Young woman Working to save money
Money Habits,  Productivity

How To Save Money In Your 20s: 15 Important Tips

Financial decisions during your 20s can impact on your long-term wealth accumulation. So it’s essential to establish financial discipline and start saving money in your 20’s to reap the benefits later in life.

By developing better money habits with responsible spending and saving practices, like acquiring budgeting skills and maintaining a good credit score you can avoid unnecessary debt, take advantage of the power of compound interest to build substantial wealth over time.

If you need some tips on how to save money in your 20s. Here are 15 important financial tips to manage money better. Follow these tips and you’ll thank yourself in your 30s, 40s, 50s, and beyond.

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How To Save Money In Your 20s

#1. Create A Budget To Track Your Expenses

If you are serious about saving money in your 20s, start by monitoring your monthly income and expenses through a budget.

Stick to your budget and regularly check-in with your money saving goals to avoid going overboard with expenses.

If you share expenses with someone else, like a roommate or a partner, make sure you both hold each other accountable.

Categorize all your monthly expenses like bill payments or groceries into different categories and do a weekly review of the money you spent; spot any instances of impulsive spending. This can make a world of difference to improve your money habits.

If creating a budget seems daunting there are numerous online tools and applications to assist you, or you could get a planner just like the one below which has several categories to organize your finances in a uniform manner.

#2. Take Advantage of Compund Interest by Saving For Retirement

If you start saving early you will retire really rich, since your money will increase exponentially with compound interest

You may have heard the term magic of compound interest but what is it actually. Here’s a simple example.

Say you have $1000 in your retirement account, earning an interest of 5% each year. So in your first year you will earn an interest of $50 (1000*5/100= 50) so your total stands at $1050.

The next year your interest will be calculated on $1050 so you will earn an interest of $52.5 taking your total to $1102.

Taking into account your career growth, increase in salary overtime, imagine how much you’ll earn if you keep this amount for long term say for 25 to 30 years.

Most countries have a retirement plan for its citizens, where you have the provision of setting aside an amount each month or annually into your retirement fund. Do some research on this and start accumulating your wealth today.

In the USA most companies have a 401(k) plan is a retirement savings plan, even if you are self-employed you can still open a 401k account without an employer here’s how.

#3. Create an emergency fund

Emergencies have a terrible way of surprising us when we least expect it so creating an emergency fund would be a wise move in your 20s.

Each month set aside some amount for this purpose. By doing so, you can avoid taking out unnecessary loans or going over your credit limit.

Decide how much you wish to save for emergencies, say for eg $1000-$2000. Now automate a certain amount of your salary to go into your emergency fund every month.

#4. Pay off Your Debts

Debt is a financial obligation that many people face in their 20s like student loans, credit card balances and so on.

Not paying debts in a timely manner can negatively impact your credit score, lower your chances of getting approved for loans and also increase your interest charges.

So create a debt repayment plan by allocating a portion of your monthly budget towards debt repayment. Financial experts suggest allocating 20% of your take-home pay for this purpose.

Debt consolidation is another option, especially if you have balances on multiple credit cards. It can help streamline your monthly payments and this even carries less interest charges.

It’s also wise to pay off credit card debt first, as it usually carries the highest interest rate or you could start by paying off balances below $1,000 and then, pay debts with high interest.

Paying more than minimum monthly amount will lower the total interest charges overtime.

#5. Build A Good Credit Score

A good credit score is crucial for qualifying for loans and credit cards. A higher credit score will also save you thousands of dollars in interest in the long run.

Successfully managing your debt can build your credit score and score above 720 makes borrowing easier and less expensive for larger goals, like building a home.

If you’ve never taken on any debt before, applying for a credit card can be a way to start building credit history in your 20s.

Although, qualifying for a credit card without any credit history is tricky, becoming an authorized user on a family member’s credit card or applying for a secured card by paying a token amount can solve this.

Once you get credit card use it responsibly by spending within your means and making payments on time to avoid paying more interest charges.

#6. Say No To The Instagram Life

Just think for a minute whether you are living for yourself or just living to keep up appearances.

Like for instance, your friend buys a pair of nice shoes, so you too get influenced and purchase a pair of shoes you probably don’t even need; or maybe a social media influencer recommends some high-end skincare products and you buy it right away.

If you are influenced social media or your favorite celebrity or what your friend uploads on Tik Tok, remember social media images and videos are curated to sell you an idea of perfect life.

That lovely image of your favorite celebrity has probably been airbrushed a thousand times. The fully furnished rented accommodation your friend just moved into was probably paid by her parents.

So avoid falling into the comparison and appearance trap.

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#7. Get Your Insurance

A proper insurance coverage does require some financial investment but it can provide the peace of mind and security in case of unexpected events.

If you’re in your 20s, it’s essential to have a basic understanding of the main types of insurance, such as health, life, and disability coverage so you are prepared in case of any eventuality.

#8. Protect Your Financial Information Online

There are so many financial scams happening online so make it a priority to protect your financial details. Measures such as monitoring your financial accounts for any signs of fraudulent activity, setting up two-factor authentication and changing your passwords at least once a year can be helpful.

It’s a good idea to review your social media accounts and old posts to ensure that there’s nothing that could potentially harm your reputation or be used against you by prospective employers.

#9. Create some financial goals

Your 20s is a good time to start planning for your future. Creating a solid financial plan can help you optimize your income and plan for significant future purchases, such as a car, a house, or a vacation.

Take time to map out a plan for saving, spending, and investing, to gain clarity on your financial goals and the specific steps you need to take.

You’ll also have a clearer idea of how much you need to save, how long it will take, and what adjustments you may need to make along the way.

#10. Start A Side Hustle

Some extra cash flowing every now and then feels good right, especially when you are trying to live independently.

Depending on your skill set earning a decent amount each month is possible. With the boon called internet, you are never short of opportunities. 

Even non-internet jobs like renting your car, Airbnbing your room, babysitting, dog-walking are equally lucrative.

Here is a long list of 40 legit side gigs that you can consider if you are trying to earn some extra bucks.

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17 important Money Saving Tips For your 20's

#11. Invest in Financial Education

Learning how to manage your money is always useful, especially if you in your 20s and on the verge of earning or just starting to earn.

Consider learning about investments like mutual funds, real estate, crypto-currency and stock markets. There are so many courses online you can learn for free.

If you need book recommendations I found Ramit Sethi’s book “I Will Teach You to Be Rich” extremely well-researched in money management for young people.

#12. Get rid of freeloaders who never pay

We all have that one friend who is always wants to have fun but never take the responsibility. Yes, I am talking about the freeloaders.

Freeloaders never pay their bills; never return the money they owe you even when you remind them.

I have met and suffered enough of such free loaders and trust me when I tell you to avoid them like a hornet’s nest.

Get away from such toxic people who take advantage of you.

#13. Share Your Living Expenses

The charm of living independently is so exciting! Free from prying eyes of parents, unlimited fun with friends, impromptu road trips, concerts, clubbing, dining out.

But many would hate to admit living independently can be difficult even lonely at times.

You are responsible for everything – your rent, grocery, car servicing, paying utility bills, managing your money etc. You might be cash-strapped also.

If you are tired of living alone maybe moving back home isn’t such a bad idea or consider moving to an affordable locality and get a roommate to split up costs.

#14. Start meal-planning

Meal planning and prepping will save you some hard-earned money which otherwise goes in take-outs and dining out.

Every week or month take out an hour or so to create an elaborate meal plan that saves your grocery bills without compromising on nutrition.

For my meal-planning I rely on planners and currently I’m in love with Life & Apples Meal Planner.

It comes with an extensive 52-week meal planning pages along with meal prep, shopping list, recipe card pages, expense trackers, seasonal produce guide, a nutrients index and so much more.

#15. Saving Money In Daily Life

Cancelling Multiple Streaming Subscriptions

Those little cable subscriptions do add up plus you’re not going to watch Netflix, HBO, Hulu and Amazon Prime all together.

Brewing Your Own Coffee

Imagine how much of that Starbucks coffee money is going to your bank account if you brew your own coffee.

Tracking Your Credit Score Every Six Months

It is so important to track your credit score to know your debt. If you are preparing to avail a loan the first thing banks would ask is your credit score.

Opting For Carpooling Or Public Transport

Not only will you be helping the environment by limiting carbon footprint but you’ll also save that fuel cost.

Making Cash Payments Whenever Possible

When you part with physical cash the pain is real usually the risk with both debit and credit card is you might go overboard with your expenses. So pay in cash whenever possible and use cards for big expenses like grocery or travel bookings and so on.

Be Smart While Shopping

Some smart shopping tips like, buying during the sale season, or purchasing some things in bulk or comparing prices when you buy things online can save you money even while you spend.

Final Thoughts On Saving Money In Your 20s

Your 20s are a fabulous time to explore and grow, but it is also a time to create a financially stable future. If you want a stress-free future, at least financially, start implementing just a few of these tips like sticking to a monthly budget, saving small amounts each month, limiting unnecessary expenses and so on. By the time you hit your retirement age you’ll accumulate quite the fortune.

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