5 Crucial Money Moves to Make in Your 20s

Written By Alla Levin
September 30, 2021

5 Crucial Money Moves to Make in 20s

Your 20s are an exciting, fast-paced time of your life. But though it can be tempting to blow your early paychecks on new gadgets, fancy clothes, or weekend parties, it’s also a good idea to cultivate some financial responsibility in these years.

In fact, the most financially successful individuals make smart money moves in their 20s before many of their peers. Let’s look at five crucial money moves you should also make in your first decade of adulthood.

  1. Start building credit;
  2. Start saving for retirement ASAP;
  3. Avoid high debt purchases;
  4. Practice budgeting early;
  5. Save all “found” money.

Start building credit

Your credit score will stay with you throughout your life, so it’s a good idea to start building it ASAP by:

  • Using a credit card and paying off its balance every month;
  • Paying all your bills on time, including utility bills;
  • Not taking out exorbitant debt or missing your bill payments.

It can be very tough to recover from a bad credit score because of irresponsible decisions in your 20s. But on the bright side, if your credit score is reasonably high by the time you hit 30, you’ll have an easier time applying for great loans, buying a house, and more. A good credit score is anywhere between 600 and 750, which is what most Americans have.

Start saving for retirement ASAP

You should also start saving for retirement as early as your first paycheck. The sooner you start to save for retirement, the bigger nest egg you’ll have to enjoy your golden years. Waiting until their 30s or 40s is one of the biggest mistakes people make with money.

Thanks to the benefits of compound interest, your early retirement funds can eventually reach several million dollars if you regularly funnel cash into an IRA or a 401(k) plan. Saving just a few percent of your annual salary in your 20s can lead to financial dividends in your future.

Pay off debts

If you have any debts in your 20s, try to pay them off ASAP. Even better, follow the debt avalanche method and pay off those debts with the highest interest rates to save yourself money in the long term. By paying off your debts early, you’ll give yourself more spending money in your 20s than if you kicked those debt payments down the road.

Practice budgeting earlymoney moves to make in 20s

It’s a good idea to practice budgeting habits, like using accounting software or tracking your expenses, while still young. This way, you’ll have those habits built up by the time you’re in your 30s. If you practice good budgeting early, you’ll be a more financially responsible adult for your entire life.

Save all ‘found’ money

“Found” money is any cash you didn’t expect to make, like prize money, a sudden promotion at work, and more. In your 20s, it’s a better idea to tuck that extra money away into your retirement account. Why?

Doing this won’t succumb to “lifestyle inflation,” which unfortunately traps many professionals in their 20s. Your 20s will see you gradually make more and more money, and it’s easy to spend that money irresponsibly.

If you save that cash instead, you’ll be well prepared for your future and won’t have to start saving from scratch in your 30s (or even your 40s!).

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