How to Save Money in Your 20s

How to Save Money in Your 20s
Written by Irina Vasilescu

The minute that you get out of college, that’s as good a sign as any that you have to take charge of your own finances. Although it’s true that you do have the leeway to make as many mistakes while you are young because you can charge it to experience, anyway, but your finances is an entirely different matter.

While you are in your twenties, that is the best time to start making sound financial decisions that will benefit you in the future. If you impulsively buy stuff and carelessly borrow money, you might start your thirties neck-deep in debt.

The good news is that there are many things that you can do in order to straighten out your finances while you are still in your twenties. When you combine sound financial management with practicing ways to save money on a day-to-day basis, you will definitely be on the right track financially.

What to Do When Income’s Low but the Debts Are High

Let’s say that you are fresh out of college and you fortunately managed to secure an entry-level position for yourself at a company with a solid reputation. Your first salary is still a few weeks away, so you are still relying on your credit card or whatever meagre savings you have to survive.

You want to make a good first impression at work so you need to update your corporate wardrobe. You also need to rent a place near your place of work, furnish the apartment, repay your student loans, secure insurance plans, get a decent means of transportation, etc.

All these need to be done with a meager budget! How can you afford to pay for all these when your first salary is still weeks away, and once you receive it, there are all these bills to pay?

The key to taking control of your finances when you are just starting to work is to not panic. Knowing which expenses to prioritize and living way below your means will help you settle on the financial aspect of your life as a twentysomething.

When the income is low but the debts are high, prioritizing which expenses you should settle first is the solution. You should also create a budget and stick to it so that you would not risk overspending on not-so-important items or under saving on big ticket purchases that you really need.

It also helps to make a list of your short-term and long-term goals. While you are working at your first job, absorb information like a sponge. Learn a lesson for each day, even if that lesson is “I don’t want to do this ever again” because the tasks that you are being assigned as a newbie are very mundane.

Once you have proven yourself capable of handling bigger tasks, you can slowly but surely work your way to the top – and have your salary increase in the process.

Top 10 Ways to Save Money in Your 20s

As mentioned earlier, budgeting should be the first skill that should be learned by those who are in their twenties. This should be combined with living within or way below your means.

Since you are still at that stage where you are establishing yourself financially, it pays to know which aspects of everyday living you can save money at. Even the smallest savings can add up to a lot when you consider how much is cut off from your budget on a monthly basis.

To give you more specific ideas on how you can save money in your twenties, take a look at the following list:

1. Make a decision to not rely on your parents’ finances anymore

You might use not having a salary yet as an excuse to still get allowance from mom and dad. However, once you do start receiving that paycheck, you should make it a point to wean yourself away from their financial support.

This means getting your own insurance, car, mobile phone plan and all the other things that you need to survive as a self-sufficient adult. It may sound easier said than done but you will definitely thank yourself later for not relying on your parents’ help anymore.

2. Straighten out your financial documents

Again, you’re already an adult so keep your own official and financial documents. Your birth certificate, driver’s license, Social Security card and other official IDs should be in your possession. If there are bank accounts which your parents may have managed on your behalf when you were a teenager, politely ask them to have it transferred to your own name.

Also keep records of your apartment lease, car registration and other official papers all in a safe place. Just to be on the safe side, make sure that someone you trust 100% knows where these are located.

3. Create a budget – and stick to it

You might find yourself drowning in debt during your first few months at work, but if you continue living below your means, you can slowly but surely climb your way out of it. While you’re at it, make sure to not incur new lines of credit anymore. Otherwise, you will spend your thirties and even your forties paying off debts. The best way to steer clear of the debt trap is to create a budget and stick to it.

Make a list of the things you need for everyday living. Once you see where the money is going, you can make adjustments based on which debts you want to repay first, and how much salary you are earning. Also factor in your short-term and long-term goals, and don’t forget to set aside an emergency fund.

4. Start building a solid credit history

Financial experts say that having no credit history at all is as bad as having a bad credit score. When you’re getting a car loan or applying for a home loan, you would not want your credit score to hinder your purchasing power.

So how can you build a solid credit history while you are still in your twenties? The best solution is to use your credit card sparingly, and to make sure that you are paying off the full amount of the bill each month. Also, look for ways to boost your credit score while you are young.

5. Pay yourself first

When you’re paying bills left and right, you might not find any room in your budget to pay yourself. But if you cannot afford the expense of treating yourself to a night out with friends at least twice a month, where is all the money going?

When creating a budget, allot even a small amount for personal luxuries like a massage or a night out drinking with friends. Better yet, set aside money for your wants instead of needs – and this is the part of your salary that you can assign for paying yourself.

6. Include insurance and debts repayment in your financial plan

Car insurance is important if you have a vehicle that you’re using to drive yourself to and from work. If you’re renting an apartment, you should also have renter’s insurance.

Check if the health insurance plan that’s part of your employee benefits package is suitable for your needs. If not, you may want to get a separate plan to insure your health.

7. Start building an emergency fund

Again, no matter how small your salary is initially, you can set aside even a small amount for emergency expenses. Even a meagre $10 per month would add up to $120 for a whole year. Once you see that you have more room in your budget, increase the amount that you are setting aside on your emergency fund.

8. Know which areas of your budget you can scrimp on

Takeout food, fancy coffee, pricey furniture, designer clothes – these are luxuries that you can ill afford while you are still a struggling twentysomething. Wait until your finances are on a more even keel before treating yourself to the luxury of buying fancy coffee every day.

For now, scrimp on these items by brewing your own coffee, cooking your own food and basically relying on a poor man’s budget while you are still waiting for your finances to stabilize.

9. Know how to take age-appropriate risks

Being in your twenties is actually exciting because this is the time that you can extract the utmost benefit from compounded interest. You have 20, 30 or 40 years to earn compound interest on even a small amount – so this could snowball to a sizable sum when the time comes. Time is on your side if you start investing in your early 20s, so spread out your portfolio to maximize your possible earnings.

10. Save for retirement

Lastly, make a plan to save up for retirement. Being in your twenties may be too early to think about retirement but remember that the earlier you save up for it, the better. Ask your employer about the retirement plans that they have and how you can contribute as an employee.

Being in your twenties is when you can make mistakes, and learn from them. But when it comes to your finances, saving is key if you would like to get out of your student debts, survive on a typically meagre salary, and get your finances in order.

About the author

Irina Vasilescu

Irina Vasilescu is our crafty designer. She joined the team three years ago and is also involved in the writing process.


  • I wish I had seen this article when I was in my 20s. I certainly misspent a good deal of money in those days. My three biggest mistakes back then were my lack of a budget, not paying myself first, and not setting up an emergency fund. Now, I have all three of these steps in place. I feel much more secure financially because I know exactly where my money is going, and I feel like my money is working for me and not the other way around.

    • I agree Bright, I wish I had been a little more frugal in my 20’s and read an article like this.
      It’s never too late though, I really started saving hard in my 30’s and it pays off.

  • I’m a huge fan of paying myself first! I automatically transfer money from every paycheck into accounts for emergency savings, a new car, and a vacation fund. Since I never really see that money in my checking account, I don’t miss it. I also take advantage of my 401k to save money for later without ever seeing it. One thing my company offers that I believe is pretty common, is the ability to set up an auto-increase on your 401k contribution. For example, my 401k contribution increases by 1% of my salary every year until I turn that feature off. It takes the control out of my hands so I can’t make a bad financial decision. I think tools like that are great!

    • 401k plans are always a good idea, although some employers limit their employees’ ability to control their own contributions and investments. I prefer 401k plans that offer plenty of flexibility and self-control rather than relying upon the employer to make every decision possible. Still, it’s a great way to save for retirement nonetheless.

  • It’s not that 20-something year-olds are terrible with money because of their age. The fact of the matter is that people who are bad with money can often point towards their parents being just as bad with money. Parents that fail to teach their children the basics of personal finances and saving will often see their children struggle to manage their money as they become an adult. This can last for many years before the problem is corrected, if it ever is.

  • These are great tips. I actually loved the bit about how the most important thing is not to panic- it’s so true.

    I actually think the most important tip here is the one about starting an emergency fund. It’s really really important to have some cash stashed for when unexpected expenses come up, and as someone who’s in her late 20’s now, I can guarantee that they do :/ I’d build this up before even worrying about retirement since I think it’s really important to have some accessible cash if you need it. I recently got laid off and really wish i’d stashed less in my IRA’s and more in an emergency fund.

  • My mother is much more money-savey than I ever was, and she has set up all kind of saving accounts for me over the years, allowing money to accumulate by sheer virtue of interests, etc. Now that I’m in my twenties, done with university and living away from home, I did feel anxious about how to organize my finances. So many things that I have no idea about, that look so boring to research, and that my mom would know! She’d know how to do it better than me… but with this article, I have a fighting chance to stand on my own. My emergency fund was always my family money. Time to be more independent and learn how to do this stuff, so that I can one day help my kid out too! But first, helping myself out, and paying me first. 😉 Thanks a lot!

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