Saving money is a habit that can be difficult to master in your 20s. In this early stage of your financial journey, you likely have lots of competing pressures on where you should spend your dollars. But making the move to save money in your 20s smart!
If you can, making it a point to start saving in your 20s will pay off big time. What should you do with savings in your 20s?
Should you save in your 20s?
First things first, should you save in your 20? It may seem obvious, but of course, the answer is yes.
I know — you probably feel like you have better things to spend your money on in your 20s. After all, you may rightly think that you’ll have decades to save for the big goal of retirement. And everything else can work itself out in your 30s.
But choosing to save in your 20s can set you up for a life of better financial options. The earlier you can start building your savings, the better. Not only will you have the power of compounding, which can help you grow your savings dramatically over time, on your side, but you’ll also build the important habit of saving.
Whether you are able to set aside $20, $100, or more each month, every little bit will help put you closer to your long-term financial goals. Plus, you’ll get in the habit of putting aside money for your future money goals.
What should I do with my savings in my 20s?
Here’s a quick look at some of the things you may want to save for in retirement.
- A down payment on your first house. The cost of becoming a homeowner is typically to the tune of several thousand dollars.
- Retirement. Whether you want to pursue early retirement or quit work at the traditional age of 65, you’ll need to build savings to make the leap.
- Vacations. Yes! You should absolutely set aside funds to enjoy yourself on vacation.
- Pet ownership. I love my pup. But adopting him was not an inexpensive endeavor. If you’re considering pet ownership, I highly recommend setting aside some specific savings before welcoming a furry friend into your home.
- Invest. Invest savings into opportunities presented by real estate, the stock market and more to grow your savings for the future.
- Investing in yourself. Investing in yourself can come in many forms. Whether you choose to pursue a degree or learn a new skill with an online course, don’t skimp on giving yourself opportunities to improve your situation.
- Emergency fund. An emergency fund is a key component of a healthy financial life. Take action to build 3 to 6 months’ worth of expenses in your emergency fund.
- Build more freedom into your life. Who wants to be locked into any particular financial arrangement? Most of us don’t! Build freedom in your life by paying down debt and adding to your savings.
Although this is not an exhaustive list of what to do with savings in your 20s, it should give you some ideas on where you want to stash your savings. Remember, personal finance is personal. You can and should make choices about your money that reflects your long term goals and interest.
For example, I’ve saved for most of the things on the list above.
As I grew my income and checked different savings goals off my list, I moved onto other goals. I started by building investing in myself and taking a course about freelance writing that completely transformed my financial trajectory. At the time, it felt like a huge investment to spend $150 on a course. But it was completely worth it!
From there, I built my emergency fund, saved for a two-week honeymoon in Scotland, made a down payment on a house, saved up to welcome a puppy into our life, and steadily invest in assets to build towards a potential early retirement.
Whatever your dreams are, saving money can help you achieve them.
How to save money in your 20s
Okay, so you’re convinced – saving money in your 20s is important. But HOW can you create savings? Here’s a few tips to help you build more savings into your life.
Build that budget
Budgets often have a negative connotation of a constraining tool.
However, I think of my budget as a way to keep our household on track towards our long-term financial goals. Instead of thinking about budgeting in a negative sense, try to think of it as an opportunity to put your money to work for you. After all, a budget can help you keep a lid on overspending in areas that don’t truly matter to you.
Without a budget, it can be a difficult road to saving money in your 20s.
Learn how to cook
You’ve probably heard this one before — cooking at home can help you save on takeout.
In the first month of our marriage, my husband and I spent over $750 on food! Considering we are a household of only two people, that seemed like a ridiculous amount of money. The big culprit was takeout, and we decided to make a change.
Essentially, we decided to start meal planning and cook at home more. I took meal planning to the next level and started going to the grocery store just once every three weeks. (This frequency is partly because my lazy self didn’t want to go to the store more often and partly because it helps us stick to the plan.)
With this strategy, we were able to cut our food spending in half! If you want to give this type of savings strategy a try, I highly recommend checking out the Budget Bytes cookbook. Most of our favorite meals, like Creamy Mushroom Ramen and Pork and Dragon Noodles, can be found there.
Give house hacking a try
House hacking is a strategy that can be used to slash your housing expenses.
Essentially, you buy a property with extra space of some kind. This could mean extra bedrooms in a home or extra units in a multi-family property. From there, you rent out the extra spaces to tenants with the intention of covering your entire mortgage with their rent payments.
With that, you can have someone else pay the mortgage while you enjoy living in a free space. That is a surefire way to start saving money in your 20s.
Want to learn more? I would recommend checking out the House Hacking podcast. Or pick up a copy of The House Hacking Strategy by Craig Curelop for a deeper dive.
Downgrade your transportation
Transportation can be a major expense. This is especially true if you have a ride that requires a lot of finely tuned maintenance or a steep monthly car payment.
If at all possible, look for ways to cut back on your transportation costs. You might be able to scale back to a less expensive vehicle or tap into the public transportation in your area. Get creative on the possibilities of spending less on transportation.
Pay off debt
Debt is a financial burden that drains your resources. If you have debt, then consider paying it off early. Specifically, you should consider eliminating high interest debt.
Of course, this is not always the mathematically best course of action if you have low interest debt. With that, you should weigh the cost of your outstanding debt against the opportunities you could tap into by investing those funds instead.
Build a side hustle
It’s true – you can only cut back on spending so much. At a certain point, you won’t be willing or able to cut back any further on your spending habits. That’s when you may need to focus on the other side of the savings equation — your income.
A higher income can help you boost your savings and transform your financial future completely. And a side hustle can help you make the leap. In fact, the right hustle could make saving money in your 20s a reality.
Personally, my side hustle as a freelance writer has allowed me to tackle major financial goals. Take some time to consider what side hustle could be a good fit for your situation.
The bottom line: Saving money in your 20s is a good idea
Saving money at any age is a great idea. But saving in your 20s sets the stage for a bright financial future filled with your freedom to choose your own path. Consider what savings goals you have in mind for yourself and take action to build your savings rapidly.
