Money Mistakes To Avoid In Your 20s

Your 20s are some of the best years of your life. You start to learn more about yourself and think about where you see your life going. There’s plenty of fun and frivolity. But it’s also a great time to be thinking about the future. In your 20s you might be at university or in further education for some of it. You may start a business or start building a career. It might also be a decade where you move out, buy property, or meet a partner. It’s a busy decade. It’s also the best time to start building your finances up and thinking about the future. I made plenty of financial mistakes when I was in my 20s, and I wanted to talk about some money mistakes to avoid in your 20s.

When you’re adulting for the first time, you’re likely to make mistakes. We all do. But the important thing is that these mistakes don’t haunt you later in life. But getting into some good habits, or kicking out bad ones you can put yourself in a better future position.

Money mistakes to avoid in your 20s- Debt

It can be so easy to get into debt, especially when you’re at university. It might be a car loan so you can buy your first car, a Buy Now Pay Later account that never gets paid or a credit card that spirals out of control. Debt might seem small at the time, but it builds up over time. All of the little bits add up and thanks to compound interest it builds up each year. So debt gets bigger over time if you don’t get rid of it.

One of the biggest money mistakes to avoid in your 20s is debt. Research any loans or finance you take before you commit. Make sure you can afford to pay it back and that you really need it. Are you getting a credit card so you can book a holiday? When actually all you need to do is cut back a bit and put that money into savings to book a holiday later in the year. Or think twice before hitting pay on ASOS with a Buy Now Pay Later company.

Not investing

This is one of the biggest money mistakes to avoid in your 20s and the one that I relate to most. Investing is a great way to build wealth and make money over a longer period of time. And the longer your money is invested the more money it can make. A bit like compound interest that I mentioned above because interest on investment works in your favour. You can choose to up your pension contributions when you get a job. And this way you’re thinking about your future. But also you can start investing in stocks and shares ISA or another form of investing so you can earn more on the money you put aside.

Other than a bit of pension I pretty much did no investing in my 20s and I seriously regret it. I whittled away so much money on things I didn’t need that I wish I had invested some of it back then.

Money mistakes to avoid in your 20s- Not thinking about your retirement

I mentioned this briefly above about investing in your pension. When you’re in your 20’s and just starting to build a career you probably think retirement feels so far away. Heck even in your 30’s or 40’s it probably feels this way. But the longer you’re saving towards your pension the less you’ll have to put in, and the more you’ll end up with in the end. The longer your money is set aside the more interest it will earn. So even if you put in the same amount of money you’d earn more from putting it aside over 45 years than you would over 25 years. That’s because the money has been able to earn interest over a longer period of time.

This is one of the most important money mistakes to avoid in your 20s, but it’s a common mistake to make. I only starting upping mine when I was in my late 20’s and even now I know it’s not quite enough.

Thinking you don’t need an emergency fund

The past year has been a stark reminder that anything can happen and your life can change in just a few weeks. Too many people don’t have savings, or if they do it’s for a specific purpose like a home deposit or a holiday. But having an emergency fund is incredibly important as the name suggests when there’s an emergency. Perhaps you lose your job, or your car breaks down unexpectedly. Having savings you can access to help out could stop you from getting into financial difficulties.

This should be the type of money you don’t dip into unless it’s really necessary. But it will give you peace of mind knowing that if something does happen you won’t need to worry about money.

Buying a brand new car

I’m sure we’d all love a shiny brand new car that no one else has driven before. It’s a great feeling and a lot of people see them as a status symbol to show they’re doing well in life. But new cars drop in value so quickly, around 15% of the value the moment you drive it out of the dealership. And another 15% in the first year you own it. That’s a lot of money to waste when you’re probably not earning the big bucks quite yet.

You can get a good quality second-hand car which someone might have only had for a few years without spending the premium of a brand new car.

Do you have any other money mistakes to avoid in your 20s that I’ve missed?

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