saving up $1,220 by the time you’re 18 and/or graduate high school, you’ll ensure you can pay your first-semester textbooks (you’ll need to find a teen job for winter break or on weekends to save up for next semester’s), you can put down your dorm room deposit, you can pay 3 months of your car insurance – giving you a buffer in case you can’t find work during the semester or don’t want to – and you can pay your car deductible in the even that you get into an accident.

Example #2: Living at Home, with a Full-Time Job

You and your parents have talked about the new rules and privileges now that you’re 18, graduating high school, and deciding to live at home to work and save your money.

Your Money Responsibilities Include:

  • Rent (approximately $200)
  • Car Insurance each month ($60)
  • Smartphone plan ($60)
  • Health Insurance hospital deductible ($250)
  • Car deductible in the event of an accident ($500)

How Much Should I Have Saved by 18?

In this case, you’d want to have an estimated $1,220 in savings by the time you’re 18 and starting this arrangement.

This accounts for three months’ worth of rent, car insurance payments, and smartphone plan – because it might take you awhile to find a job.

Example #3: Moving Out into an Apartment, with a Roommate

You have a first job out of high school lined up, and you’ve decided to get a first apartment with a friend as your roommate.

Your Money Responsibilities Include:

  • Half of the Rent ($450)
  • Groceries ($250)
  • Half of the Utilities – water, trash, electricity, etc. ($100)
  • Half internet/cable ($50)
  • Car Insurance each month ($60)
  • Gas ($70)
  • Smartphone plan ($60)
  • Health insurance premiums ($200)
  • Half the apartment deposit, plus half of the first/last month’s rent ($1,350)
  • Health Insurance hospital deductible ($250)
  • Car deductible in the event of an accident ($500)

How Much Should I Have Saved by 18?

In this case, you’d want to have an estimated $6,270 in savings/emergency savings by the time you’re 18 and starting this arrangement.

Notice how I pointed out the emergency fund, here? While in the other two examples, you’re protected to some extent by the circumstances you’re in (either living at home with your parents, or living on campus at college with room/board paid for with scholarships/loans/grants), in this example, it’s all you.

You will absolutely need an emergency fund saved up of at least a few months to start with (6 months is typical advice, though I know you’re just getting started and that would be an enormous amount to have saved by 18 — I calculated your savings amount needed with 3 months buffer on your monthly bills).

That way if you lose your job (I lost my first job out of college just one year in!), or if something else happens, your default is not to go live at home with your parents. Instead, you can take the money from your savings while you, temporarily, get back on your feet.

And then you need to pay your emergency savings back so that it’s there the next time you need it.

You’ve now got the conversations you need to have in order to estimate your living costs, how to figure out how much to have in savings by age 18, and also three example scenarios to help you picture what your next step in life might look like.

Use all this information to come up with how much to shoot for in your savings account by the age of 18. Then, check out my teen savings resources to figure out HOW to actually save up that amount of money. Do that? And you’ve got a plan with action steps.

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Amanda L. Grossman is a Certified Financial Education Instructor, a 2016 Plutus Foundation Grant Recipient, and founder of Money Prodigy. Amanda's kid money work has been featured on Experian, GoBankingRates, PT Money, CA.gov, Rockstar Finance, the Houston Chronicle, and Colonial Life. Read more here.
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