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Have big dreams for your money, but not a ton of know-how yet? No sweat. These money tips for your 20s can help you reach your future goals.

Welcome to your 20s, a hugely transformational time in your life. It’s when you’ll probably move out on your own, kick off your career, and really start getting to know yourself.

Part of coming into your own means creating good habits that you can maintain throughout the years. And it’s easier to learn those habits early in life, rather than have to correct poor habits later, says Bright Dickson, co-host of “Money and Mindset With Bright and Brian.”

“In your 20s—as you start to learn what it is that you really value—it’s the time to establish money habits that are in line with your values. And those values can change as you grow and develop,” Dickson says.

Starting on these money goals now while in your 20s can help create better opportunities for you down the road.

1. Build your confidence with an emergency account

An emergency fund is the cornerstone of your financial life. We don’t call it a “financial confidence account” for nothing: Being prepared for a rainy day can help give you a sense of inner peace. And when you have your safety net established, you can make better financial decisions when times are turbulent—such as the year 2020.

 

To establish your financial confidence account, set up an account that’s separate from your main spending account, easy to access, and reserved for emergencies only. A low- or no-fee, high-yield savings account is a good tool to use here. Then, pay yourself first and automatically via direct deposit or automatic transfer. Work to save $1,000, which is enough to cover many small emergencies, but then set a goal to save three to six months of living expenses to ensure you’re covered for an event like a loss of income. As you steadily grow your savings, notice the peace of mind it brings you.

 

2. Learn how to spend on what matters most

The best way to ensure you’re making the most of your money is to budget for your values. To get an idea of how to set up your budget, start by tracking your spending to see where your money is going. Then, create line items for your must-haves, like rent, groceries, and utilities, before making categories for your values. Once you know your basic needs are covered, you’ll feel that much more confident stashing away cash for your next trip or night on the town.

 

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3. Prioritize paying down debt

Debt is something most of us will have at some point in our lives. In your 20s, you may already have some debt from student loans, credit cards, or an auto loan. If you have credit card debt, work to pay that off first—it typically comes with the highest interest rate, which means paying a lot more for something in the long run.

A simple way to approach paying off debt is by paying down balances under $1,000 first, which can give you some quick wins and help free up cash flow. Then, focus on the debt with the highest interest rate, and go from there. Paying more than the minimum each month will cut down what you end up paying in interest.

 

4. Build a solid credit score

As you continue to tackle your debt burden, keep an eye on your your credit score, too. Managing debt well will help build your credit score over time—and a score above 720 can make borrowing easier and less expensive when you’re ready for bigger money goals like buying a home.

Never taken on any debt at all? To build credit, you have to have credit—and applying for a credit card is one way to start building credit history in your 20s. As long as you pay off your balance in full each month, you won’t pay interest and you’ll prove to lenders that you’re a reliable borrower.

 

5. Protect yourself online

If you’re like most 20-somethings, you probably have an online presence. With all the social media platforms and websites out there, it’s easy to reveal more about ourselves than we realize. Taking steps to protect yourself—like monitoring your financial accounts and credit report for any suspicious activity, using multiple passwords, and setting up two-factor authentication—can help safeguard your personal information.

Since you’re early in your career, you should also consider how potential employers may view your online presence. Take a look at your social media accounts and old posts to make sure there’s nothing that could be held against you.

 

6. Get insured

Insurance is what can help stop a bad situation from getting worse. A goal for your 20s should be to understand the fundamental types of insurance, like health, life, and disability. While being properly insured may take up a portion of your budget, the peace of mind you get from knowing you have a financial backup in case something goes wrong is well worth the cost.

Benefits of starting sooner. Lydia started at 45 and has $209,000. Mark started at 35 and has $422,000. Jane started at 25 and has $733,000. This chart assumes a $1,000 initial investment, $500 monthly contribution, 5% rate of return, montly compounding, and retirement age at 65. The chart above is for illustrative purposes only and not representative of the performance of any investment. Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money. IRA withdrawals prior to age 59 and a half may be subject to a 10% penalty.

7. Picture your future self

By now, you may have heard several different retirement terms—IRA, Roth IRA, 401(k) … OMG! It can seem like a lot to figure out at first, but here’s some good news: The type of retirement fund and how much to invest in your 20s is less important than starting a fund and contributing to it regularly.

When you start saving in your 20s, the amount you save and the interest you earn will compound, adding up to big savings—and a better chance at a comfortable retirement—later.

Keep other money goals in mind, but save as much as you can—as early as you can—for retirement. You can make this easier by having your retirement savings automatically withdrawn from your paychecks. Next thing you know, you’ll have a nice nest egg for your future self.

Pro tip: Starting your retirement savings in your 20s can make a huge difference in the long run—check out the chart.

 

8. Plan for your desired lifestyle

Certain decisions—like whether to rent versus buy a home—should depend on how you want to live your life. If you plan to stay in the same area for at least five years and have the funds for a down payment, homeownership can be a powerful way to start building wealth. But renting may be a better option for you if you value flexibility or aren’t ready for the responsibility.

Being a homeowner usually means spending a significant portion of your take-home pay on your home—you have to cover the mortgage, utilities, insurance, property taxes, homeowners association (HOA) fees, repairs, and maintenance. That may seem like a lot now, but if you start saving for it in your 20s, homeownership can be a reality for your future. Your 20s are for figuring out what you really want in life, and that includes how and where you want to spend your time.

 

9. Consider a side hustle

The gig economy has made side hustles a norm, especially among millennials and Gen Z. Lucky for you, it’s easier than ever to start one and increase your income. Even if you have a 9-to-5 job, a side hustle can help you make a little extra to put toward your goals.

 

10. Look for ways to pay it forward

Studies show that giving is good for your mental health, opens in new tab. It helps give us a sense of purpose in life, and we can get a mental boost when we do something that helps others. In your 20s, make finding a way to give back one of your goals. You can find ways to budget for giving, or instead prioritize sharing your time and talents to make the world a better place.

 

11. Don’t just invest—invest in yourself

Remember: You are your greatest asset. In your 20s (and especially in your early 20s), Truist head of financial wellness Brian Ford recommends investing in networking, knowledge, education, and skills to set you up for long-term success.

“Put money into investing in yourself,” says Ford. “It’ll pay greater dividends early in your career to get you on the right trajectory.”

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