Fool-Proof Financial Advice For 20 Year Olds!

Financial Advice For 20 Year Olds
Fraser - FireTheBoss™ Founder

Fraser - FireTheBoss™ Founder

With over 15-years experience in online entrepreneurship and investing, I provide honest, practical information - without the usual marketing BS.

When you’re in your 20s, saving for the future isn’t always a priority.

And to some extent, this is how it should be! 

Enjoy travel, food, friends… life.

But future you will be extremely grateful if you also manage to tuck away some savings. 

Investing in your 20’s can make an exponential difference to your future net worth. Consequently, following some simple financial advice for 20 year olds is a great way to get started. Start by saving an emergency fund, optimizing your budget and learning to invest. Financial literacy is the ultimate goal, but this takes time. 

We collated some financial advice for 20 year olds to get you started. This is a very comprehensive (and therefore long) post. I recommend taking the time to read it carefully. Grab a pen and make yourself a plan of action!

Disclaimer: As always, I am not offering financial advice and this article is for educational and reference purposes only. You should always carry out your own research and take specific professional advice. Remember, only you can make the final decision on an investment. 

Table of Contents

Is 20 Years Old Too Young To Start Saving?

Who out there hasn’t had their parents say to them “save your money”? 

Mine did.

But let’s be honest.

How many of us actually listen to our parents… especially when it comes to our money?

It isn’t until you are in your 30’s that you realize that maybe, your parents were right. 

By then it’s too late – you’ve lost the benefit of over 10-years of compounding!

But you’re here, reading this article. 

You’re already one step ahead of the pack.

So let me start by saying… your parents are wrong!

Are you even using the right tools?

Unless you have specific saving goals in mind (e.g. a house deposit) you should not be mindlessly saving. 

Money in the bank is money wasted. 

Inflation will see to that.

At nearing 5%, inflation is no joke. 

Your $10k “savings” account is actually costing you ~$500 every year! 

You should instead (in our not-so-humble opinion) be building wealth generating assets and an investment portfolio. 

Kick inflation in it’s inflated ass!

Now, we’re not saying don’t save any money. 

Just that saving is only one small tool in your financial toolbox. 

Our financial advice for 20 year olds explores your other options. 

Read on carefully. 

How Much Should I Be Saving In My 20s?

Ok, with that said, everyone needs to start somewhere.

Whilst it sounds like I’m contradicting myself, I’m not. 

Saving for a very specific goal is still a legitimate strategy…

And everyone should build a small emergency fund before investing.

We know money can be tight, but how much should you start to put aside in your 20s?

how much should i be saving in my 20s

That’s a tricky question.

We also know that you are still going to want to spend your hard-earned money.

That’s why you went to school in the first place, to get a better paying job, to earn more money, and to live a better life! 

So let’s just set some savings goals and work towards them. 

As above, the first thing to save for is your emergency fund, or a ‘rainy day fund’ as others call it. 

This way if you lose your job or main source of income (as many unfortunately did during COVID) you’re not totally up shit’s creek. 

We recommend that you put 3-6 months worth of your expenses into this savings account. If you can, put it into a separate high-interest savings account to avoid temptation. 

For example, let’s say that between rent, your car bills, your phone, food – your average monthly cost is around $1,500. 

You’ll want to make sure that you have around $4,500 to $10,000 saved up so that if you ever do lose your job, you have money to be able to support yourself. 

From there, we recommend that you follow the 50/30/20 rule when it comes to your earnings.

This is covered in how to do a money makeover.

Or… just keep reading below. 

how much should i be saving in my 20s. (2)

The 50/30/20 rule is a popular income rule and the foundation of many financial savings models.

It simply divides your earnings into different areas.  

The first 50 percent will go to your needs. This includes things like your rent, utilities, groceries, and so on. The stuff you actually need to survive (unfortunately, that does not include extra guac at Chipotle) goes in this category. 

The next 30 can go to your wants. Now when I say wants, that may include some of your short-term financial goals like a vacation or new computer. Don’t blow it all on fast food!

Guac… Well, that’s acceptable. 

The final 20 percent will go towards your savings. 

However, it makes no financial sense to simply leave that money in a savings account to collect dust. 

Rather, that 20% of your income should at least be sitting in a high-interest savings account. But, the best option here, is to start investing those savings into a secure investment fund. 

Applying average returns, $2000 saved aged 20, grows to $5,187.48 by aged 30.

You now have an emergency fund and an investment savings account that is (hopefully) growing perpetually growing! 

What Should A 20 Year Old Invest In?

If you’d have asked me as a 20-year-old what I would invest in, I’d probably give a generic answer like… “Stocks”. 

But, at the end of the day that’s not the most helpful advice. 

Most 20-year-olds don’t need to overly concern themselves with building a bullet-proof portfolio of stocks and bonds and ETFs…

The more important thing is finding an investment app or advisor to work with. Then, invest your savings into a secure investment account, earning some interest. 

It’s never too early to get into investments either. You may not be a finance-savvy investment guru yet, but there are a ton of options to get into.

Let’s just say that each pay check you earn $1,000. You’ll be off to a great start investing 20% of that pay check each time. 

But where should you invest it?

Here’s a very simplified flowchart example answer to the question: what should a 20 year old invest in?

A flowchart outlined financial advice for 20 year olds

Retirement Funds

Aside from simply getting involved in investments, now is a good time to talk to your employer about putting money into a 401k. I know, I know – you can’t believe that I’m already talking to you about your retirement.

Welcome to adulthood, kid (it’s all downhill from here…) 

It’s impossible to offer good financial advice for 20 year olds if we don’t discuss retirement. 


The earlier you invest money, the more it will grow. 

No shit, Sherlock. 

But it’s true! 

We’ll discuss compound interest in a moment, but the difference between starting now and in your thirties is just ridiculous. 

What Is A 401k?

If you don’t know much about a 401k, this is your retirement fund – your employer takes a set amount right off of your pay check. 

They will then put this into an investment account for you, which will earn interest and grow into a (hopefully) substantial nest egg for your retirement. 

Depending on how much you contribute, and how well your account is invested, a lot of people even retire early, because their 401K has earned so much.

The best part? Some employers will match a portion of what you put in. That’s free money!

Think of it this way… Let’s assume that it takes 20 years for a 401K to earn enough for you to retire on. If you start investing, and your employer matches, at the age of 20—you may have no problem retiring at 40. 

What If My Employer Doesn’t Have A 401k?

If your employer doesn’t have a 401k, or you’re a freelancer, invest into a Roth IRA

This is also for retirement, and even though you put the money in after taxes, it will grow in the Roth IRA tax-free. Think of a Roth as your 401K (if you don’t have access to a traditional 401K). 

After you have those set up, one of the simplest ways to set up your investments is through a robo-advisor. 

This is an automated algorithm that takes the information you give them about your risk tolerance and financial goals, and then it creates an investment portfolio that is best suited for you.

Even better, some of the advisors let you invest with just your spare change (like Acorns). They simply round up your purchases to the nearest dollar, and then put that right into your investments!

Index Mutual Funds 

Index funds are the ultimate weapon in the fight for financial independence. 

So much so that they deserve a whole article to themselves.

You can find this here.

Individual Stocks

Personally, I can’t recommend this.

90% of rookie investors lose money in the stock market. 

The majority of seasoned stock brokers fail to routinely beat a well built index fund… You gotta be pretty confident (or naïve) if you think you stand a better chance. 

High Risk (High Return) Investments

With volatility, comes potential. 

Both for huge rewards or huge failures. 

I’m talking of course, about Cryptocurrency and NFT’s

More on this later 🔥

TL;DRWhat should a 20-year-old invest in? 

  • Use investment apps to get involved in lower-risk, steady growth assets. Get set up with a robo-advisor, and start by just investing small amounts each month. Work up to that 20% mark. Index funds are a great start.
  • Start investing in your 401K or Roth IRA as soon as possible. This will grow exponentially over time. 
  • Avoid individual stocks unless you really know what you’re doing. You ain’t no Wolf Of Wall Street (and he ended up in jail anyway). 
  • Leave Real Estate for when you have more financial security and cash in the bank.
  • (For those with an appetite for danger – cryptocurrency could make up a small percentage of your investments. Enter at your own risk!)

How Do I Learn About Saving?

The best financial advice for the younger crowds out there is to learn. 

Learn about investments, learn about spending wisely, learn about budgets… But more importantly, learn about how to save smart. 

When we talk about savings, we are talking about the whole package. Saving for your short-term goals as well as your long-term goals. Yes, this does include retirement.

If that seems like a lot of work that you’d want to avoid, don’t listen to yourself! This is the time to start taking care of your money and develop great habits.

You don’t have to do this alone!

You could talk with a financial planner who can help set everything up.

You also have all of the resources here at Fire The Boss. 

But, how else can you learn? 

Hit the books… with our 7 Best Finance Books for Young Adults.

But read the rest of this post first 🔥

financial advice for 20 year olds

You can also head to google and research different methods of saving, budgeting, and investing. 

Remember the adage, first you learn, then you earn.

Super cheesy, but it’s true!

Important Financial Tips For 20 Somethings

Now that we’ve got some investments under our belt, let’s discuss some of the best financial tips for people in their 20’s. 

The reason these tips differ from those given to millennials or people in their 30s is really based on three things:

  • Your age (giving you more time to save and make change)*
  • The money you have available
  • Your experience with finances

*As a young person you may have a higher risk tolerance than someone approaching retirement. You have more to gain and less to lose.

This is why financial advice for 20 year olds deserves special attention. Here’s some general tips…

Avoid Credit Cards!

Credit can be your worst enemy, but it can also be your friend.

No credit score, no mortgage!

As we learned in How To Build Credit In 5 Simple Steps – a credit card can be your secret weapon when building credit. 

The key to using a credit card though:

  • Use it only a couple times a month.
  • Pay it off completely.
  • Pay it off on time!

You do not want to be paying interest on a credit card. This is basically throwing money down the drain!

In addition, missed payments make your credit card company take notice! They can damage your credit, and make things like loans, mortgages, and big purchases harder in the future.

Say No To Borrowing, Unless It's A Mortgage

When you borrow money, you are padding someone else’s pockets.

It really is better to save up your money and buy things outright.

Yes, it does mean you may have to wait a bit longer, but it is far better than paying interest to someone else.

For example, let’s say you have a $10,000 purchase:

You’re hasty and take out a loan of $10,000 with 6% interest over a 5-year term. You end up paying closer to $11,500 because of all the interest. 

Had you instead managed to save up for the expenditure, you could instead invest that extra $1500. $1500 invested in an S&P 500 Index Fund, with average returns of 10%, returns $2416 in 5-years time (or $10,000 in 20-years!).

Now, I appreciate this is easier said than done. 

But it’s certainly manageable for smaller expenditures like your new phone or laptop. Multiple small loans soon add up to big interest payments. 

The Exceptions?

Ok, when it comes to your mortgage, I totally get that saving up is not possible… 

Just remember when you are getting a mortgage for the first time, bigger is not better. Start small. 

You don’t need a big, fancy house to start off with. Even if you think you do. 

Get something that is reasonable so that your mortgage, and mortgage payments are smaller. This will allow you to pay it down faster and save you paying out as much interest.

Remember the core principles of our financial advice for 20 year olds – save, budget, invest. Large mortgages cut you off at the very first stage!

The opportunity cost of your huge house is therefore having no leftover money to invest!

Student Loans

Another necessary evil. 

The less said, the better. 

If you gotta do it, you gotta do it. 

Why Is Borrowing Bad?

Once of the biggest culprits is the aforementioned credit card. Yes, this too is a form of borrowing. 

When you get your first one, it feels like you have access to a bottomless money pit. You might be dying to go out and use it for the first time.

Technically, you do have access to more money, and it feels great!

But, with great power comes great responsibility… (*cringe*)

You may even tell yourself that you’re smart with money, and you’ll pay it off as soon as you see the statement. You may even succeed at this when you start using it….

Typically, it just starts with deciding that “it’s just a coffee, I’ll pay it off later”. 

This can extend out to borrowing money for a car or a trip. Once you get into the habit of borrowing, you’ll be so busy trying to pay them back, there’s no time to save or invest.

So, just remember to use your credit card as little as you can, and you’ll be in the clear. 

On the topic of student loans… We get it that you, like most of us, have had to take out loans to go to college. The key is to borrow as little as possible. Don’t max out your student loan so you can relax and take your friends out for drinks later. 

TL;DR – Avoid borrowing where you can, and where you can’t – remember to fall back on good money habits. “Good debt” does exist but is mostly outside the scope of financial advice for 20 year olds. 

Develop Good Money Habits

Speaking of good money habits…

The best habit to develop early on is to keep more money out of sight, and out of mind. 

The rest of your money will be in funds that you always look at. Track your purchases, track your bills, make yourself a budget. If you see how much you really spend on the “occasional” fast food stop – that’s motivation enough to curb your spending. 

You probably already have a checking account, so now it’s also time to set up a high-interest savings account. A high-interest savings account won’t earn you much in interest, but it will keep up with inflation better than a regular account.

Set up an automated withdrawal from your checking account, and do this on a consistent schedule, you will be amazed at how quickly your money will grow. This becomes your “emergency fund”. 

If you’re not sold on a savings or 401K account, then we strongly suggest considering the route of an investment app, robo-advisor or index fund. This is also be the natural next step for anyone who has also accrued their emergency fund. 

A robo-advisor app like Acorns can do half the work for you. After all, why bother developing good money habits when an app can do it for you? (joking!) 


  • Make looking at your bank statements a healthy habit. This helps to reduce unnecessary spending. 
  • Set up automated deposits from your checking account to a savings account.
  • Once you hit your savings target, setup an automated deposit into an index fund.
  • Once these are up and running – spare funds can be used for more adventurous investing (which we’ll discuss later).
  • Here’s some more specific good money habits…

Try Saving Up For Something

Do not save what is left after spending, but spend what is left after saving.

Setting up a goal to save for something is actually really rewarding. Remember when you got your first job and you were able to go out and pay for something with your own money?

Maybe you want to travel next year or maybe even buy a car. These are both big purchases. If you can, start saving for these expenses well ahead of time. 


The moral of this story is to not only focus on saving but focus on making a financial goal to save for something. If there’s something that really motivates you, motivate yourself to put in the effort to work towards it. 

Otherwise, the money left deflating in your bank would be better off invested!

Try Your Patience - Wait 5-Days Before Buying Something Over $100

As many of our parents have told us all… Wait a day or wait a week to see if you really still need that lofty purchase. 

Most often… They’re right.

We all like shiny new toys. The thing is though, do you really need it? 

We aren’t saying that you should never buy anything or spend any of your money, we are just suggesting that you think about it first. 

Delay the gratification that you think you will feel, even if for a few days or a week. Even if you do end up buying it, you will have put more thought into the value of that purchase.

You definitely want to get into that habit now, while you are in your 20s. If you don’t, the things that you impulse-buy can get a lot pricier. Nobody likes buyers remorse!

TL;DR – Don’t buy shit you don’t need (or even really want). When thinking about opening your wallet, sleep on it first!

Trouble Fixing Your Budget? Try Cash!

As discussed, learning to track your purchases and create a budget is huge. 

Advanced technology (tapping your debit card for every spend) has actually made you less likely to track your spending. 

Switching to cash instead of card is proven to make you spend less money. However, who carries cash nowadays? 

A better alternative is to simply sit down and actually look at your expenses. See how many of them are justified, like rent, gas and groceries. See how many of them are movie tickets, coffee and fast food. Those small purchases are the ones you have to watch out for.

Remember the 50/30/20 rule? Do that!

If doing this manually seems too much for you, download an app!

Aim To Make A Profit - Set A Weekly Goal To Spend Less Than You Earn

The most basic rule of business – make a profit. 

That is, spend less than you earn, and you’re “in the black” as they say. 

If you are not in profit each week, you have two choices:

  • Spend less money
  • Make more money

It’s easy to overspend. That’s why credit card companies do as well as they do. 

Utilising our 50/30/20 split – if you realize that your needs are more than 50%, you may be living beyond your means. Is there something you can cut out? 

If not, you’re only choice is to earn more.

Easier said than done, right? 

This is where passive income or side hustles come in!

Start Paying Off Debt

Nobody wants debt, but we all seem to acquire it. 

The key is to pay it off sooner, rather than later. 

Do not start investing whilst you’re still in debt!

It’s no good earning 6% returns on a mutual fund whilst owing a big sum to your credit company at 7.9% interest!

(The exception to this rule is very low interest debt like a mortgage. If money invested returns 6-10% then this might be smarter than overpaying your 2% mortgage). 

Make it your mission to become debt-free!

Set And Monitor Financial Goals

Ok, this may seem like a big ask. 

After all, you’re only in your 20s…

So start small.

The easiest way for you to look at your goals is to break them into short-term as well as long- term goals. You will likely be treating them differently.

General examples:

  1. Pay off all debts within X amount of time
  2. Save up an emergency fund
  3. Automatically invest $200/month into an Index Fund 
  4. Budget your way into having spare cash. Invest this into higher risk investments (to be discussed). 

Pro Tip: It helps to set daily or weekly spending and saving goals. Telling yourself to invest $2 per day, or $10 per week is a lot easier than forcing yourself to put away hundreds each month.

What Are My Short-Term Goals?

If you don’t have that emergency fund yet, this should be your first, and number one short-term goal. Remember, you want to aim for 3-6 months of expenses to be covered.

After that, your short-term goals are really anything that is under 5 years. This could be the trip we keep mentioning, a car, maybe even a wedding or mortgage. Yikes!

Once you have this list, figure out what really belongs in your 30% “wants” and what belong in the 20% savings.

When you save for these goals, you will probably want to put your money into a high interest savings account, or a bond that is easily accessible. You still want this money to earn interest for you. 

What Are My Long-Term Goals?

You bet we are going to put retirement in here first! That 401K is calling your name. 

We really do want you to start saving for it.

From there, you need to decide what your other long-term goals are.

Maybe for you, a house is that long-term goal. These are things that you know you are going to want in 5+ years. The savings that you allocate to long-term goals can then go into investments…

Open Accounts For The Future

How about opening up an investment account to save for these long-term goals?

When you invest your money, it will work and grow for you.

You may even choose to invest in things that are a bit riskier, because you have longer for the markets to balance out. You will be amazed at your financial growth.

Pro Tip: Only consider this with money you don’t need access to for a good number of years. You can’t risk needing to withdraw in a year or two’s time and then finding the market is down 20%. Longer investment periods give you time for the market to ride all the way back up again.

Learn About Compound Growth

Do you remember learning about compound interest in school?

Me neither.

Compound interest is basically when you make interest… on your interest. This causes your investment to grow exponentially, disproportionate to the amount your contributing monthly.

Let’s say you are 25 and you save $100 each month. You have a conservative 7% interest rate that is compounded annually. In 40 years, you will have $248,651.50! That’s over $200,000 in interest. AND you only invested $48,000?!

Let’s take a look at another example below (substitute Euros for USD – or any given currency). 

Be like Investor 1! 

You’re ahead of the game and start investing aged 25, putting away $5,000 each year for 10 years, until you’re 35. Then… no further contributions. 

Your best friend, Investor 2, only started aged 35. But they put away $5,000 each year for 30 years. Surely they’ll end up with more money in the end?


Compounding won, despite Investor 2 paying in an extra $100,000!

This is the power of investing in your 20’s!

Best Investment Tips For A 20-Year Old

Remember that simplified flowchart?

A flowchart outlined financial advice for 20 year olds

We’ve already covered the basic investment strategies above. 

What about general tips?

The number one generic tip or piece of financial advice for 20 year olds – diversify. 

Don’t put all of your bags in one basket. 

Spreading your investments, reduces your risk of loss. This is the basis on which index funds work.

Once you have invested in some more stable investment vehicles you may want to consider putting a small percentage of your portfolio into high risk/high reward investments.

High Risk Investments For 20 Year Olds

For some reason, this is the part everyone wants to know about. 

You maniacs!

To be fair, if there is ever a time to invest in riskier assets, one could argue it’s when you’re young. 

As long as you only invest money you can afford to lose, you have time to earn it back and recover. 

You also have more time for your more “stable” investments to compound and make up for any losses.

Conversely, someone heading for retirement needs to cling onto everything they already have – their earning potential is now minimal.

This is not to say I am recommending high risk investments, but if you must do it, do it safely.   

Personally, I invest in high risk assets, but only after accruing a full emergency fund, setting up a retirement fund and contributing to my index fund. 

Examples of high risk investment: 

A Note On Side Hustles

We couldn’t leave without mentioning this one. 

Some side hustles or businesses will have far higher returns than any other investment. This blog is one such example!

Blogs can have start up costs of just a few dollars and go on to earn hundreds of thousands. Very few stock market investments can match that (albeit the side hustle is a lot more work).  

If you have a great idea for a side hustle, it might be worth the investment!

Be Smart... But Invest in You Too

We have talked a lot about saving money.

You do need to spend a little too though.

Ready for our absolute best piece of financial advice for 20 year olds?

Remember to invest in yourself. 

It’s cheesy, but it’s true.

If all you focus on is saving and investing, and adhering to a strict and rigorous budget, you won’t give yourself much time to live. 

Invest in travel, invest in experiences, invest in acquiring skills, invest time in your relationships.

These will all lead to a wiser, happier you – better able to make good financial choices when you’re older. 

The fact you’re here, reading this, means you’re already more financially aware than your peers. Make simple changes to sure up your financial future, but not at the expense of enjoying your 20’s.

Travel and experiences in your 30’s-70’s have a different set of restrictions attached. Don’t wait. 

Summary: Top Financial Advice For 20 Year Olds

Hopefully you’ve found that helpful!

Ultimately, some of the best financial advice we can give to a 20 year old (you!) is to become financially literate. 

Absorb information. Build good habits. Figure out what’s best for you and your own circumstances. 

The internet is a great place to start… and we have loads more articles to keep you going. 

Best of luck!


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