Your twenties are the prime time to build a strong financial foundation by establishing good money habits, starting retirement savings early to harness compound interest, and building an emergency fund while managing student loan debt responsibly. This decade is also crucial for investing in yourself through career development and education, building a good credit score, and learning to live within your means while potentially saving for major life goals like a home down payment or starting a business. The financial decisions made during this decade can have a significant impact on long-term wealth building potential, making it essential to develop healthy financial habits even while balancing entry-level salaries and social pressures to spend.
Goals
Build an emergency fund
As you start to earn steady income, you should also start thinking about starting to build your emergency savings. These come in handy if life throws a curveball and you need some extra time to get back on our feet.
Begin retirement saving
This is also a good stage to start thinking about saving for retirement. Most employers match these contributions up to a certain level and even if you don’t go full-steam on retirement saving, it’s good not to leave available money on the table. Contribute enough to get the match if it’s available.
Build your credit history
Building a credit history takes time and the earlier you start, the better the outcome is going to be. Even if home ownership is a distant dream, a good financial discipline and starting to build our credit history will go a long way.
Challenges
Paying student loans
If student loans are relevant, now is a good time to start paying it down to the extent possible. Generally, the interest on student loans is higher than other debt, so its good to be aware of how much interest is due, and make efforts to pay down the highest rate of debt, which in most cases will be our student loans
Doing more with less
Income is limited in the early career stage, but with a sensible and disciplined approach, it can go a long way. It’s good to look for ways to adopt frugal and a disciplined approach to make the limited income go longer.
Understanding workplace benefits
Many employers offer benefits that help lower your rates for insurance, or may offer other benefits that help lower your cost of living. It’s important to learn and understand how these benefits work to make use of everything that is available.