Here's how much savings you should have at 40

By 40, you should have an emergency fund and a good amount of retirement savings stowed away. (iStock)

By the time you hit age 40, you should have a decent amount of cash saved up — both for emergencies and your future retirement goals.

But saving is hard. It takes concerted time and effort, and for best results? You need to start early.

Have you started saving for your future yet? Just want to make sure you’re on track to do so? Here’s what to keep in mind.

How much you should have saved at 40

At age 40, you should have both an emergency fund and a good amount of retirement savings stowed away.

According to Joe Hartman, co-founder of Perry Hall Investment Group and strategic real estate investing consultant at Real Estate Bees, your emergency fund should be able to cover at least three to six months of household expenses.

If you don’t have that much just yet, Hartman recommends setting up a bank account that you have limited access to. (Maybe forgo setting up that online login or choose a high-yield savings account with a small withdrawal limit).

Credible can help you find a high-yield savings bank account provider and interest rates that will boost your savings. Check out what options — from each banks' minimum balance requirement to its APY — are currently available.

In terms of retirement, the amount you’ll want to be saved really depends on your lifestyle, where you live, your household size and any big-ticket items you plan to purchase. Generally speaking, though, you should have at least three times your salary saved up by age 40 — or a third of your long-term retirement goal.

Aside from the better interest earnings, high-yield savings accounts also offer a way to build wealth without too much risk. This makes them a good place to store emergency savings and sudden windfalls, like inheritances.

"40 is also the age where many folks start to experience large windfalls of funds," said Ben McLaughlin, head of Save Better. "No one wants to think about inheritances, but it’s a financial reality that has to be properly managed. It’s important to have a plan in place beyond simply tucking them away for a rainy day. If you have a low-risk tolerance, placing them in high-yield savings accounts or laddering them in certificates of deposit will allow those funds to grow safely, insured, and without the volatility of the stock market."


High-yield vs. traditional savings account

Traditional savings accounts won’t do much to help you build up your savings, even in the long run. To maximize how much is in your emergency fund and any cash you put toward future goals, a high-yield account is usually best. While the interest rates on these vary, they generally have a significantly higher APY than your typical bank account, allowing you to earn interest and start building that balance faster.

If you do opt for a high-yield savings account, make sure to shop around, as APYs and other details can vary widely.

"When putting money into savings products, it is important to keep an eye out for FDIC insurance as well," said McLaughlin. "FDIC insurance protects your deposits up to $250,000 per institution, even in the unlikely event that the banks they’re held in were to collapse."

You can use a tool like Credible to compare several FDIC-insured high-yield savings accounts at once.


Other tips to help you reach your savings goal

Experts had other tips for reaching your savings and retirement goals, too. They recommended:

1. Automating your savings

Schedule regular payments from your bank account to your savings account or, if possible, have a portion of your paychecks deposited into savings. This will ensure your savings goals stay on track without much effort.

"Don’t rely on yourself to manually fund your savings," Hartman said. "It’s easy to find a reason not to."

2. Diversifying

Having a high-yield savings account, utilizing your employer’s 401(k), and investing in stocks, bonds and other products is important — both to build your wealth and shield you from too much risk.

To shop around for high-yield savings accounts, head to Credible. Use a tool like Credible to streamline the process and ensure you get the best rate possible.

"Diversification is crucial when it comes to saving for retirement," McLaughlin said. "People should absolutely have their assets in a mix of accounts and products depending on their risk appetite, goals and timelines. One thing is for certain, you should always have a percentage of your total savings in cash products — like savings accounts, as they are considered very low-risk and highly accessible for any unknowns that you may face."

3. Saving first, then spending

To achieve your financial goal, saving needs to come first — not as an afterthought. As Warren Buffet once said, "Do not save what is left after spending. Instead, spend what is left after saving."

"If you truly want to make savings a priority, it cannot be a residual — what is left over," said Robert R. Johnson, professor of finance at Creighton University. "It should be a line-item on your budget. You don't successfully build wealth by simply taking what you have left after all your expenses. We accomplish what we prioritize. Prioritize savings and invest those savings."

Saving early and often is critical to reaching your future financial goals. Head to Credible to compare high-yield savings accounts and start your savings journey today.