6 Things You Should Be Saving For In Your 20’s

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For most people, their twenties is the time when you get your first taste of financial independence.

You’ve finished school or university, move out of home and live independently, and begin to make your way up the corporate ladder, finally earning money for yourself.

Having your own money after years of living frugally as a student can be really exciting.

It’s tempting to treat yourself and go out and buy things that you can’t really afford: a brand new car, lots of clothes, expensive holidays

Whilst we should always recognise our own achievements it’s important to get the balance right.  Overspending on things to reward hard work, is no good if it lands you in debt which then takes years to pay off.

People who live financially free in later life are the ones who think about what type of future they want, even when they are still in their twenties.

Planning ahead is the key to living a fulfilled and prosperous life later down the line, and is the best way to have the confidence that you’ll be able to take care of your family well into retirement. 

So I have put together a list of some of the key things that you should start saving towards when you are still in your twenties.

No matter your financial situation, how much you earn and where you live in the world, these are all things that you should consider starting saving for right now.

Even if it’s only a little bit at the moment, the pennies really add up over time, and you’ll be amazed at how much you’ve actually have saved in years to come.

6 Things You Should Be Saving For In Your 20’s

RETIREMENT

Blah blah blah – who wants to hear that they should be saving for retirement when they are fresh out of university?

For some of you that might be over fifty years away!

But that’s kinda the point – the power of saving a little bit each month now for your retirement is in compound interest.

Compounding is the effect of earning interest on top of interest. If you put £1,000 into a fund that returns 10% annual interest rate (yeah right – this is just to make the maths easier) in year two you’ll be starting with a figure of £1,100. In year two you will earn 10% on £1,100 and so on. 

The effects that this can have on retirement savings are astounding.

If you saved £50 a month in a retirement fund that returns 3% over twenty years, this is what you’d be looking at at the end of the term: 

YearYear DepositsYear InterestTotal DepositsTotal InterestBalance
1£600.00£9.84£600.00£9.84£609.84
2£600.00£28.39£1,200.00£38.23£1,238.23
3£600.00£47.50£1,800.00£85.73£1,885.73
4£600.00£67.20£2,400.00£152.93£2,552.93
5£600.00£87.49£3,000.00£240.42£3,240.42
6£600.00£108.40£3,600.00£348.82£3,948.82
7£600.00£129.95£4,200.00£478.76£4,678.76
8£600.00£152.15£4,800.00£630.91£5,430.91
9£600.00£175.03£5,400.00£805.94£6,205.94
10£600.00£198.60£6,000.00£1,004.54£7,004.54
11£600.00£222.89£6,600.00£1,227.43£7,827.43
12£600.00£247.92£7,200.00£1,475.35£8,675.35
13£600.00£273.71£7,800.00£1,749.06£9,549.06
14£600.00£300.28£8,400.00£2,049.34£10,449.34
15£600.00£327.67£9,000.00£2,377.01£11,377.01
16£600.00£355.88£9,600.00£2,732.89£12,332.89
17£600.00£384.96£10,200.00£3,117.85£13,317.85
18£600.00£414.91£10,800.00£3,532.76£14,332.76
19£600.00£445.78£11,400.00£3,978.54£15,378.54
20£600.00£477.59£12,000.00£4,456.14£16,456.14

Whilst your regular deposits of £50 would total £12,000 after 20 years, you would also have earned yourself £4,456 in interest – money for nothing!

Now if you made those monthly deposits of £50 for 50 years, these would be your results.  Whilst you would have put away £30,000 over the course of those 50 years, this time you would have earned £39,639.82 in interest – that’s more than your monthly investments! 

YearYear DepositsYear InterestTotal DepositsTotal InterestBalance
20£600.00£477.59£12,000.00£4,456.14£16,456.14
21£600.00£510.37£12,600.00£4,966.51£17,566.51
22£600.00£544.14£13,200.00£5,510.65£18,710.65
23£600.00£578.94£13,800.00£6,089.59£19,889.59
24£600.00£614.80£14,400.00£6,704.39£21,104.39
25£600.00£651.75£15,000.00£7,356.14£22,356.14
26£600.00£689.82£15,600.00£8,045.97£23,645.97
27£600.00£729.05£16,200.00£8,775.02£24,975.02
28£600.00£769.48£16,800.00£9,544.50£26,344.50
29£600.00£811.13£17,400.00£10,355.63£27,755.63
30£600.00£854.05£18,000.00£11,209.69£29,209.69
31£600.00£898.28£18,600.00£12,107.97£30,707.97
32£600.00£943.85£19,200.00£13,051.82£32,251.82
33£600.00£990.81£19,800.00£14,042.63£33,842.63
34£600.00£1,039.20£20,400.00£15,081.82£35,481.82
35£600.00£1,089.05£21,000.00£16,170.88£37,170.88
36£600.00£1,140.43£21,600.00£17,311.31£38,911.31
37£600.00£1,193.36£22,200.00£18,504.67£40,704.67
38£600.00£1,247.91£22,800.00£19,752.58£42,552.58
39£600.00£1,304.12£23,400.00£21,056.70£44,456.70
40£600.00£1,362.03£24,000.00£22,418.73£46,418.73
41£600.00£1,421.71£24,600.00£23,840.44£48,440.44
42£600.00£1,483.20£25,200.00£25,323.64£50,523.64
43£600.00£1,546.56£25,800.00£26,870.21£52,670.21
44£600.00£1,611.85£26,400.00£28,482.06£54,882.06
45£600.00£1,679.13£27,000.00£30,161.20£57,161.20
46£600.00£1,748.45£27,600.00£31,909.65£59,509.65
47£600.00£1,819.88£28,200.00£33,729.53£61,929.53
48£600.00£1,893.49£28,800.00£35,623.02£64,423.02
49£600.00£1,969.33£29,400.00£37,592.34£66,992.34
50£600.00£2,047.48£30,000.00£39,639.82£69,639.82

These numbers are just to demonstrate the power of compound interest, and to show you that if you start young, the potential for how much you could have put away for retirement is amazing.

If you want to have a play around with numbers for yourself to see how much you could be saving, then check out this compound interest calculator.

YOUR FIRST HOME

Thankfully, this one is actually one that many twenty somethings are actively thinking about.

Getting onto the property market is one of the first ways that many adults start to feel that they have some financial stability.

Not only does owning your own home give you a place to live that nobody can take away from you – not like renting where your landlord can tell you they want their place back at any moment – owning your own home also gives you an asset which usually goes up in value over time, therefore gives you something to fall back on later in life.

Whilst the property market fluctuates, and recessions can hit and cause property prices to fall, over the long term, property prices nearly always go up.

As you pay off more of your mortgage over time, you increase your equity in the property, meaning you can sell and buy something bigger, or you can remortgage and use the extra money to purchase more properties, which you can then let out as an extra form of income.

The earlier you’re able to get onto the property market, the more you will be able to benefit, so if there is one thing that you want to focus on saving for then make it your first property. 

PAY OFF DEBT

Whether it be credit card debt, student loans or any other type of debt (besides mortgages as we covered that above) debt is bad news.

Interest rates on credit cards and loans are often through the roof, so while you might be making regular monthly payments to clear your balance, it feels like you’re getting nowhere as the monthly interest is adding up just as fast.

The best way to clear down debt fast is to increase your monthly payments as much as possible.  If you’re only paying the minimum, then it’s going to take you years to clear your balance.

Your other option is to look for a balance transfer credit card.  Balance transfer cards allow you to consolidate your debts into one place, and sometimes offer a 0% period where you don’t pay any interest on that balance for a set amount of time (usually anywhere between 6-24 months) this allows you to make regular payments to bring down your balance, without the interest eating away and keeping you in debt.

So before you start saving for holidays, new cars and other things that really don’t matter – think about clearing off your past debts first.

EMERGENCY FUND

What would you do if your boiler broke down?  You needed a new clutch on your car? Or you lost your job for any reason?

The sad truth is most twenty-somethings would not have the money tucked away that they needed to help them through difficult times.  

Ideally, an emergency fund should be enough to pay for three to six months worth of living expenses should you not be able to work for any reason – that includes mortgage or rent, travel costs and money for basic necessities like food and medicine.

When you’re trying to save for huge life changing things like purchasing a home or a retirement fund, putting extra money away ‘just in case’ can seem like a waste of precious money which could get you closer to your other goals much faster.

But it’s not a case of if there is an emergency, it’s a case of when.

Even if you only put £20 a month aside to begin with, you really won’t regret it when you find yourself in a pinch and you have a couple hundred set aside so help you out. 

FAMILY

Starting a family is one of, if not the most rewarding chapters of a person’s life.

To you, starting a family might mean having children, getting married, or filling your home with pets – no matter what your idea of family is, this is a time when you finally get to make your dreams come true and settle down.

But all of those things cost money, children being the most expensive as you’re financially responsible for your tiny humans for the next 18 years – at least

So even if you’re fresh out of uni, start thinking about what your plans are for the next 5-10 years, and where you’d like to see yourself in a decade’s time.

Put away a little at a time, and when it comes to planning your wedding, or having your first child, you’ll have a little extra financial support.

PERSONAL GROWTH

Never forget the importance of personal development.

Whether you dream of starting your own business, travelling the world, public speaking or writing your own book one day, make sure that you’re always looking for ways to grow and bring yourself closer to those goals.

While there are plenty of ways you can develop as a personal totally free – such as reading books, listening to podcasts and networking with others who have similar interests – there will also be opportunities that might be pretty costly that you should be saving some money aside for. 

If you’re able to set aside just 5% of your monthly income towards personal growth, it’ll allow you to attend that seminar, enroll in that course or take that trip across the world that will help you along your journey to making your dreams a reality.

To Finish Off…

I really hope you enjoyed this post and that it’s given you some food for thought for things you should be saving your money towards while you’re still in your early twenties.

Even if you’re reading this now you’re a bit further along in life – there is no reason why you can’t start working towards some of these financial goals if you’re already in your thirties, forties, even fifties!

Let me know if there are any other major financial commitments that you think are important to save for earlier in life.  Or, if you’re one of my more mature readers, are there any lessons you learned later in life that you wish you knew when you were younger?

Make sure to check back here on a regular basis as I post new financial, lifestyle and fashion content on The Angelina Archives every single week!