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Your 20s are one of the most interesting and terrifying times of your entire life. In our 20s, we have no idea what we’re actually doing 90% of the time and no one really teaches you how to start saving money in your 20s and how to really get your finances to work properly.

Your 20s are a really intense period of change. You go from college, to the real world, getting your first job, maybe even starting a family and buying your first home.

Since it’s such a weird time for all of us, it’s important that you start saving in your 20s, even if it feels impossible. No matter what your life plan is or what choices you make, taking the steps to make better financial decisions now is going to make your life better later.

Why You Need to Start Saving in Your 20s

There are 3 huge reasons why you should start saving in your 20s, when you’re still young and eager. Let’s go over each of them for a second:

1. Building Habits

Building good financial habits is a great way to go into your real adult life with a good foundation for success. Good money habits take time to develop and you’ll never just wake up one day and know how all this money stuff works. If only it were that easy.

That’s why it’s so important that you start building your financial foundations in your 20s instead of waiting until you’re in your 30s or even 40s. When you wait to start doing smart money stuff, you may not have anything figured out in time to start saving for retirement.

If you don’t know what kinds of financial habits you should be working on, you can check out this article about the 15 financial habits that will make you rich!

Building a solid financial foundation is going to influence all the decisions you make going forward. It will influence where you can live in the future, where your children will be able to go to school, and how much money you’ll have to retire. So many amazing things can happen in your life if you start developing financial habits early.

2. Emergencies

Emergencies are always going to happen, it’s just the way life works. When you think about the last real emergency you had, how did you deal with it? Did you grab a credit card and deal with it later? Or did you have a nice cushion of cash set aside to cover the emergency with ease?

As you can imagine these two ways of dealing with emergencies have very different emotions connected to them. If you have the nice cushion of money ready to go for emergencies, you’re not going to experience nearly as much stress as you would if you had to throw it on a credit card that has a 20% interest rate.

Thankfully, you’re still young and may not be a parent quite yet so your emergencies are going to be a lot less expensive than if you had a single family home, three kids, and two cars.

If you want to learn more about building your emergency fund, you can check out this article all about building an emergency fund, the right way!

3. Interest

Oh, compound interest, how I love you! I’m going to assume htat not every person reading this totally understands what compound interest is, so let’s do a mini lesson on the power of compound interest.

Compound interest is the interest that gets calculated based both on the principal in your accounts, but also the interest you’ve earned over the years. Make sense? Kind of? Okay, let’s look at an example because finance is confusing.

So let’s say Richard starts putting money in a savings account when he’s 18 years old. He has $1,000 in the account at 18 and he only adds $100 a year until he’s 38. If there was no interest accrued he would have only $3,000 in the account by the time he’s 38. 

Richard’s best friend George starts saving at 28 and puts $300 in the account every year until he’s 38. George would also have $3,000 in the account in that 10 years if no interest were accounted for. Okay, so how does compound interest come into play?

Since Richard starting saving 10 years before George he had a lot more time for interest to accrue on this account and he started earning money ON HIS INTEREST. Let’s look at some numbers.

Richard has an initial principal of $1000, he puts $100 in every year, with an interest rate of 5% he would have $6,125 in the account by the time he’s 38.

George has an initial principal of $300 and puts $300 in the account every year for 10 years if it’s also a 5% interest rate he would have only $4,450 by the time he’s 38. See? Richard started early and made way more money off his investment than George did! 

Compound interest is awesome and you should start saving as early as humanly possible to take complete advantage of it. 

Steps to Take to Start Saving in Your 20s

1. Budgeting

Okay, Okay. I know budgets aren’t sexy, but they are effective. Budgeting is the smartest thing you can do to save yourself money because it gives you a great look at exactly where your money is going.

A great way to think about budgeting is using the quote “failure to plan is planning to fail”. When you make a budget, you’re making a plan for your money and giving every penny a purpose. When you decide not to follow a written budget you’re going to fail at saving money because there will be no structure to where your money goes. Makes sense, right?

So, where should you start when deciding to start a budget? Well, my favourite budget for absolute beginners is the Zero-Based Budgeting Method because it makes a plan for every penny and doesn’t allow for much confusion.

2. Don’t Ignore Student Loans

A huge mistake that a lot of people make when they leave college is just acting like their student loans don’t exist, making just minimum payments for the next 20 years of their lives.

Student loans suck, they always will. But they aren’t something you can just ignore and hope goes away. The longer you wait to pay down your student loans the more interest you’re going to be paying and that adds up so quickly.

Ignoring your student loan debt can hurt your credit score, and make it really hard for you to ever grow your savings account. If you’re overwhelmed by how much your minimum payments are, take a few minutes and call up your provider and see if you can apply for some type of financial hardship status to get a smaller minimum payment, just in case there are months that are a little tight.

3. Get a Second Income

Let’s face it, you’re never going to have more time or energy than you have right now. As we get older, we get more responsibilities, and our bodies just can’t handle as much. That’s why this is the absolute best time for you to try and create a side hustle or get a second job.

Look at it this way, if you make an extra $1,000 a month from a side income you could save every single penny of it, or pay off your debt faster. You can live off your regular income and your side income can go towards smart financial decisions.

Not sure what to do for a side income? Here are a couple articles that might help you:

My best recommendation for creating a side income that will make you money for months to come is to start a blog of your own, and I have an entire second blog where I teach you how to do that!

4. Start Investing

The further along you get in your financial journey, the smarter it is to start investing your cash. Unfortunately, investing is one of the more complicated things to learn when it comes to personal finance.

That’s why I’m a huge fan of services like WealthSimple! I started investing using wealthsimple earlier this year because I am finally at a place where my student loans are shrinking, my savings are growing, and I’m thinking about my future.

If you want to start investing without it being super complicated, you can get your first $10,000 managed for free using my exclusive link!

5. Start Thinking About Retirement

When you’re in your 20s, retirement feels like it’s a thousand years away and like it’s not something you need to worry about right now. However, like we talked about in the first section, the earlier you start the more money you’ll have.

Even if you can’t afford to save a few hundred dollars a month, you should at least be saving enough money to get your employer match. Most employers have really great employer match programs that are essentially free money if you take advantage of them.

You may need to make a few sacrifices now in order to reap the benefits later, but I promise you, it’ll be worth it.

6. Ignore The FOMO

FOMO is one of the biggest budget killers. But wait, what is FOMO? FOMO stands for fear of missing out, and it’s a big reason why people are spending so much money on new clothing, drinking, and expensive trips.

These days everybody posts just about everything on social media and you get to experience everyone else’s life everyday. This causes us to think that our lives aren’t good enough and we fear that we’re missing out on a lot of the good stuff.

FOMO is a huge reason why so many young people are in debt and not saving because they don’t want to be the only one of their friends not getting a new car, or going on an awesome vacation.

How do you avoid FOMO? Well, the best thing you can do is to create a goal for yourself and actually stick to it. I know it’s hard, but it’s the best way to save money. Having a goal will keep you focused on yourself and less focused on other people!

17 Ways to Save Money in Your 20s

1. Try Meal Planning

I’ve found that having a meal plan when going to the grocery store is the number one way I’m able to save money each week. When I don’t meal plan I end up walking through the aisles of the grocery store throwing whatever looks delicious to me in my cart and half the time these things are already in my fridge.

The solution? Well, in 2017 I started using a services called $5 Meal Plan that completely changed my life and the way I meal plan. They send you a detailed meal plan and a grocery list once a week for only $5 a month.

You can try $5 Meal Plan and get your first two weeks free!

2. Give Your Savings a Nickname

One of my favourite ways to stay motivated to grow my savings is by doing a small trick I learned a few years ago, giving your savings a nickname.

Imagine if every week you’re putting money into a savings account called new car or europe trip instead of an account number like 7489274632. I swear to you it’s so much more motivating and can make you feel so accomplished when the account begins to grow.

3. Track Your Spending

The simplest thing you can do to save more money in your 20s is to track your spending and it has a huge impact. You can use something simple like the Highlighter Budgeting Method to organize it and figure out where you’re putting your money every week.

Doing this can help you see where you’re throwing your money away and the simple places you can cut back your expenses to save hundreds of dollars a year.

4. Use Different Banks

When we’re in our 20s, it can sometimes be hard to not just transfer money from our savings into our checking and just spend it on food and clothes. That sounds more fun, right?

Well, what sounds fun isn’t always the best answer for our savings account. A great way to make this process a little bit harder is to have your savings account at an entirely separate bank!

Setting your savings up this way makes it so you can’t just easily transfer from one account to the other immediately, but you’ll have to wait a few hours or even a few days which can often convince us to not spend the money in the first place.

5. Try a No-Spend Month

Doing a no-spend day, week, or month is an amazing way to stop spending money for a short period of time to grow your savings for a specific purpose.

I’m a huge fan of doing No-Spend November because it allows me to grow a bit of money so I can pay for the holidays entirely in cash instead of putting all of my gifts on credit cards.

You can use no spends to save up for small things like new shoes, or bigger things like a new car or a house downpayment. They’re also a really awesome option because they make you realize that you don’t need some of the things you spend money on everyday!

6. Entertain at Home

A huge part of being in your 20s is being social and spending time with your friends. The issue? Most 20-somethings are likely to spend their social time out at bars or eating at restaurants which can get expensive really quick.

A great way to offset some of these expenses is to plan social events at home, like game nights or potluck dinners. Doing these types of activities with your friends and family will make you closer because there’s more time to actually communicate and it will easily save you money in the process.

7. Try a Meatless Monday

When you go grocery shopping, what’s the most expensive thing you buy regularly? Unless you’re a vegetarian, the answer is probably meat, chicken, and fish.

That’s why implementing a few meatless meal days is an awesome way to simply save money and really learn how to make some interesting meals that are actually delicious. You can start with just a meatless Monday, and then slowly add more meatless meals as you get more comfortable with cooking them!

8. Negotiate Your Bills

Did you know that a simple phone call can save you hundreds of dollars a year on utilities, phone bills, and more? Just because you signed a contract, doesn’t mean you can’t get that price lower!

Companies spend most of their money on trying to get new customers to sign up for their services, so they don’t really like when people are going to leave them. So, you can call up just about any company and say “oh, well I can get this this deal from this company” and usually they’ll match the same deal just to keep you around!

9. Use a Cash-Back Credit Card

I’m not like most finance “gurus”, I will never tell you that credit cards are evil. However, credit cards that have no rewards are pointless. If you’re going to get a credit card (and hopefully pay it off in full each month) you should definitely get a cash-back card.

This is a great way to have a little bit of extra money put on your credit card at the end of the year, it always feels very good.

If cash back doesn’t sound great to you, there are other awesome credit card perks you can choose from. You can get airmiles, hotel points, or movie tickets. The credit card world is your oyster, go out and find a good one!

10. Get a No-Fee Bank Account

One of the simplest money hacks I have is to STOP throwing money at banks and let them get richer while you get poorer! What’s the best way to do this? Well, to use a no-fee bank account, of course.

There are new no-fee bank accounts out there popping up all over the place and doing just this one simple hack can save you around $15 per month in bank fees. Really awesome, right?

I’m a firm believe that you shouldn’t have to pay money to be able to use YOUR money. So, free banking is a must in my eyes.

If you’re Canadian, I highly suggest using the no-fee bank Tangerine! It’s the bank that I use for my personal banking because they’re free, easy to use, and have great customer service. And BONUS, if you sign up using my orange code 50681730S1 you can get $50 for FREE when you deposit your first $100!

11. Cancel Subscriptions

It seems like there are new monthly subscriptions popping up all over the place these days. You can get anything from make up, to clothes, to even raw meat delivered straight to your door. Not to mention all of the digital monthly subscriptions out there!

It’s really easy to have 5-10 subscriptions and not realize how much money you’re actually paying for all of them. It’s a really smart idea to do a quick subscription audit and see which ones you’re actually using and which ones can be easily cancelled.

12. Delayed Gratification

As children, we were creatures that required instant gratification in order to be happy. We didn’t really understand how to wait for the things we want, and our parents usually gave in. However, being an “adult” means that you sometimes need to wait for things and practice delayed gratification.

This can mean waiting anywhere from 5 minutes to using something like the 30-Day Rule to Control Impulse Spending, but no matter what, practicing delayed gratification can save you hundreds of dollars a year.

13. Get Cash Back Online

Shopping in person seems like a thing of the past these days, and most of the purchases I make are made online. It’s almost unavoidable. A great way to save big money when making online purchases is to get cash back from websites like Ebates.

Ebates is a 100% free shopping tool that gives you up to 10% cash back on all the websites you already shop on, like amazon! If you sign up using my exclusive ebates link, they’ll give you $5 free when you make your first purchase fo $25 or more.

14. Monitor Your Credit Score

Something that a lot of people in their 20s don’t realize is just how important a credit score is. A good credit score can save you thousands of dollars in your life. How? Well, having a great credit score will decrease your interest rates for your car loan, mortgage, and more.

You can monitor your credit score FOR FREE using websites like Credit Karma!

That’s why it’s so important to monitor your credit score and make sure that there are no mistakes on your credit report. If you aren’t sure how your credit score works, check out this article: How to Increase Your Credit Score 100+ Points (And How It Works).

15. Automate Your Savings

One of the easiest ways to save money is to completely automate the process so you don’t even realize you’re doing it. How does this work? Well, you set up an automated transfer from your chequing to your savings on the day you get paid.

This transfer happens before you’re able to spend a penny which makes it seem like you were never actually paid that bit of money in the first place. It can be anywhere from $10-100 a pay period and it can add up quickly without you really ever thinking about it.

16. Try a Savings Challenge

One of the most fun ways to kickstart your savings is to try out a money saving challenge! There are so many different kinds of challenges out there, so I wrote an entire article for you to read that outlines the different kinds!

17. Think of Prices as Time Worked

When I was working for an hourly wage, I used this tip all the time and it made it so I thought for a few minutes longer about huge purchases that I didn’t really need to make.

It’s quite simple really, all you need to do is take the price of the product you want to buy and divide it by your hourly wage. So, let’s say you want to buy a pair of $200 headphones and you make $12 an hour. It would take you 17 hours of work to be able to afford those headphones.

If you work 8 hours a day, that’s over 2 full days of wages (and that’s before taxes) for you to be able to buy those headphones. If that doesn’t make you stop and really think about it, I don’t know what will!

Final Thoughts

I know that your 20s are scary, confusing, and stressful, but they can also be the most exciting and beautiful time of your life. Don’t let your finances ruin this awesome time of your life. Doing some of the above tasks can help you figure out your money and make your life even better. Thanks so much for reading!