Your 20s is the Best Time to Save

Ah, to be 20 again. The world is your oyster and you have your entire future in front of you. What’s a youngster to do? You party like there’s no tomorrow, right? After all, you only live once. Wrong!!! Sure, your 20s are a wonderful period of identity forming and making friends. But, it is also a great time to establish a strong financial base for your future.
You may not be making a huge income, but you likely have fewer expenses than someone in their 40s or 50s. You also have flexibility. By laying a strong foundation now, you won’t have to play catch up later.
Okay, you might be thinking, “How can I save when I’m only making $30k a year?” I honestly believe that the best time to build up your savings is your 20s. Before you roll your eyes, hear me out. Here are the reasons why the best time to save is in your 20s.

You’re Single

Okay, some people marry young, I get it. For those who are not yet married though, realize that you are in complete control of your finances. You get to decide how to set your budget and how much money to put away for savings.

As an aside, I just want to point out that I single out married couples here because marriage has different legal implications as opposed to cohabitating couples.

Marriage with great but when your life and finances are commingled, it’s gets just a little harder to make decisions. You’re going to have disagreements, you value things differently, and you’re going to have arguments. That’s just a part of life. No matter how in sync you are with your better half, fights break out from time to time.

When you’re single, you don’t need to check in with your better half regarding how and where to save your money. You can assess your own needs and proceed accordingly.Your 20s are a fun time. New job, new friends, the world is full of possibilities. It's not just about fun. Your 20s are the best time to save money.

You Don’t Have Dependents

Again, I know I’m making a generalization but as Americans are getting married later in life and having children later, many people in their 20s do not have kids. When you don’t have kids, not only do you get to sleep in, you also get to save more money!

Let’s count the ways. You’re not paying for costs of prenatal care and labor and delivery, you’re not paying for diapers and formula, you’re not paying for toys and clothes, and you’re not paying for childcare.

Okay, to clarify, I’m not saying that you skip having kids in order to save money. I am saying since you likely don’t have kids during your 20s, it presents a great opportunity to squirrel money away.

You Don’t Have a House

When you’re in your 20s, you likely haven’t yet bought a house or have decided renting is preferable. Either way, you’re saving yourself from monthly payments that encompass the principal, interest, escrow, and insurance.

Not only that, you don’t have to pay for maintenance. Without debating the pros and cons of home ownership, we can all agree that not having a mortgage and not having to deal with home maintenance means a chance to save money.

Right now, we literally have a savings fund called “Home” that’s earmarked for things like replacing the AC. I would much rather put the money in an investment account but such is life when you’re responsible for maintaining your own residence.

It’s Easier to Keep Living Like a (Poor) Student

Lifestyle inflation is real. As you make more money, you start to think that you can afford and deserve nicer things.  As a 20-something, you can still live like a college student even when you have a full-time job.

You don’t have to keep subsisting on ramen or rice and beans but it’s helpful to hang on to the money saving habits you developed as a student. These habits may include living with roommates, cooking your own food, and continuing to drive your old car. It sucks to say this but it’s more socially acceptable for young people to live cheaply so you should use that to your advantage. Don’t feel compelled to spend in order to impress other people.

Since you haven’t yet developed expensive habits and tastes, these behaviors won’t feel so much like a sacrifice. They’re just a way of life. Remember this, just because you’re earning more money doesn’t mean you have to spend it all. By keeping your expenses low, you can put more money away towards savings.

You Can Go Where the Money Is

Being young often means the freedom of mobility. You can go to cities where the job market is hot. If there’s a certain company you want to work for, you can move to where the company is located.

When you buy a house and/or have kids, it’s much harder to just pick up and leave. Your 20s are a time for building a strong career foundation and moving to where the jobs are is one way to do that.

It can be scary to move to a new town. It can mean leaving your friends and family. However, just keep in mind that this is an option for seeking higher income jobs.

Time is on Your Side

The money you sock away in your 20s has more time to grow and benefit from compound interest. When you start saving at a younger age, you don’t have to put away as much money to achieve the same results as someone who’s just starting to save in her 30s or 40s.

If you put $10,000 in an account at age 25 and it averages a return of 8% a year, you’ll have $242,819 in the account at age 65. That’s if you never add another cent to the account.

Contrast that with someone saving the same amount starting at age 35 and earning the same return. At the age of 65, this person will have $109,386 in the account. A difference of 10 years accounts for a balance difference of over $100k!!!!!! That’s a pretty powerful illustration of the power of time. And that’s is why you definitely should start saving earlier rather than later.

What are your thoughts? Do you think that there is a period in one’s life in which it’s easier to save money?

Your 20s are a fun time. New job, new friends, the world is full of possibilities. It's not just about fun. Your 20s are the best time to save money.





4 Replies to “Your 20s is the Best Time to Save”

  1. I wish I knew about saving when I was in my 20s. I just lived that YOLO life at that time. My 30s is a different story and glad to understand the meaning of compound interest. It has helped me immensely because I’m able save at a bigger rate and catch up to all the times I didn’t save when I was in my 20s.

    1. I think a lot of us in our 30s have that tinge of financial regret. I wish I saved more and bought mutual funds instead of trying to chase after the next hot stock. I’m glad to hear that you’re able to catch up and make up for lost time.

  2. When I was in my 20s, I was too focused on getting all the experience I could, even working for free! Not until I hit 30 did I realize that I need to save up for my retirement. Better late than never!

    1. So true, Jen. It’s good to start saving young because you have time on your side, but it’s never too late to start saving!

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