July 31

Smart Money Moves to Make in Your Late Teens and Early 20s



Your late teens and early 20s are an interesting time in terms of personal finances. Many young adults are faced with large amounts of student debt, but relatively low daily expenses. You might be just starting out in a new career, and are, hopefully, excited about your future opportunities in terms of growth and salary increases. Retirement, and even goals like buying a house or having kids likely still feel like they’re far off in your future.

But whether you find yourself living paycheck to paycheck or with a hefty sum leftover each month to spend, now is the time to start setting yourself up for a successful financial future. Keep reading to learn the smart money moves that you should be making today.

Learn to Follow a Budget

Following a budget, especially when your day-to-day expenses are low or when your paycheck is stretched thin each month, can feel pointless. But learning to follow a budget today is about more than making sure you have enough to cover your bills.

Learning the habits that go into setting and following a budget is a great way to start honing your financial know-how. It will teach you to think twice before making impulse purchases. It will also make you more conscious of your spending in different categories, like groceries, dining out, clothing, or gas. Identifying areas where you struggle with overspending now can help you work on habits to help you avoid doing so in the future.

Start an Emergency Fund

If your car got a flat today, would you have enough money to purchase a new tire without putting it on a credit card? What if you had to go to the emergency room and suddenly faced a $1,000-plus bill? What would you have to do to pay your bills if you suddenly lost your job?

Fewer than 4 out of every 10 Americans had enough money set aside to cover a $1,000 emergency expense prior to the COVID-19 pandemic. It’s likely that number is even smaller today.

Starting an emergency fund is a great way to set yourself up for a better financial future. An emergency fund is something you can lean on when things go wrong. Rather than draining your primary bank account to cover an unexpected expense, you can dip into your fund. This allows you to keep your other financial goals on track. It also helps prevent you from falling into debt to pay for that expense.

You don’t have to start big to start an emergency fund. Setting aside even $50 a month will add up over time and help to offset any expenses that do come your way. As your income increases, it’s likely that your expenses are increasing as well. This means that the amount of money you’re setting aside in your emergency fund needs to increase at a comparable rate in order to keep up.

Avoid Debt as Much as Possible

It’s easy to fall into the trap of using credit cards and personal loans to cover anything you can’t pay cash for in your late teens and early 20s. But before you fall into that trap, consider the long-term consequences.

Credit card debt, in particular, can snowball fast. Thanks to the high-interest rates, that seemingly small debt can turn into a bill that you’re paying off for years to come.

Avoiding credit card debt now will help to ensure that nothing stands in the way of your goals later on.

Educate Yourself About Your Credit Score

Don’t wait until yours takes a sudden dive to learn about credit scores. Now, when you’re just starting to build your credit, is the perfect time to learn about what it is and what financial moves affect it.

Educate yourself about what does and does not affect your credit score. Then, make moves to start growing a strong credit score.

While you should try to avoid relying on credit cards to pay for everything, making some purchases on a card and paying off the card each month is one great way to start building a strong credit score.

Set Financial Goals for Yourself

Another great way to stay on track for a brighter financial future now is by setting goals for yourself.

These goals don’t have to be lofty, like buying a house or retiring early. It’s perfectly fine to set a goal of affording a fun vacation with friends next year. Or being able to afford an awesome apartment that you’ve had your eye on.

Setting these goals now and focusing on them is a great way to reduce your chances of giving in to impulse purchasing. While your friends are spending their paychecks on dining out or new clothes, you’ll have your eye on the prize—and money in your bank account.

Start Your Retirement Savings

Nearly three-quarters of 20-somethings in one survey reported feeling confident that their financial situations will improve in the next 5 years. When you’re constantly looking ahead to better things, it’s easy to convince yourself that you’ll have time and money to save for big expenses later on. That includes starting to save for retirement.

But starting your retirement savings now offers a number of benefits. To start, it can set you up for a more comfortable retirement. Even if you can only set aside a small amount today, that money will have more time to gain interest and grow if it’s set aside in your 20s.

If you can aggressively start saving towards your retirement now, you may even be able to set yourself up to retire a few years earlier than you could if you waited to make this smart financial move.

Setting Yourself Up for a Brighter Financial Future in Your Late Teens and Early 20s

Making smart financial moves and developing good money habits today is definitely something that your future self will thank you for. Your late teens and early 20s aren’t too early to start retirement or emergency fund, learn about your credit score, or start following a budget and working towards financial goals.

No matter your age, if you’re ready to start improving your financial know-how, CIG is here to help. Get started today to learn more about CIG ‘s credit-building and improving tools and resources.


Leah Roberts

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