Thinking about personal finance in your 20s might not sound that exciting. But it’s actually the best time to get on top of it. Growing wealth takes time. Even if you can only commit a little to your money goals, if you stick with it you can reap long-term big benefits. 

Loqbox has 9 of the best financial tips for your 20s that’ll have you thanking your younger self in your 30s.

9 money tips for 20 year olds

The best financial advice for 20 year olds (spoiler alert!) is to get started. When you’re managing money in your 20s, compared to later in life, time is like a superpower. 

There’s truth to the phrase “take care of the pennies and the pounds will take care of themselves”. But what else can you do to boost your financial goals and how do you even begin?

Loqbox has you covered with 9 great pieces of money advice for 20 year olds that you can use to build your future financial plans. Before you start, it’s a good idea to write down your short and long-term goals. Be specific, don’t just say “save money”. How much do you want to save, and by when?

Whether you want to pay off a credit card debt or clear an overdraft, or start saving for a deposit for a house, when it comes to personal finance for 20 to 30 year olds, having clear goals will help you to stay motivated to stick with your plans. Let’s get into Loqbox’s top financial advice for your 20s.

Discover SMART goals: Find out how work SMARTer, not harder!

1. Get educated

Managing money in your 20s is about educating yourself. Whether you’ve recently left education, or you’re still studying, the thought of more learning might be daunting. But putting a little extra-curricular time into your financial literacy is well worth it. If you’ve not heard of it, you can read more about how to teach yourself financial literacy here.

Financial literacy is getting your head around financial products and services to avoid the traps and maximise the benefits. There are plenty of potential banana skins in the world of finance, but there are a lot of opportunities too. Even a basic grasp of the fundamentals can help. 

Check out Loqbox Learn to start your journey to financial literacy.

2. Get budgeting

One nugget of financial advice for your 20s is to create a budget. There are lots of different budgeting rules, so try to find one that suits your goals. 

Budgets are overviews of your income and expenses. They give you a realistic idea of your saving power, where you might be overspending, and what changes you need to make to succeed. Budgets might not sound exciting, but they’re a brilliant way of spending your money intentionally. 

Start by collating your bills and bank statements. Break your expenses into things you NEED (rent and bills) and things you WANT (luxuries and entertainment). Try to be honest with yourself about what counts as essential. Do you really use your gym membership? Do you watch all your streaming services? Do you really need those shoes? 

In the past, the best money advice for 20 somethings was to keep essential expenses under 50% of your monthly income, keeping the rest for financial goals and “wants”.  That’s increasingly difficult now. The most important thing is to find something that is sustainable for you. You might find that the 70-20-10 rule — where 70% of your income covers your needs, 20% your wants and 10% your financial goals — is the most practical for you. 

Discover the 70-20-10 rule for money & budgets: as seen on TikTok

3. Get on top of your debts

You might be eager to start saving. Everybody likes to see their bank account filling up. But it’s often a good idea to clear your debts first. The interest that you pay on your debts will likely be far greater than the interest you earn from savings. If you can clear your debts you can boost your saving power and lift the weight off your shoulders too. 

There’s a couple of ways you can tackle your debts. One is known as the avalanche method. This is where you attack your highest-interest debts first. Those will probably be the debts causing you the most stress. Once they’re cleared you’ll find that the smaller, lower-interest debts will start to fall like dominoes as your spending power increases. 

Alternatively, if you don’t like a ‘rip the plaster off’ approach, you can try the snowball method. The snowball method is where you tackle your smaller, lower-interest debts first, tackling the easier ones so that you can clear the decks and focus on your bigger, higher-interest obligations without any unnecessary noise.

4. Get saving

Life is unpredictable, and having a financial safety net is important if you don’t want your finances to be hurt long-term by a sudden need for car or house repairs, or medical emergencies. 

Having money set aside in an “emergency fund” — where you can easily access it if you need it — is one of the most effective things you can do to improve your financial security. Being more financially independent can help to reduce stress, and make you feel more confident about the future. It’s often recommended that you save around three to six month’s worth of your income, which is a really good “shoot-for-the-moon” goal to have. That amount of money can support things that crop up, or cover you for an extended period if you’re unable to work. 

If that goal feels a little out of reach right now, setting a goal of around £1,000 could still help you feel more secure and in control. Any amount of emergency savings is better than no emergency savings, and could help you to avoid getting into debt unexpectedly.

5. Get protected

We know that life can throw curveballs. That’s why you want to back yourself with an emergency fund. But you can also add extra protection with insurance. You can get all sorts of insurance to cover your health, your income, and  your life. These options can give you and your loved ones some much-needed peace of mind.

It’s important to research lots of insurance providers to make sure you get the best one to suit your needs. Comparison sites are great services to help you find what’s on offer and how deals might benefit you differently. You may even have insurance options through your employer so check your benefits too.

6. Get investing

If you’ve cleared your debts and banked your emergency fund, why not consider making 20% of your income work for you? Investing can be a risk. It’s important to be clear that you may not get a return that matches your investment and you could even end up with less, or nothing. But investing also offers large potential returns.

The best investing advice for 20 year olds is to diversify your portfolio. This means investing smaller amounts in various places to spread the risk. Basically, you don’t want to put all your eggs in one basket. If one or two of your investments falter, you won’t lose your full initial outlay and you could even make up the difference with other successful ones. 

Whether you’re investing in stocks and shares, or rare and collectible items like designer trainers or fine wine, remember to do your research and do consider  professional help if you’re not sure. It can take approximately five years to get a decent return on your investments, so again, in your 20s you’re lucky to have time on your side. 

Find out more about investing: How to invest in stocks and shares for beginners in the UK

7. Get pension cover

When you’re in your 20s, retirement can feel like a lifetime away — because it almost is!  But it’s never too early to start building towards your pension. The longer you have to save the less of an impact it needs to have on your day-to-day finances, and the greater the opportunity for growth in your pension savings. Start planning for your retirement early by contributing to a pension scheme. 

If you earn over £10,000 a year, and you’re over the age of 22, your employer must automatically enrol you in a workplace pension scheme. While you can choose to opt-out, staying enrolled means that your employer will make contributions to your pension, and your contributions are likely to be exempt from income tax. 

Take advantage of employer contributions and consider increasing your contributions as your income grows. Your future self will thank you for making these thoughtful financial decisions now. And knowing that you can relax towards your retirement will help to relieve stress and improve your general financial wellbeing. 

8. Get to grips with your credit score

Whether you want to buy a house, take out a loan, or even just sign up for a smartphone contract, lenders will usually want to check your credit report to learn more about you. 

Your credit report is a record of how you’ve managed your money. It includes information like your address, whether you pay your bills on time, and how you manage any credit agreements. You can find out more about credit reports here. 

Your credit score is a number that lets you know how creditworthy you appear to potential lenders. So it helps if it’s as high as possible. 

Not only does a higher credit score mean that you’re more likely to be accepted for credit, it can also impact on the quality of the deal that you’re offered. Getting better interest rates on a mortgage, for example, can actually save you £1,000s in the long run. So it’s well worth it. 

If you want a fast and effective way to boost your credit score, join Loqbox. We can help you build your credit score with the top credit reference agencies in the UK: Experian, Equifax, and TransUnion. No credit check, no fuss!

Improvements to your credit score are not guaranteed. 

9. Get the richer life you’ve always wished for

While it's important to be financially responsible, remember to enjoy the fruits of your labour. You can’t just be a lean, mean savings machine. You have to lead a fulfilling life as well. Invest in experiences, education, and personal growth that add value to your life. 

Be kind to yourself and be realistic about your goals. And don’t beat yourself up for missing the odd target. But try to stick to your plan as best as you can. If your goal is attainable you will find it easier to keep motivated. Remember to celebrate the milestones! 

Now you’re ready to smash your personal finance in your 20s and 30s

By implementing these 9 financial tips for 20-year-olds, you'll be well-equipped to navigate the challenges and opportunities that come your way in your journey towards financial independence. Start today, and build a secure and prosperous financial future for yourself. Remember, you have time on your hands. It’s your superpower!