What Is a Nest Egg and How Do I Start One?
Last Updated: May 13, 2025
What Is a Nest Egg and How Do I Start One?
A nest egg is money you save over time to use in the future. It can help you with big goals like buying a house, paying for college, or retiring comfortably.
More than two in five older adults in Central Indiana report experiencing at least some financial difficulty.[1] This includes paying for daily expenses and finding affordable health insurance.
Building a nest egg gives you financial security and peace of mind. In this article, you’ll learn what a nest egg is, how much money you might need, and how to start and grow your own.
What is a Nest Egg?
What's commonly called a nest egg is a sum of money set aside for the future. The nest egg meaning goes beyond just having savings. It’s about planning ahead so you can use it for retirement, big purchases, or emergencies. Having a nest egg gives you financial freedom and reduces stress. Unlike an emergency fund, which covers unexpected expenses, a nest egg is meant for planned goals.
You can save your nest egg in different types of accounts, like:
Savings accounts offer a simple, safe place to keep your money. Meanwhile, CDs offer fixed interest rates over a set time. And, MMAs often provide higher interest rates with more access to funds than CDs. IRAs help you save specifically for retirement, while HSAs are designed for healthcare needs.
The right account, or combination of accounts, is based on your financial goals and how quickly you might need the money.
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Why a Nest Egg Matters for Your Financial Future
A nest egg may help with matters like financial security, future goals, flexibility, and debt reduction. Here's how building a nest egg may impact your future financial goals.
Financial Security
Financial security is when you have enough money to comfortably meet your financial obligations and goals. It gives you peace of mind and may reduce stress. When you build a nest egg, you're setting yourself up to be more financially secure.
Supports Retirement Goals
Retirement savings goals may be supported by a substantial nest egg. The more money you start saving during your working years, the more you will likely have in your retirement nest egg. Private accounts and employer-sponsored retirement accounts can be part of a nest egg. Consider an IRA to grow your money until you reach retirement age.
Freedom and Flexibility
With financial security and ample funds, you give yourself freedom and flexibility. For example, when you build a nest egg, you may be able to cover unexpected expenses. You can also plan for goals beyond retirement income. This may include vacations, major purchases, and helping your community.
Could Reduce Reliance on Debt
Nest egg building may help you decrease your reliance on obtaining credit and accumulating debt. When you have a safety net, you may not need to use loans and credit cards as often. Meanwhile, you may be able to grow other assets instead of making monthly payments toward debt. In the long run, it may save you a lot of money.
Helps You Prepare for Life’s Major Milestones
The sooner you start your nest egg, the sooner you may have purchasing power for major milestones. A good nest egg may help you fund education, marriage, family planning, graduations, and more.
How Much Money Do You Need in a Nest Egg?
The amount you need in a nest egg depends on your goals. If you're saving for a retirement nest egg, aim to save enough to cover 70% to 80% of your yearly income. Consider the advantages of traditional IRAs and Roth IRAs.
So, if you earn $50,000 a year, you might need $1 million to $1.5 million to maintain your lifestyle for 25 to 30 years. This amount might help maintain your lifestyle after you stop working, depending on any other income you might have.
If your goal is not retirement, the size of your nest egg might be smaller.
For example:
You may need 20% of the home’s price as a down payment if you need to save to buy a house.
You might need enough to cover tuition, books, and living costs to save for college expenses.
To start a business, you would need to calculate the startup costs and a cushion for expenses.
The amount you need in your nest egg depends on your life plans.
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Nest Egg Example
Imagine you want to save $50,000 for a down payment on a house in 10 years. If you save $350 each month in a high-interest savings account, CD, or MMA with a 4% interest rate, your savings can grow significantly over time. Unlike keeping your money in a regular checking account, these options help your money grow faster.
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How To Start Your Nest Egg
Starting a nest egg might seem challenging, but it’s doable with the right steps.
Here’s what you can do:
Set a goal. Decide what you’re saving for and how much you need.
Make a budget. Write down your income and expenses. Find ways to cut costs and save more. To make informed decisions, use our savings goal calculator.
Open a deposit account. Choose an account that offers good interest rates. To see what Centier offers, explore our savings products.
Start small. Even saving $20 a week can add up over time.
Automate your savings. Set up automatic transfers from your checking to your savings account. If you’re looking for a completely automated way to save, consider a Round-Up Savings account.
To see how your fund is growing, monitor your accounts over time. Make adjustments to your savings plan as needed.
A good strategy might be to "pay yourself first." Before spending money on other things, put a portion of your income into your nest egg. This habit can help you build your savings without even thinking about it.
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How To Build a Nest Egg and Maintain It
Once you start saving, the next step is to build and maintain your nest egg. Here are some practical tips.
1. Save Consistently
Make saving a regular habit. Even if it’s a small amount, consistency is key. Over time, small amounts add up to big savings.
2. Increase Savings When Possible
Whenever you get a raise or a bonus, put some of that money into your nest egg. For example, if you get a $1,000 bonus, you might try to save at least $500 of it.
3. Explore Different Savings Options
Consider putting some of your savings into various deposit accounts, like CDs or MMAs.
CDs are good for long-term savings. They often offer higher interest rates than regular accounts, especially if you can leave your money untouched for a set period.
MMAs typically offer higher interest rates than traditional savings accounts and may come with check-writing options.
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Avoid Dipping Into Your Nest Egg
If possible, do not use your nest egg for everyday expenses. It’s tempting, but remember, this money is for your future. If you need extra funds, look for other solutions like cutting expenses or boosting income.
Review and Adjust Your Savings Plan
Regularly check your savings progress. Make sure you are still on track to meet your goal. If your financial situation changes, adjust your plan as needed.
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Start Your Nest Egg Today With Centier by Your Side
A nest egg is an important part of your financial plan. Whether you are saving for retirement, a home, or another big goal, starting early and saving regularly can make a big difference. By setting clear goals, choosing the right accounts, and maintaining consistent savings habits, you can build a strong financial future.
If you’re ready to start or grow your nest egg with Centier Bank, explore our helpful financial calculators.
Frequently Asked Questions
How do tax advantages affect different nest egg accounts?
A retirement nest egg has the potential to grow faster when tax rules work in your favor. Traditional IRAs and 401(k)s let you use "pre-tax dollars" and defer taxes until future use. Roth accounts use "after tax dollars" but allow tax-free withdrawals later. Taxable accounts don't have these advantages, so you may owe taxes each year. If your employer offers matching contributions, take advantage. This may give you more income toward big financial goals.
What’s the difference between a nest egg and an emergency fund?
The nest egg definition refers to the money you save for a specific purpose, such as retirement or other financial goals. It can include a mix of accounts. This might include stocks, bonds, cash, and various accounts to help you grow wealth over time. An emergency fund, on the other hand, is cash you save to cover sudden, unexpected expenses or financial emergencies without touching your long-term reserves.
Can I use my nest egg before retirement?
Possibly, but dipping in early can shrink your target amounts for future use. Withdrawals from certain Individual Retirement Accounts before age 59 ½ may come with tax penalties. This can be true even if you use it well. Some exceptions may exist for education, a first home, or other approved financial goals. Consider a financial advisor to make the best decisions for your situation.
How can I protect my nest egg from market risks?
There is no way to 100% know what the market will do, but spreading your funds across different asset types may help. Include cash and low-risk options like CDs or MMAs that earn interest in your portfolio. This can help you balance risk and growth. Choose the best accounts for your time horizon (how long you plan to keep the account). Adjust as your current income changes or you get a few years from retirement and Social Security income.
How long does it typically take to build a nest egg?
It can take years or decades of regular contributions and the right accounts. The idea is to grow your funds steadily, at a safe pace, to build toward your target amounts over time.
Source:
[1] https://centralindiana.stateofaging.org/financial-stability-2023/