Key Financial Lessons to Learn in Your 20s

Personal Finance

Everyone knows that their 20s are a time for learning and growing into adulthood. This includes a lot of learning when it comes to finances.

Of course, life for 20-year-olds also means facing disappointments and making some mistakes, a lot like the young aspiring dancer in the film Frances Ha (playing on DIRECTV STREAM).

However, when it comes to money, young adults also have time to recover from such mistakes. But, if you’d like to avoid making them in the first place, consider taking the advice of older investors who can share the lessons learned from their past.

Lesson 1: Save as Much as Possible as Soon as Possible

People in their 20s often open a checking account or two, but they tend to overlook the opening of any savings account. Having savings is crucial for everyone, regardless of age, since savings money can help cover unexpected costs that come up in the future. Savings can also create a safety net for you to fall back on if you ever lose a job or take unpaid time off from your current work.

When it comes to saving, never forget a basic rule – buy only what you need. You may be tempted by discounts, cashback, and easy payment plans, but know that those schemes are only intended to make you spend more.

As a young adult, you should also take time to open a retirement savings account as soon as you can. This is because, even though retirement may feel far away, starting a retirement fund in your 20s gives you the maximum amount of time possible to fill that account up. And, with investment-focused retirement accounts, like 401(k) accounts, the money you put in now will have a lot of time to grow on interest too.

Lesson 2: Create a Usable Budget

A lot of people know what budgeting is, but putting a budget into practice can be difficult to do correctly. To create a budget that works, use a digital or paper spreadsheet to note down every expense you plan to pay during a one-month period. Include a name or short description of what each item is and the cost of each item on every line of the spreadsheet. Make sure you leave room for unexpected payments. Once done, place a grand total of expenses.

The first time you create a budget, spend as you normally would for the month, then check back later to see if your spending matched what you had planned. If it didn’t, check your numbers and see what items you may have spent more money on than you thought. From there, you can create next month’s budget with the elimination of unnecessary items to help free up some money to put into your savings.

The key to sticking by a budget is to track it down to each dollar. If you have the right data, you will be able to improvise and plan your savings accordingly.

Lesson 3: Get Insurance Wherever Possible

While it may seem like an extra expense, insurance isn’t something to skip over when you are evaluating your finances. Insurance can save you from financial burdens when emergencies or accidents happen, and it can help alleviate regular costs that you may already be paying, such as payments for dental check-ups. 

The types of insurance that all young adults should look into include medical, dental, automobile, renters, and home insurance.

One point to note is to not rely too much on insurance from your employer. If you lose your job and find yourself dealing with emergency expenses, you will be forced to dip into your savings or get expensive loans.

Lesson 4: Promote Your Credit Score

Your 20s are the perfect time to build up a good credit score since this score will later help you get the loans you may need to buy a vehicle, house, or even business. To build up a good score, you may get a credit card to make some purchases. However, only spend within your budget, and never spend more money on a credit card than you have in checking and savings accounts.

Most importantly, good credit comes from making on-time credit payments, so be sure to always pay off your credit card bills as soon as possible. Some credit card issuers also offer automatic payments for card users to set up so that they do not ever miss a payment, and you should take advantage of that if you can.

Lesson 5: Make a Plan to Pay Off Your Debt

If you’re a young adult, you may not have much debt accumulated in your life. However, a lot of people in their mid to late 20s have student loan debt, and this can become a burden to pay off if you don’t have a plan.

If you have a steady income, plan to put some of this income aside each month to pay off any loan debt you may have. You can decide how much you are willing to put aside for loan payments but keep in mind that loans come with interest rates, and this means that the longer your loan sits without being paid for, the more time it has to grow.

Lesson 6: Talk About Finances with Others

If you have a serious partner, you should take time to talk about finances with that person, especially if you live with that partner. Partners, married or not, often share money and learn from each others’ spending habits, so set a good example of saving for your partner and consider creating a joint checking account if you feel comfortable sharing funds.

You can also talk with family members and friends if you have questions about your personal finances, making sure you take notes to share with others if they ever come to you with financial questions. 


Keeping track of finances can be difficult, especially for young adults who are still learning about savings, loans, and insurance. However, if you are someone in your 20s, be sure to read through these tips from experienced investors to avoid common mistakes.

Remember, your 20s won’t last forever, and you may one day be the one to give advice to the next generations.