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Your 20s are the time to make the right money moves that will establish a solid financial foundation for the rest of your life. Find out what to do know, even if you think you’re too young.

One of the best times to start laying a foundation for better money management is during your 20s. In fact, the earlier you start making better money choices, the better off you’ll be during the rest of your life.

If you’re in your 20s, here’s what you should consider doing with your money.

1. Develop a Marketable Skill

Your career is probably one of the most important things you can focus on during your 20s. Whether you choose to attend a more traditional college or go to a trade school, the important thing is that you develop a marketable skill that others are willing to pay for.

You don’t even need to go to school at all if you have entrepreneurial skills that result in filling a need in the marketplace. Figuring out how to make money, whether it’s through a job or through running your own business is an important first step toward long-term wealth.

Do your best to find out skills that are in demand. You can look at the Bureau of Labor Statistics for career outlook information, or run a search online for popular products and services.

2. Establish a Separate Financial Identity from Your Parents

Now that you’re out there, earning money and taking care of your needs, it’s a good idea to separate your finances from your parents’ finances. Consider opening your own bank account and, if it makes sense, getting your own credit card.

Related: The Best First Credit Cards For Young Adults & First Timers

You should also ask your parents for important financial documents. You should be keeping a copy of your birth certificate, Social Security card, passport, and other major documents. As you move through your 20s, it’s up to you to begin taking the lead in your own financial development.

3. Spend Smart

Pay attention to your spending. Your 20s is the time that you’re developing habits that can stay with you for the rest of your life. Make it a point to spend conscientiously.

Track your spending using an app like Personal Capital, Mint, or YNAB, so you can get an idea of where your money is going. Be sure to distinguish between needs and wants. You should understand the items in your life that must be paid for, and the things you merely think would be nice to have.

While there’s nothing wrong with spending on fun items, it’s important not to overrun your income or neglect long-term goals. Carefully determine whether each purchase you make fits into your long-term goals and ideas. And, even if it’s frivolous, make sure it’s a purchase that will enrich your life in some way. The less you spend on things that don’t matter to you, the happier you’ll be.

4. Pay Down Debt

It’s common to end up in some debt in your 20s. Unfortunately, interest is money you pay for the privilege of borrowing. Interest payments take away from your own wealth, as well as from what you could be doing with that money.

One of the best things you can do for your finances is to pay down your debt as quickly as possible, so less of your income goes toward paying interest. If you reduce your debt in your 20s, you’ll have more time to build your wealth later. Consider tackling high-interest debt first, and then moving on to other debts.

Even if you don’t end up completely debt free during your 20s, it’s important to create a plan for debt payoff so that you’re at least progressing toward a better financial future.

5. Work On Your Credit Score

In many cases, your credit score is seen as your financial reputation. A good credit score can provide you with access to better financial products and services. For example, you might end up with a lower car insurance premium when you have a good credit score. Additionally, you’ll pay less in interest when you make big purchases with loans, including cars and houses.

You can work on your credit score by making your payments on time, and by using credit. A good credit card, that you use regularly but pay off each month, can be a great way to build your credit score.

If you’re looking for an easy way to increase your score, sign up for Experian Boost™. This service is free and can see when you make your monthly payments like your utility bill and cell phone bill on time. When you do, your credit score will get a boost.

It’s important to be careful with credit, though. You don’t want to end up in debt while trying to boost your credit score. You can build your credit without ending up in too much debt.

6. Build an Emergency Fund

Your 20s is a great time to begin building an emergency fund. Get in the habit of setting a small amount of money aside regularly, either each week or month. Even if it’s not very much, the idea is to develop good habits. Make saving a priority now, and it will remain a priority later.

As you start building an emergency fund, you’ll reduce your reliance on credit cards and other forms of debt in case of an unexpected expense, and that should also help you build a firm financial foundation.

7. Start Saving for Retirement

It’s never too early to start saving for retirement. And, in fact, you’ll need to set aside a lot less now than you would need to later on. Make it a point to have a portion of each paycheck put into a retirement account. If your employer offers a matching contribution, try to get the maximum match. That way, you get free money for retirement.

You might feel as though setting aside a small amount now won’t be enough. However, the point of starting now is to help you develop better habits. Plus, if you invest in your retirement, you’ll gain the advantage of compounding returns over time. As your income improves, you can increase the amount of money you put toward retirement each payday.

You can also go a step further by making sure your 401(k) is properly managed. Thankfully, there’s a robo-advisor that can do the job and affordably. blooom is the only dedicated robo-advisor for 401(k) accounts. With blooom, you can get a free analysis of your retirement plan and for $10 a month, blooom will manage your 401(k).

Don’t Forget Other Investing

Your retirement account is a type of investment account, but you don’t want to forget about other types of investing. Consider setting up other investment accounts designed to help you grow wealth–even if you won’t get a tax benefit. Learning how to invest now, when you have time to recover from mistakes, can be a smart money move.

Our Recommended Robo-Advisors

BrandBest For
Ally InvestPortfolio diversification
BettermentPassive investors
WealthfrontFirst time investors

8. Buy Insurance

You might think insurance is an unnecessary expense, especially when you’re young. However, getting insurance in your 20s can be a smart move, depending on your situation.

If you have a rental, it makes sense to get renter’s insurance so that if something happens to your belongings, you can replace them without spending a great deal of money. It’s always a good idea to have health insurance, even if it’s a catastrophic plan that protects you in the event of a major accident or illness.

Emergency costs, especially healthcare costs, can be very expensive, and wipe out any savings you have when you aren’t prepared with insurance. Consider adding insurance to the mix for early asset protection.

Some people start families in their 20s, so it can make sense to get life insurance if you have dependents. A term life policy is usually very reasonably priced and can provide for your family–and your peace of mind.

Compare Life Insurance: Find the best life insurance rates with Policygenius 

Bottom Line

Now is the time to establish a solid financial foundation. You’re young enough to recover and learn from financial mistakes. This is the time to learn valuable lessons and make it a point to develop habits that your future self will thank you for.

Author Bio

Total Articles: 68
Miranda Marquit is a nationally-recognized financial writer and money expert. She has contributed to NPR, Marketwatch, Yahoo! Finance, U.S. News & World Report, FOX Business, The Hill and numerous other publications. Miranda is an avid podcaster and writes about money and freelancing at her website, MirandaMarquit.com. She lives in Idaho and loves reading, board games, travel, the outdoors and spending time with her son.

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