When I was ten I thought twenty was old. Seriously. I thought that by twenty years of age I’d have my house, and my husband, and my dog. I certainly didn’t think I’d still need money lessons. Now I’m 24 and I’ve only recently had to buy a hoover. Not quite a house and a dog. But I am saving money. Enough to buy a house. So I’ve learnt my fair share of money lessons.
Your twenties have the potential to be the best years of your life. Whether you’re finishing uni and starting a new career, or you’ve worked your ass to the bone since high school and are now living a student loan debt-free life, you should have started to learn something about money. These are the nine money lessons you should learn in your twenties.
1. Make Saving Money Automatic
It’s easy to say you will save money. It’s even easier if you’ve made it automatic. This money lesson is usually learned by people trying to reach a savings goal. I have friends who needed £7,000 to go travelling. And I have friends who needed £1,700 to buy a new car. Either way, if you haven’t found yourself in that position, you should consider setting up a standing order into your savings account.
They say you should save 10% of what you earn, and some employers will happily do the split for you – paying a percentage of your salary into an alternative account. This makes it easier because you don’t see the money come in and go out. Get yourself a savings account, and set up a standing order so that you can be sure money will keep trickling in.
2. Negotiate. Everything.
We all know someone who tried to leave there insurance/energy/TV/wifi contracts, but was offered a really good price to stay… so why don’t we all do it. I’ll admit I’m awful at this. I haven’t negotiated my car insurance ever, and pay significantly more than my friends. Use price comparison sites to research the best prices, then phone your supplier to tell them that you’re leaving because you’ve received a better quote. Watch them squirm. And then watch them knock hundreds of pounds off your bill.
This can work in shops as well. You’ll have seen the price comparison promise in some supermarkets. But often, if you tell a shop that you’ve found the product cheaper elsewhere then they will try and match the price (or at least throw in some freebies). This is particularly common in electrical shops, but I’ve heard stories from all over. Be brave and negotiate a better price. Your thirty-year-old self will thank you.
3. Saving Vs. Investing
So saving automatically was the first money lesson, but there has to come to a point where you realise you’re savings are doing nothing sitting in a savings account. Learn to invest. There are several ways you can invest risk-free. Your bank will offer ISA’s and Bonds that will grow your money pot over the years that you leave it in there. The banks basically take your money and invest in themselves, eventually giving you back your full sum plus a percentage of the interest they have earnt. Obviously, if you’re brave enough to dabble in stocks and shares yourself then do it. That’s how people get rich overnight. Having a substantial amount of money in a savings account is a lazy way to lose money.
4. Credit Scores, and How to Improve Them
Get a credit card. If you’re mentally stable enough. You need a good credit score to do basically anything now. And owning, using, and paying off a credit card is the quickest way to improve your credit score. This money lesson is a given.
We’re bombarded with adverts on the TV, and it’s something we’ve heard our parents talk about all our lives. Unfortunately, your twenties is the time to tackle this. Before it’s too late.
5. Rule of Three
You didn’t think you’d get through these money lessons without me telling you to spend less, did you? If you can’t afford to buy something three times, then you probably shouldn’t buy it. Your twenties are the time to learn to budget. Gone are the days that you spend the last £40 you have to your name on a new mascara and a meal out. It’s time to adult. And it’s time to learn to budget. Some people use the thirty-day rule. Basically, if you want something try waiting thirty days until you go back and buy it. Chances are you’ll have forgotten. But I prefer the rule of three, it’s much easier to work out on the spot.
6. Safety Net
Saving money isn’t just so that you can buy a more expensive car, travel the world, or buy a house. You need to make sure you have a safety net, because (as your twenties will teach you) you have to expect the unexpected. This should be the equivalent to three months salary. That gives you three months to get your life back on track if you get let go from work. Or three months to pull your socks up and decide to quit your job and start your own business. Having a safety net is the most valuable money lesson you can learn in your twenties. You’ll sleep better knowing that you’ve got that option.
7. It’s Easy to Increase your Income
Don’t be afraid to ask for a pay rise. The worst thing that can happen is your boss says no. And if she/he says no? Go and find a new job that will reward you for your hard work with a higher salary. There are other ways to improve your income though. Side hustles can earn you up to £1,000 a month if you put the hours in. But then you are spending your evenings completing online surveys, which isn’t ideal in your twenties. If you want to be financially independent, it starts with that talk you have with your boss. How much do you think you’re worth? More than you earn, I know that.
8. Memories Vs. Material Goods
When you blow out thirty candles on a birthday cake, do you want to see a pile of money, a pile of stuff, or a pile of photos and memories? I know what I would prefer. Learn to spend your money wisely, and you’ll unlock the secret to buying happiness. You can save money by cutting out the useless material goods you were addicted to in your teens. And you can choose to spend that money on making memories or save that money for your future. Money lessons don’t work for everyone. Saving is important but I would encourage you to use your twenties to make memories, on a budget, of course.
9. Quality Vs. Quantity
Finally, throw away that £5 saucepan you bought for your uni house that has black paint chipping off in your dinner. It’s time to spend a bit of money, in the right places. The quality Vs. quantity argument dates back to my gran’s age. For some reason, as reckless teenagers, we just want to buy as much cheap stuff as possible. Look at how successful Primark is in the UK. Your twenties are the time to kick this habit. You only need one coat, if it’s a good coat. Same goes for most things. Spend a bit of money to avoid spending a lot of money on a ton of rubbish. Kitchenware, clothing, electronics, and car care are the places you need to start.
Knowing how to earn, save, and manage your money is key to living a financially independent and secure life. The real money lesson is learning how to enjoy your money, whilst still keeping that safety net there for emergencies. Go an buy that latte. I won’t judge. Just make sure you can afford three of them.