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Even in your 20s, it’s never too early to start setting financial goals.

Main points:

  • As you enter your 20s, realistic goals include sticking to a monthly spending plan and saving a month’s worth of expenses for an emergency fund.
  • This is also a great time to start saving for retirement and building your credit score.
  • Make sure you have a high yield savings account so you can earn a lot of interest on your savings.

For those entering their 20s, financial goals are often not a priority. Early adulthood is an exciting time, and personal finances sometimes take a back seat. But this is also the best time to set financial goals, because good decisions now can pay you big for years to come.

Most people don’t have a lot of disposable income at this stage of life, so you’re not expected to have $10,000. It’s more about building a solid foundation. Here are five financial goals to help you do just that.

1. Save at least one month of living expenses

From time to time, unexpected money problems arise. Your job may cut your hours, or your car may break down, to give you a few common examples. Sometimes these things are impossible to predict, which is why every adult needs an emergency fund.

Your emergency fund is savings you use to cover unexpected expenses. The usual recommendation is to have three to six months of living expenses in your emergency savings, but that can be a lot to manage as a young adult.

Aim for an emergency fund with a month’s worth of living expenses to start. If your basic necessities like rent, groceries, and gas cost $1,200 a month, try to save $1,200. And if you need to use those savings for an emergency, make sure to top it up as soon as possible.

2. Follow a monthly spending plan

One of the best habits you can get into is planning how you will spend your money. Many people, of all ages, fail to do this. They spend every dollar they earn, or worse, overspend and get into unnecessary debt.

To create a monthly spending plan, start with your income. Then divide it into the following categories:

  • Basic expenses
  • Want (your fun money)
  • Savings/Investments

For example, a popular type of budget is the 50/30/20 method. You spend 50% on essentials, 30% on things you want, and 20% on savings and investments.

If money is tight, you may need to allocate a larger portion of your income to basic expenses. That’s good: What’s important is that you have a spending plan that you stick to. You can always adjust it later as your income increases.

3. Create a retirement fund

Retirement may seem like something you can start saving for later, but if you can start now, you definitely should. When you start young, you give your money more time to grow. And if you invest, your money can grow significantly.

This is easiest to understand with an example. Let’s compare two people, one who starts investing in his 20s and the other in his 40s. Both invest $100 per month and earn a 7% annual return, which is realistic based on average stock market returns. Here’s how much money everyone will have when they retire at age 65.

Started investing

Total amount invested

Final balance

20 years old



40 years old

30,000 dollars


Data source: author’s calculations.

The difference is that the investor who started with 20 earned a much higher compound interest. That’s when you earn interest on top of the interest you’ve already earned. Thanks to compound interest, their account has grown over $288,000. On the other hand, an investor starting at 40 has earned about $36,000.

Retirement accounts are popular ways to invest because they help you save on taxes. Here are some options to consider:

4. Get a credit card to build your credit score

Learning to use credit is another smart thing to do when you’re young. While some people have bad experiences with credit cards, they are a useful financial tool as long as you don’t spend more than you can afford.

To get started, look for a credit card designed for consumers who are new to credit. Be sure to choose one that doesn’t have an annual fee so you can use it without paying extra. Here are some cards that are good for building credit.

Here’s the key to using your credit card. pay the bill on time and in full each month. If you do this, there will be no interest charges on your purchases. And by paying on time, you build your credit score. This can help you get approved for housing, pay lower interest rates on car loans or mortgages, and possibly even get cheaper insurance rates.

5. Open a high-yield savings account

You need a safe place to store your savings, which is why a good savings account is a must. If you have your money in one of the big banks right now, check out how much interest they’re paying you compared to the best high-yield savings accounts on offer.

What you’ll likely find is that high-yield accounts have much higher interest rates than what you’re getting. This is because they are available through online banks that do not have physical branches. Because online banks don’t need to spend money at bank branches, they can charge higher interest rates. In some cases, they offer 10 to 20 times more than the national average.

Online banks are also as secure as others. They have the same FDIC insurance that covers up to $250,000 per eligible account. Your money will still be safe and you will earn much more interest.

It’s good to have financial goals at every stage of life. In your 20s, it’s all about getting off to a strong start. If you check off all five of those goals, you’ll set yourself up for success.

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