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How To Manage Money In Your 20s

Written by Cait Flanders

Tuesday, November 5th, 2019

The word "millennial" is used so often these days, its meaning almost seems to have been lost in translation. But for those of us born between the early 1980s and early 2000s, we know the unique challenges our generation faces compared to those before us and, unfortunately, most of them are financial. As someone who's just exited her 20s — and who made plenty of financial mistakes in them — I was glad when Tangerine asked me to share some of my key financial literacy lessons for millennials. If you can learn something from my experience and use it in your own financial life, I'm glad to share it here.

My key financial life lesson: Saving

The adult role models in my life always told me I should save at least 10% of every paycheque. I heard that advice and yet I barely saved a penny in my early 20s — and now I'm years behind on saving for certain milestones. Because of that, you might think my advice would be to save at least 10% of your income, but it's almost the opposite. The lesson I wish I'd been taught would've been to live on as little as possible and save everything else. Having savings in the bank gives you a freedom that can't be bought. Even if you don't have a goal for your money yet, still save everything you can. You'll be grateful you have it, one day.

My key financial life lesson: Spending

To go along with my point about living on as little as possible, I wish I'd learned sooner that you can't buy happiness at a store. For years, I spent every penny I earned (and more) buying brand new furniture, clothes, electronics and a car, thinking that I wouldn't feel "successful" until I had everything I wanted (and it all matched). When I turned 29, I finally realized that my stuff didn't define me, and I'd wasted thousands of dollars on things I either never used or didn't really love. If you stop buying into the idea that "retail therapy" works and, instead, make the conscious effort to only buy things when they run out or break beyond repair, I guarantee you'll find true happiness.

My key financial life lesson: Investing

When I was a teenager, I remember being told that if I invested some money every month, I'd be able to retire with $1 million. The concept was so foreign to me, because both retirement and $1 million were so intangible, the advice basically went in one ear and out the other. Unfortunately, waiting to get started with investing means it'll now take me a lot longer to reach my financial goals — and the reason I waited so long was simply because I was too scared to sound "dumb" if I asked someone questions about it. Investing early and often is important — but first, you must get past the fear of sounding dumb and just start asking questions. The more you ask, the more you'll understand, and the better-informed decisions you can make about your financial future.

My key financial life lesson: Borrowing

Millennials borrow money for so many different reasons. We get student loans to go to school, use credit cards to build credit and take out mortgages to buy homes. There are lessons I wish I'd been taught in school about all of those milestones, but personally, I wish I'd understood what it really meant to only borrow what you can afford to repay. I used to use credit cards like they were second bank accounts and thought I was fine as long as I could make the minimum payment. That mindset stole two years of my life — the amount of time it took me to pay off $30,000 of debt, after I realized I was maxed out. If I'd known it would take that long, when I was racking up the debt, I would've made some better borrowing decisions.

Further reading:

Financial Planning in Your 20s

How people in their 20s can build a good credit history

How to Graduate with Less Student Debt

And...

See how your savings can grow with our Tangerine RSP Savings Account Calculator

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