Nail your 20s: Essential money saving tips and goals

Last updated: September 4, 2024

Your twenties are a time of growth, self-discovery, and figuring out how to be a fully functioning adult. It’s also a time when many adults make their first significant financial decisions. The money habits you develop now can pave the way for your spending and saving in the future. Keep reading to learn essential money-saving tips and goals to help you build a solid foundation and secure your financial future.

Start saving a percentage of your income early

When you’re finally earning a steady income, it's tempting to go crazy at your favorite store or order takeout every night. However, living paycheck to paycheck isn’t the smartest thing to do if many of your expenses are nonessential. This leaves very little savings when faced with an emergency or when you want to save up for your future goals. 

Keep your spending in check by consciously setting aside a percentage of your income. We recommend saving 20% of every paycheck in a savings account. You can then budget your remaining pay toward your essential expenses and what’s left after that toward fun expenditures. Use an app like Dave to help track your savings and find other areas to reduce spending. 

Learn to live below your means

In the words of Ice Cube, check yourself (or more specifically, your spending habits) before you wreck yourself. While you’re building your career or finding additional side hustles to boost your income, your increased earnings could make it easy to fall into the lifestyle inflation trap.

Let's say you land your first job and can finally cover your essential expenses and maybe even eat out once or twice a week. After some time, you get a significant pay raise, and now you're tempted to eat out three or four times a week. Even though you got a raise, you're not any better off financially because you're spending more money. 

If you really want to save money, it's a good idea to live below your means. You need to stick to a budget for your essential expenses and an allowance for your fun nonessentials. Then, you can put the rest of your money into savings. 

Establish an emergency fund for financial security

It's always a good idea to have a little extra cash set aside for those unexpected emergencies life can throw your way. Whether a medical emergency, job loss, or repairs after a natural disaster, a safety net can be a real lifesaver.

If you're just starting to think about your finances, we recommend setting up an emergency fund before diving into other investment options. Financial experts suggest having three to six months' worth of expenses saved up, depending on your income and lifestyle. This will give you some peace of mind, knowing that you have a cushion to fall back on if something unexpected happens and it takes a while to find other sources of income.

Invest in retirement accounts

Your twenties are the best time to start saving for retirement. Beginning early gives you a head start on building a retirement fund, which can grow exponentially over time thanks to the power of compounding interest. The more time your money has to grow in these accounts, the more financially secure you'll be when you reach retirement age.

Additionally, retirement accounts like 401(k)s and IRAs offer significant tax benefits, which can help you save even more money. Contributions to these accounts are either tax-deductible, subject to annual limits, or grow tax-free, which can give you a significant long-term advantage. If your employer offers 401(k) matching, you should definitely take advantage of it.

Learn and address your credit score

As you begin to make financial decisions that have a greater impact, it's important to understand how your credit score can influence your ability to apply for loans, credit cards, and other credit products. So, why is a credit score important? The short answer is that it impacts many of the major financial decisions you make.

Having a good credit score can open up a world of opportunities for you, such as favorable interest rates on loans, credit cards, renting a property, or even buying your dream home. On the other hand, poor credit scores can limit your financial options and lead to higher interest rates, disqualification for loans, housing difficulties, and other obstacles.

Your credit score reflects your financial habits. You can create a positive credit history by demonstrating responsible credit management, such as on-time bill payments and minimizing debt. This, in turn, makes lenders more likely to trust that you can repay loans and manage credit responsibly. So, it's definitely worth putting in the effort to maintain a good credit score. 

Establish short- and long-term financial goals

Another important aspect of financial success is setting achievable goals and assessing your progress. It's important to establish both short-term and long-term financial objectives to guide your decisions and monitor your financial progress.

Short-term goals could be saving up for a dream vacation, paying off debt, or putting money aside for a new gadget you've had your eye on. On the other hand, long-term goals could include developing a retirement plan, saving for your child's future education, or putting aside enough money to invest and retire early on passive income.

Let Dave help you manage your money

These essential money-saving tips can help you get a running start on your financial journey. Remember that everyone’s financial goals and capacities are different, so whether you do better by using an app to track your finances or a money-saving challenge to motivate you to save, you’re establishing healthy spending and saving habits in early adulthood. By committing to a disciplined savings habit and clear financial planning, you'll be well on your path to financial success and security for the long term.

Want to develop positive money-saving habits? Let Dave be your new financial friend. Download the Dave banking app to learn how to save and earn 4.00% annual percentage yield (APY) with our Goals and Dave Checking accounts.¹