8 Things All 20-Something-Year-Olds Should Know About Money

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Being in your twenties is an exciting time filled with new experiences, independence, and opportunities – but it can also be a time of financial insecurity between having to enter the workforce at lower entry level salaries and having little in savings. Establishing healthy financial habits early on can help you avoid financial missteps and set you up for a secure future. Here are ten essential money lessons every 20-something-year-old should know:

1. Start Budgeting & Setting Financial Intentions

To get started, you should be tracking your income and expenses meticulously to understand your spending patterns and identify areas where you can cut back. It all comes down to being intentional and making sure your spending habits actually align with your priorities. Do you want to eat expensive takeout food and take Ubers on the regular, or should you be eating home-made sandwiches more often and saving up for a trip instead? You’re the master of your own financial destiny. You can use a manual budgeting tool like a Google Sheets template, or automate and streamline the process with one of the many apps built for this purpose, like Rocket Money or Copilot.

2. Live Within Your Means

On that same note: learn to delay gratification. It’s easy to get caught up in the desire to keep up with friends or trends, but living within your means is crucial. Create a lifestyle that is sustainable based on your income. Focus on spending money on things that truly matter and bring value to your life. Avoid the trap of lifestyle inflation, where increased income leads to increased spending on non-essential items. 

Trust me, those expensive trendy shoes you want right now likely won’t matter to you at all in a couple of years.

3. Build an Emergency Fund, Even If It’s a Small One.

Life is unpredictable and having an emergency fund can protect you from unexpected financial hurdles. The financial experts like to say that you should aim to save three to six months’ worth of living expenses – but if you are living paycheck-to-paycheck (like more than 70% of Americans say they are in 2024) saving anything at all might feel out of reach. However, saving something is better than nothing, even if it’s just $20 per month to start, and a trick is to automate your savings with automatic transfers before you even see the money hit your account. It might not seem worth it when you’re just getting started, but down the line even a couple hundred bucks tucked away somewhere might help future-you out of a sticky situation.

And hey, don’t sweat it if you haven’t achieved building an emergency fund yet – if you’re faced with unexpected expenses, financial app Kasheesh can help by letting you split any payment between up to 5 of your cards.

4. Always Keep Educating Yourself About Personal Finance

Knowledge is power. Take the time to read books, follow financial blogs (like our Finance Academy!), watch credible TikTokers or Youtubers, and listen to podcasts about personal finance. Understanding concepts like investing, taxes, insurance, and retirement planning can help you make informed decisions. Take it from someone in their early 30s, I certainly wish I had understood the importance of these things much sooner in life.

5. Start Investing in Your Future Early

Speaking of retirement planning… it’s never too early to start investing! Look, I get it, retirement feels sooo far into the distant future when you’re in your 20s. Who has time to care about something that’s happening forty years from now? For someone who’s twenty that’s literally two lifetimes away. Live fast, die young, and all of that. But here’s the thing, all of a sudden you’re in your 30s – just a few years later – and suddenly it doesn’t feel so far away after all.

A lot of people in their 30s, 40s, or even 50s, are currently damning their younger selves as they are realizing too late that they need to start seriously planning for the future and have to start from zero with a short saving horizon. You don’t want to end up there. Take advantage of retirement accounts like 401(k)s or IRAs and consider investing in a diversified portfolio of stocks, bonds, and mutual funds to balance risk and reward. Compound interest can significantly grow your savings over time, so the sooner you start, the better.

6. Mind Your Credit Score

Your credit score is a crucial number that affects your ability to get loans, rent an apartment, and sometimes even get a job. And once you do get approved for a loan or a new credit line, your credit score also determines things like your APR (Annual Percentage Rate), meaning how much you’ll pay in interest – you see, if you have a lower credit score it will actually cost you more to borrow money. Spend some time trying to learn about the factors that influence your credit score, such as payment history, credit utilization, length of credit history, and types of credit. Pay your bills on time, keep your credit card balances low, and check your credit report regularly to ensure there are no errors.

If you’re having trouble wrapping your head around how it all works, Kasheesh Smart Split was built for this exact reason. During each transaction it factors in your card limits, balances, and APRs, and determines which cards to use to keep your credit utilizations low at all times. Learn more about how Kasheesh works here.

7. Good Debt vs Bad Debt – Understand How To Leverage Debt

Speaking of borrowing money, on the surface level it might seem like all debt is ultimately bad – but it’s more nuanced than that. It’s often argued that strategically taking on certain debt can act as a barrier to entry into the middle class, including things like student loans, mortgages, business loans, or other debt that invests in a better future in one way or another. There’s a reason for the common phrase “you have to spend money to make money”, and that applies to the cost of borrowing money too, when done wisely. 

The same goes for learning how to use credit cards responsibly to build your credit score to get lower interest rates and access to the best credit card rewards – such as travel points, cash-back on all purchases, and big sign up bonuses – which can help you save a lot of money in the long run. More about that in the next point.

8. Learn the Difference Between Debit and Credit

Understanding the difference between debit and credit is essential for managing your finances effectively. A debit card withdraws money directly from your checking account when you make a purchase, which helps you avoid spending money you don't have. 

In contrast, a credit card allows you to borrow money up to a certain limit, which you must repay, usually with interest if you carry a balance. Using a credit card responsibly can help you build a good credit history, which we already mentioned is a crucial part of adulthood, and it can give you access to a whole world of credit card points and rewards. You should always aim to pay off your credit balances in full each month to avoid high-interest charges and debt accumulation - but if you must carry a balance, focus on paying off cards with the highest interest rates first.


Learn more about how to start spending responsibly, utilizing credit in a responsible and beneficial way, and building a higher credit score with Kasheesh.

Let's see how much your budget
needs Kasheesh
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Term
Capital
Visit Glossary
Meaning
The value of personal items that one owns, including savings, investments, and property. One of three factors in credit scoring
Visit Glossary
You’re not using Kasheesh yet?
Join the Waitlist
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Let's see how much your budget
needs Kasheesh
Take a quiz
Term
Capital
Visit Glossary
Meaning
The value of personal items that one owns, including savings, investments, and property. One of three factors in credit scoring
Visit Glossary
You’re not using Kasheesh yet?
Join the Waitlist
No items found.
Let's see how much your budget
needs Kasheesh
Take a quiz
Term
Capital
Visit Glossary
Meaning
The value of personal items that one owns, including savings, investments, and property. One of three factors in credit scoring
Visit Glossary
You’re not using Kasheesh yet?
Join the Waitlist
No items found.
Let's see how much your budget
needs Kasheesh
Take a quiz
Term
Capital
Visit Glossary
Meaning
The value of personal items that one owns, including savings, investments, and property. One of three factors in credit scoring
Visit Glossary
You’re not using Kasheesh yet?
Join the Waitlist
No items found.
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