8 Financial Literacy Concepts You Should Know by Your Early 20s
Personal finance essentials every 20-something needs to know.
Your early 20s are a time for growth. New friends, new jobs, new towns. But with so many firsts, mistakes are natural.
And with money, some mistakes can be costly.
To prepare for life’s financial twists and turns, it’s important to equip yourself with a solid foundation of financial literacy. And fortunately, you don’t need to know everything — just some key essentials to navigate the unique challenges of that time in your life.
We spoke to eight financial experts about the top financial literacy concepts every 20-something should know. Here’s what they said.
No. 1: Income is the greatest asset
Travis Price, licensed income protection agent
Your income (present and future) is your most important asset and it should be protected at all costs.
It’s important because your income is the foundation of your entire financial house. If your income fails and your savings become depleted, your house crumbles.
There are a number of tactics that people can learn to protect their income. First, making sure they have adequate savings to cover at least six months of their expenses. Furthermore, making sure they have adequate short- and long-term disability systems in place to ensure that they do not have a drop in income, provided they can’t work for an extended period of time.
No. 2: Spending requires conscious decision-making
Madeline Pratt, founder and CEO of Fearless In Training and Womxn Talk Money
The best advice I could ever give on financial literacy is to make conscious decisions about spending. So much of our American culture is about consuming rather than enjoying the things that we spend our money on. Myself and other millennials are waking up to the fact that experiences are just as, if not more, valuable than the things we buy.
The best advice I would give a younger version of myself would be to take a pause before any purchase and really consciously decide if that’s something that I will value in the long-term. If the answer is no, take that money and set it aside in an investment account so the returns it makes can pay for the things that I truly value in the future.
No. 3: Paying yourself first to save
Brianne Soscia, CFP with The Wealth Consulting Group
As soon as you get paid, transfer a portion of your income to your savings, investment, and/or retirement accounts, depending on your financial goal.
If you have a retirement plan at work, make sure you are contributing as much as you need in order to get your full employer match, if there is one. These contributions will come out of your paycheck automatically, ensuring that you pay yourself first.
No. 4: Compound interest has investment power
Janine Rogan, CPA and financial education
Time being on your side is key when it comes to building your wealth in your 20s. Starting to invest and earning returns on small amounts will compound [throughout] your life.
No. 5: Budgets create financial structure
Travis Hornsby, CFA and founder of Student Loan Planner
Budgeting is something that many people struggle to do, but if you get this part down in your early 20s, you’ll be better off. Every person should create a budget — one that’s based on your income, expenses, how much you want to save per month, etc.
No. 6: Financial flexibility starts with minimizing debt
Logan Allec, CPA and founder of Money Done Right
Many young 20-year-olds don’t realize how pervasive debt can be.
Try to buy a car? Credit check. Start a business? Credit check. Buy a house? Credit check. Even refinance your debt? Credit check.
When you have significant debt, you are limited in your ability to accomplish your financial goals and live your life. Prioritizing paying off your debt will allow you to gain flexibility and options in life.
No. 7: Always negotiate salary
Lauren Hasson, founder of DevelopHer
Even leaving as little as $5,000 on the table in your first salary negotiation can have a ripple effect that has a net impact of [6-to-7 figures throughout] the course of your career.
I myself wish I had done this early on in my career. Because I didn’t, I found out that a male peer was hired at [a 50% higher salary] than me — 50%! When I found this out, instead of getting mad, I took action and learned how to negotiate.
My investment really paid off. In less than two years, I tripled my salary and that additional amount of money I was earning was more than $100,000.
No. 8: Employer benefits are a valuable resource
Matt Elliott, CFP at Pulse Financial Planning
Learn your employer’s benefits and take full advantage of them. This can be confusing to navigate at first, but most employers provide education and resources around this — you need to spend the time to use them and learn your benefits.
Common tips are to make sure you’re at least contributing to your employer-sponsored retirement plan up to a matching contribution amount, if one is offered. If you’re eligible for an HSA through your employer, this is another top program to take advantage of.
Unique benefits are becoming more prominent to attract young employees, especially in the tech space, and every plan is different, so check with your HR department and co-workers about your specific benefits package.
The early 20s are the right time to create a financial foundation — built of successes and missteps. Learn these financial literacy concepts to aid your journey to financial success.
Logan Allec is a certified public accountant, personal finance expert, and owner of the website Money Done Right. After spending his 20s grinding it out in the corporate world and paying off more than $35,000 in student loans, he dropped everything and launched Money Done Right in 2017. His mission is to help everybody — from college students to retirees — make, save, and invest more money.
Matt Elliott is a certified financial planner based in Rochester, MN, serving clients locally in-person and virtually nationwide. Elliott founded Pulse Financial Planning, which provides financial planning and investment management to help individuals and health care professionals organize, invest, and protect their assets. Before founding Pulse Financial Planning, Elliott worked at a large brokerage firm, where he was responsible for a practice of more than $500 million in assets. He graduated from Winona State University with a bachelor’s degree in finance.
Lauren Hasson is the founder of DevelopHer and a senior engineer in apps and information security at a leading Silicon Valley fintech company. She founded DevelopHer to help fellow female professionals advance their careers, stand-out in their field, and negotiate for the salaries they deserve. Her work with DevelopHer has been featured in the international IEEE Women in Engineering Magazine; she has been hired by top companies like Google, Dell, Intuit, Armor, and more to train and inspire their women; she also received the Women in IT Awards Silicon Valley “Diversity Initiative of the Year” Award.
Travis Hornsby is the founder of Student Loan Planner, which he created after helping his physician wife navigate ridiculously complex student loan repayment decisions. Hornsby is also a chartered financial analyst and a former bond trader. He brings that experience to analyzing the best repayment paths for graduate degree professionals with six figures of student debt.
Madeline Pratt is the founder of a creative consultancy, Fearless In Training, and Womxn Talk Money, an online network for female and nonbinary financial professionals to connect. Pratt is an outspoken force for promoting education and equality in business, and she spends her time creating content and programs to make the working world a place where women are seen, heard, and supported.
Travis Price is a licensed life and senior health insurance agent located in Traverse City, Michigan. He is licensed to offer insurance programs in Michigan, Texas, Virginia, Iowa, Illinois, and South Carolina. He has been representing the insurance needs of seniors since 2012. Visit his website to learn more.
Janine Rogan is a chartered professional accountant and the founder and CEO of The Wealth Building Academy, a financial literacy company focused on educating millennials to put their best financial foot forward. Based in Calgary, AB, she has spent the past 10 years sharing her financial acumen with thousands of individuals through local workshops and international speaking engagements.
Brianne Soscia is a certified financial planner, financial advisor, and founder of the Financial Yogi. She currently holds her Series 6, 7, and 63 licenses through LPL Financial, and Series 66 license through both Wealth Consulting Group and LPL Financial, as well as her life and health insurance licenses. She specializes in working with individuals, families, and business owners across the country, in the areas of retirement planning, investment management, asset protection, and college savings.
Subscribe to our newsletter for more marketing news & industry trends
The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.