Smart money management is important throughout one’s life. While someone in their 50s may have several decades of financial knowledge, people in their 20s starting out with their careers might not have had been exposed to any information or training that’s prepared them for greater financial responsibility. Making money plans and saving and investing when you’re young can have benefits for the rest of your life.
Sometimes a little advice can go a long way, so here are just a few quick tips on managing finances for when you’re younger that may be helpful for years to come…but to be honest, below are also some recommendations that could be useful at any age.
Some money tips when you’re in your 20s
- Create a monthly and annual budget and follow it. Good budgeting habits should start early in life, and an ongoing budget is part of other planning that can help achieve major personal goals. Whether it’s buying a car or a home, paying for a longed-for dream trip, moving to another city, creating a foundation for retirement, affording a pet, or helping someone else with their life goals. Keeping close track of your income and spending will help you identify areas where you may need to cut back or shift where your money goes.
- Put time into a comprehensive in-person or online course or a book on beginning investing. It may never have been an interest for some younger people growing up and maybe isn’t an interest now, but it’s important to know basic investing information. Beginning investors should at least know a little on fundamental topics such as the stock and commodities markets, the Dow Jones Industrial Average and the Nasdaq Stock Market, compound interest, cryptocurrencies, financial stocks and bonds, U.S. Savings Bonds, mutual funds, exchange-traded funds (ETFs), life insurance, and other financial areas.
- Strongly try to save a little money every month automatically. Automate your accounts to put just a little money each month into an Individual Retirement Account (IRA), an employer-sponsored 401(k) retirement plan, a savings, or higher-interest Money Market Account. If there’s not a lot of money left every month after paying bills, you can still try save a few dollars—maybe $10—and put it into a financial account that pays interest.
- Go ahead and buy life insurance now if you can. The cost of life insurance increases with age. Generally, the younger you are, the less expensive a life policy will be, so it’s smart to get life insurance earlier in life to protect those you love in case of unexpected life changes. Younger people may be healthier than those that are 20 or 30 years older, and quality of health also informs the cost of insurance policies.
- Shop around for a low-interest credit card with benefits you can use now. A credit card is an important step in creating, raising and maintaining your credit score when you’re young. But there are many, many different types of cards that are offered with very different interest rates for unpaid balances and with a huge range of extra benefits. Interest rates are important as they affect the ability to pay back interest that accumulates if a spending balance in an account isn’t totally paid off monthly. Card benefits can provide everything from free vacation travel and hotel stays to discounts at national retailers. The type of card benefits someone prefers may change throughout their life as their wants and needs evolve. Shop thoroughly at several credit card comparison websites to find credit card that meets your needs now. Also, be careful when managing credit card spending so debt isn’t building up.
- Stay in the same home a while and buy renter’s or home insurance. Paying rent or a mortgage on time is important for building credit, and credit rating agencies prefer people who are stable and don’t move locations too much. While home insurance is pretty much essential for owning a home, those who rent often do not invest in insurance for their temporary living quarters. If you rent, you need renter’s insurance to protect both your possessions and your savings, since insurance will pay the replacement cost of many damaged or destroyed items. Some renter’s insurance will pay for short-term accommodations if you can’t live in your home if it’s being repaired or was completely destroyed—and renter’s insurance may cover the cost of valuable items stolen from your place.
- Have fun, but spend and invest wisely. Part of being young is experimenting, exploring, learning about life and having fun. Careful money management can provide more opportunities to do more activities, travel to exciting places, develop new interests and enjoy oneself, either on your own, or with family and friends.
More advice on managing money at different life stages will be coming to the blog in future months.
A few more financial management recommendations for younger and older consumers
For more information that may help you manage your finances throughout your life, look into the free Delta Community Financial Education Center webinars on a range of practical financial topics. Please visit the Financial Education Center's Events & Seminars page to register for its on-demand webinars.
There are more than a decade of Delta Community blogs that might help in managing personal finances, and here are a few:
A tip on achieving financial BALANCE™
BALANCE™ is a financial education and counseling organization that offers free services to Delta Community members. Some of its services include credit report reviews, debt management, and information on budgeting, money management and home buying.
Visit the BALANCE™ website to learn about their education and assistance programs. Members can also speak with certified credit and housing counselors to get personalized guidance.
Want to connect with a Financial Coach about your specific situation? Chat online, e-mail, or call 1-888-456-2227 to speak with a Financial Coach today.
Note that the services offered through BALANCE™ are separate and distinct from any business conducted with Delta Community and are not guaranteed by, nor are they obligations of, the Credit Union.
