Your 20s can be an interesting place to be in life.
There is a tremendous amount of change that goes on in the typical 20-something’s life.
Finishing school and potentially going to grad school, starting a career, trying to decide what you really want to do with your life, buying a home or condo, getting married, and even possibly having kids are all things that many people experience in their 20s.
In this busy time of transition and change, it can be hard to give your finances the attention it needs. Today I’m sharing the top 10 financial moves for people in their 20s.
Let’s dive in.
1) Open and Contribute to a Savings Account
More likely than not your parents went with you to the bank when you were young to open up a savings account. Also more likely than not, this savings account was either closed or severely neglected once you reached college.
If you don’t currently have a retirement account, you should open one. Not only should you open one, but you should contribute to it regularly. The value of having an emergency fund can’t be stressed enough. You never know what unexpected expenses will arise.
2) Open a Retirement Account
Opening a retirement account is another top financial move that people can make in their 20s. Not only do you get compound interest working in your favor, you also sometimes get “free” money from your employer matching your retirement contributions.
If your employer doesn’t offer a retirement plan, consider setting up an IRA. Remember, no one is going to fund your retirement for you. The average social security recipient receives approximately $1,200 a month. That’s not enough to live off of. Your 20s is a perfect time to get in the habit of regularly contributing to a retirement account.
3) Contribute to a Health Savings Account (HSA)
HSAs are one of my favorite financial tools. HSAs essentially allow you to contribute pre-tax money and allows you to use that money for qualified medical expenses, all without incurring any sort of tax.
This is another account that employers will sometimes match contributions. My employer matches $500 a year. There are limits to how much you can contribute, but I would highly recommend you contribute the max whether you think you’ll need it or not. As I explain in 8 reasons to contribute to an HSA, HSAs are treated similar to an IRA from a retirement perspective.
4) Start a Career
I know, I know. Yes, your 20s is probably the best time to live with a YOLO attitude, but I would bet a lot of people who take that approach end up regretting it later on. The older you get the harder it is to find the time and energy to go to school and launch a career.
Not only will starting a career help you financially, it will also help you “figure out” whether you like what you’re doing or not. The sooner you realize that you don’t like the career you choose, the better. Better to correct course in your 20s than in your 30s, 40s, etc.
5) Learn & Improve Skills
While college is an ideal place to develop skills that are applicable to the workplace and in-demand for employers, there is something to be said about learning and improving skills after you start in the workplace. For example, it’s hard to develop skills using accounting software before you start working at an office that utilizes accounting software.
The better an employee’s skills are, the higher pay they can command. Learning new skills also may open up new income streams. If your background is in marketing but you gain a thorough understanding of databases and data analysis, your combination of skills could land you a promotion.
6) Pay Down Debt
Paying down debt is an obvious financial move, but it would be wrong to leave it out. Paying down student loans, car loans, consumer debt, and other debt is always a good move, but even more so in your 20s. Debt affects everyone regardless of age, but if you can get in the habit of making consistent debt payments in your 20s you will eventually have NO debt.
I’m a big advocate of slowly paying down debt and making sure it’s moving in the right direction – down. As long as your debt level is slowly decreasing, you will eventually hit zero. Use your debt as motivation to earn more money. I work side hustles on top of my full-time job to help offset student loan payments.
7) Start Tracking Your Finances
Until two years ago, I didn’t track my income and expenses. Recording my income and expenses has dramatically helped me and my wife have a better handle on our finances. My only regret is not starting sooner.
Tracking every dollar you spend gives you a sense of control over your financial situation. Not only that, but if you spend more money on something than you would like to (such as groceries) you will be aware of it and have the information you need to make positive changes to your spending habits.
8) Take Risks
When it comes to taking risks, I’m pretty conservative. Blame it on me being an introvert or just being risk-averse in general, but I don’t take a lot of risks.
So call me a hypocrite, but I do think that taking risks in your 20s is a good thing. For example, perhaps you are afraid to get out of your comfort zone by taking a new job at a new company. If it doesn’t pan out you have plenty of time to find the right company and the right job. If you don’t take the risk, though, you may have missed out on the opportunity of a lifetime.
Taking risks, especially in your 20s, can pay off big time. From what I’ve heard it becomes more difficult the older you get. If you are risk-averse try starting a side hustle or something that is low-risk high-reward. Not motivated to start one? Read this: You Won’t Believe What Started as a Side Hustle.
9) Make Long-Term Financial Goals
One of the best things you can do in your 20s is sit down and think about what your long-term financial goals are. Retirement is a goal that pretty much everyone has, but what about a home? How big of a home do you want? What sort of lifestyle are you shooting for?
Some people inevitably have goals that will require more money than others. If your goal is to own rental units, for example, you will have to figure out how you will (financially) make that a reality. Having a clear view of your goals will help you make the changes necessary to make them a reality.
10) Put Off Having Kids
I know this is a controversial suggestion, but I truly believe that putting off having kids is one of the best financial moves people in their 20s can make. Kids take time, money, and make every other financial goal more difficult because of the money that needs to be allocated towards your child or children.
I want to have kids just as much as the other person (okay, maybe a little less), but the better off you are financially when you have kids, the more you will enjoy being a parent.
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What do you think is the #1 financial move someone in their 20s can make? Anything you would add (or delete) from this list?
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I totally agree that having a kid will definitely cause you to spend money and time. I was pregnant at the young age and yes, we really faced too many trials, especially financial matters and gladly we survived it.
All really good advice. I wish my employer matched my HSA! At least they match my 401K. I very much agree with starting a career in your 20’s. I’m in the same field at 30 as I was at 22 and that continuity has made a huge difference for me salary-wise. If you can pick a career and advance, you’ll have 10 years of experience by your early 30s, which is what’s required for most upper-level management positions.
Can you get an HSA if you don’t have a traditional employment situation? I’m with you on the kids. With a year and a half before I turn 30, I still can’t fathom the possibility.
brokeandbeau I’m *pretty* sure that you can get an insurance plan with an HSA even if it’s through the exchanges or you are otherwise in a non-traditional employment situation. I think a lot of the exchange plans are high deductible and that often goes hand-in-hand with an HSA. I knew you’d agree about the kids point I threw in at the end as we’ve both written about it. I still think it’s a great move even though others seem to disagree.
Avoid debt in the first place, try to work during college and pick a college that is affordable. Having less debt to pay off early and starting investing early on will pay off as much as collecting debt to get that advanced degree. Save and invest and remember that your parents took decades to earn what they have and it is okay to wait to earn what you want instead of going in to debt for new cars, phones, and the latest and greatest. Also find contentment in work and don’t jump and jump around. Just like waiting to buy something it takes time to move up at a company. Other people paid their dues to get where they are, don’t expect to be handed something you have earned.
Mrs. Frugalwoods Good point about the 10-years of experience by your early 30s. The only big exception would be careers that require a masters, phd, or some combination to even get started (doctors, lawyers, psychologists). Nevertheless, the sooner you choose the better.
Clarisse @ Make Money Your Way Thanks for sharing your experiences. I’m glad you got through some of your tougher financial times and I’m sure having a child was worth it.
hwincome Great advice and thanks for sharing. I think the college one is a tough one. Once you are in your 20s you usually don’t have much school left so the debt situation is more or less set in stone. That’s why I focus on increasing income so much on this blog – the audience are typically people who already have gone through college and either have debt or don’t have debt.
I definitely agree with taking risks. You’ll always get what you’ve always got if you always do what you’ve always done. I want more.
firstqfinance Yeah there are risks that NEED to be taken if you want to reach new levels whether it’s a higher-level in your career, a small business that can turn into something bigger, etc. Your 20s is a good time to take calculated risks.
I think you are spot-on with all of these tips. I suppose thast putting off having children might save you money, but I don’t know if I would center you decision about having kids solely based on the financial aspect. I actually heard that people actually tend to earn more money after having kids becuase they are super motivated to provide for their children.
I like these ideas for your 20s! (except for the not having kids part!) I guess we waited until we were older too- I had my first daughter when I was 29. That seemed like the perfect time for us.
Great list, DC!! I would add “Learn to love budgeting” to this list. For years, we viewed budgets as a punishment, but they really bring freedom to your financial life.
All good advice and would second Laurie’s comment about coming up with some sort of view on budgeting and making sure it works for you – though I know for many of these you would likely be doing something like that anyway. :) As to the kids, to play devil’s advocate, as someone who waited I wish we wouldn’t have waited until our 30s to start. Of course, it depends largely on your individual situation but I’d rather be younger with grandkids than considerably older. ;)
Yes, to every single item on this list. Great tips here, DC. Personally, I think putting off having kids is the way to go – that’s not to say money controls when you have kids, but it should be a factor. If people got out of debt, had a financial cushion, were working in their careers, and THEN had kids – imagine the shift in our entire culture.
Holly at ClubThrifty 29 is “close enough” to 30s that I think it would basically fall within my guidelines lol. No, I knew that one would certainly have some disagreement from others in the personal finance community, but I do think it’s hard to deny that your finances are better off without kids – not that kids aren’t worth it if you do decide to have them in your 20s!
BudgetforMore Very interesting about making more after having kids (I’d be interested in seeing the research behind that), but I still think for the vast majority of people in their 20s they will be better off if they put off having kids.
Laurie TheFrugalFarmer Great addition, Laurie. We definitely do not budget, but I know it would be beneficial if we put the time into it.
Great list DC!! I love all of it, but really agree with taking risks. Your 20s is the time to take risks in your life and career, especially if you don’t have kids or other responsibilities. I took a few big career risks in my 20s and they all led me to a better place down the road.
All great tips. I think I’m similar in that I’m risk averse and an introvert which has resulted in me not taking as many risks. And now that I have a family…I’m even more risk averse…which is why #10 is a good one too. Kids do take a lot of time and money…they are wonderful and a joy, but you can wait a little.
Number five is one that I stress about often as well. No matter what stage of your career you might be in, it’s always beneficial to keep gaining knowledge and skills.
The more you know, the more you’re worth. Employers tend to pay based on skill and knowledge, so keep on growing your personal repertoire!
Good tips here DC. As always, thanks for a good read.
I also agree with taking more risks when you’re in your 20s. With less responsibilities such as marriage or kids, time affords you to explore professionally and personally. I would also suggest for them to seek advice from people or family members who are in their 30s or older to help them gain perspective. Many young people tend to have an “I know it all” attitude that won’t get them very far.
If taking risks is “throwing my time and energy into things I’m not sure will be successful but could be fun, challenging and a learning experience” then I’m all for it. With few responsibilities, what have you got to lose?
I’m in the middle of taking some big risks and doing a lot of exploration myself. I’m glad I’m doing it, but I have a feeling it looks very silly to my parents/in-laws. I’m very glad I don’t have kids as I’m going through this transition.
FrugalRules Thanks for sharing your opinion on the kids situation. I know others who have made the same argument (wanting to be younger when you’re a grandparent) but I think that largely is dependent on your children’s decisions. They may wait a long time before having kids, so even if you have kids in your early 20s you may be waiting some time before becoming a grandparent. Anyway from a purely financial perspective I think it’s hard to argue against waiting.
theFinancegirl I think waiting to have kids can be a huge win for everyone involved. I know one of my friend’s parents in particular who waited and I think it greatly affected my view on the topic.
blonde_finance Taking risks is something people don’t think about doing enough in their 20s, at least in my opinion. I think some people take the wrong risks, such as taking too much time off from school and whatnot, but I think taking calculated risks can really change your life.
Andrew LivingRichCheaply I think with #10 I just have a hard time imagining how kids would fit into my current lifestyle. Obviously that means there would be changes in my lifestyle (finances, time, pursuits, etc.) that would be impacted if I had kids anytime soon. I think waiting can provide 20somethings with the time and energy to “go after” big goals or take risks they otherwise would not.
John Green Thanks for the kind words! It’s really interesting how heavily employers and hiring managers weigh your “paper” resume. If you look good on paper they have more confidence in you before they even meet you in person.
Kassandra @ More Than Just Money I think those who have the “I know it all” attitude get a heavy does of reality in their 20s and those who don’t are in for some big surprises. I have a number of friends who are 30 or older and I really respect their viewpoints.
Myles Money Great perspective, Myles. I think even so-called “failures” can be great learning experiences.
pfjenna I think a lot of things look silly to the older generation, especially if they haven’t taken risks or done anything out of the box for decades. Best of luck on your transition!
I love learning and improving skills. It offers a competitive advantage in the job market and contributes to personal growth. I have to say that #10 is something that I agree with. I worked at a daycare in college and it gave me a lot of insight on children. They are a joy to have and I want to be a parent but I feel at this point in my life I want to gain a solid financial footing before I start the parenting chapter.
Great tips, DC. So many young people envision their 20’s to their “fun” time and it absolutely can be, but you also want to set yourself up for long-term success, which these steps can help do. I was in my late 30’s when I had Lauren so I did follow your advice. Granted, it was more about Chris and I not intending to be parents originally. When to have kids is such a tough decision because there is never the “perfect” time but there is the right time. And I do agree that you need to mentally, emotionally and financially prepared to handle the responsibility of children. They are an incredible gift and blessing, but they are also a lot of work too. And it’s okay to wait until you’re ready versus feeling that you need to have children immediately after getting married, which was the societal pressure when I got married, eons ago. :) I’m glad it’s far more acceptable to wait these days, so it can be more on your terms.
Absolutely. I mean, think about it. If an employer is looking to hire someone and all other things are equal, they’re likely going to choose the applicant with the most skill, knowledge and experience.
Whether it’s a half hour course in IT or 4 years of college, any training we can pick up along the way has a potential to be the deal breaker for an opportunity in the future.
Love this list! Retirement is something we haven’t been aggressively saving for until just recently. Now, I’m addicted!
We also have put off having children for at least a few years. We want to be as prepared as possible, but I know everyone says that.
Love this list! Obviously a lot depends on your situation but for the most part i agree. While i feel like i wasted 3 years by not being more proactive with our debt we’re making good headway now and have learned a lot!
Invest, Invest, Invest. Stay away from credit card debt. Enjoy being able to function well on so little sleep.
I think both starting a budget and investing would be the two things I wish I would have done earlier in my life. Just knowing where your money is going and being mindful of what you are spending money on.
Those are some great tips DC. I am in the process of learning more about an HSA account. I also agree 100% with tip #10.
Hey DC,
Such a wise sage, and I’m being mostly serious here :) haha..
I like these tips and although most are common sense, ironically it’s what stops people from achieving their financial and non-financial goals..
My number 1 would have to be Learn & Improve Skills i.e. invest in yourself.. followed closely by setting up an automatic savings plan i.e. paying yourself first..
Even if you aren’t earning 100K, that physchological ability to put even $20 away a week and learn about investing will pay dividends (pardon the pun)..
It all boils down though to what you want to do/achieve in your life.. Sounds deep but I’m sure that there are some people out there that are happy and satisfied with spending all that they earn and I wouldn’t want to force someone to do something they didn’t want to, not saying your doing that here :)
Gee that’s a long comment.. My bad ;)
manneredmoney My wife worked in a daycare at the YMCA for almost a decade, so that definitely gave her some perspective on having kids. It’s not that we don’t like them, we just know how much better it will be if we have our finances in order before we have them.
ShannonRyan While I agree it’s becoming more acceptable, I do think that there is some pressure today still to have kids as soon as you can. Same with marriage. Even though people are waiting longer and longer to get married, there is still that pressure to find someone while you’re “young.”
SenseofCents I love looking at my retirement account and seeing the balance grow over time. I have it set on automatic contributions so I rarely even check it. It’s nice knowing that as long as time is passing my retirement account is getting bigger!
PlungedinDebt I agree that everyone’s situation is different. That’s why writing a post like this is so difficult because it won’t apply to everyone and parts will apply to some people that won’t apply to others. I feel a lot better when I’m making progress on my debt so I definitely agree with you that focusing on it and having it on the forefront of your mind is always a good thing.
Eyesonthedollar Haha I love your last tip. I get very little sleep during the week and I pay for it each weekend when I’m worthless on Fridays and sleep in late on Saturdays.
Beachbudget I think investing is something that is really easy to put off. After all, there is always something else to buy or fix or use your money for. I am in the camp that thinks if you can even consistently invest a tiny amount each month you are doing yourself a big favor.
Jason @ The Butler Journal Thanks Jason! I wrote a really solid HSA-related post that will be published in a couple weeks. I’m biased but I really do think it’s a post that you and others will find value in.
mycareercrusade Wow! I am humbled by you calling me a wise sage sir!
I agree with you about it boiling down to what you want to achieve. Some people will be very content at a relatively simple 9-5 job that doesn’t cause them much stress and allows them to have plenty of free time. Others want “more” and will try to build businesses on top of working crazy hours. It’s all about perspective.
I appreciate the long comments! They are the best type.
Love the tips! Thanks!! Though I’ve heard people say that having kids made them financially more responsible, so sometimes that can be a blessing! I know that was true for us, haha, but ideally I can see how it’s best to wait a little while before having them.
Sarah Brooks Funny how everyone wants to comment on the kids point, even though it’s only 1 out of 10. How did I know that would happen ;) But great to hear that it made you more responsible.
You’re welcome DC! Not sure what I’d do if I had too much “spare time” at any rate.. I’m probably ultra ambitious, which doesn’t always help but can be a good thing :)
It does mean you have to read them though haha and not everyone has time for that
mycareercrusade I think being ultra ambitious is a good thing! Comments are super important for any blogger, so I enjoy them. Long ones show that it made you think about what I wrote, so it’s encouraging. It’s also why I always reciprocate comments, kind of a “thank you” for taking the time to stop by my site.
It can be tough being ultra ambitious though cause it means you can never be satisfied, which can be a good thing though :)..
Yeah that’s a great way of looking at it!