Six Smart Money Moves to Make in Your 20s

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When you are in your twenties, you are building a solid foundation for your financial future. The choices you make now will affect you for the rest of your financial life. 

Take the steps now to build a solid future for yourself and your family. Follow our six tips to help you successfully manage your finances over the coming years. And remember, it's possible to enjoy your twenties while still planning for your future.

01 of 06

Stop Using Credit Cards


One of the best things you can do for your finances is to stop using your credit cards. It is too easy to get into credit card debt and it can take years to get out of it. 

Break that habit now. Stop using your credit cards, even for emergencies. Set up a good emergency fund instead. This will prevent you from having to pay off large amounts of debt, and waste money paying interest.  

02 of 06

Start Saving for Retirement

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You may be young, but you need to start saving for retirement now. The sooner you start, the sooner you will be able to retire. So open a 401(k) or IRA now. (And keep in mind that compound interest is on your side here.) 

If you start contributing to your 401(k) when you're young, your money will have longer to grow. This means you can contribute a smaller monthly amount, but still end up with just as much money—if not more—than someone who contributed a lot each month, but started saving later in life. 

03 of 06

Create a Solid Financial Plan

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You would never go on a trip without a solid destination in mind. In the same way, it is important to have a solid financial plan so you know where you want to go financially. Then you can identify the steps you need to take to get there.

Your financial plan should include everything from buying a home to retirement. As you get married and have children, you will need to adjust the plan. Do not put off creating a financial plan just because you are single. You still need to have specific savings and retirement goals that you are working toward. 

04 of 06

Save for a Down Payment on a House

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As soon as you have paid off your credit card debt, you should start putting money aside to use as a down payment on a home. It doesn't have to be a huge home or your dream home. But buying a home can help you build equity, which will come in handy later in life. 

Don't worry if you still have student loans. You can buy a home and pay your student loans at the same time, as long as your budget accounts for it. 

05 of 06

Establish an Emergency Fund


An emergency fund is an insurance policy, but for your finances. It can give you peace of mind that you will be covered in the case of a large unexpected expense, like a car accident or illness. 

If you are working to pay off debt, your emergency fund may be smaller, perhaps $1,000. But as you pay off debt, you'll continue to add to that fund, until you have 6 months of living expenses saved. You can put your emergency fund in a money market savings account that offers slightly higher interest rates.

06 of 06

Budget Every Single Month

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The most important step you can take in your twenties is to begin budgeting. Regardless of your financial situation, it's always wise to stick to a budget. But in your 20s, the sooner you start budgeting the better off you will be financially. 

Your budget gives you the ability to decide how you want to spend your money. It helps you to track your spending and can prevent you from overspending or relying on your credit cards.

It takes time and work, but if you have a workable budget that you follow each month, you can be confident that you are handling your finances responsibly. And who doesn't want that? 

Updated by Rachel Morgan Cautero.

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