Financial mistakes made in your twenties could impact you later in life.
- Most people make a lot of mistakes early in their adult life, especially financial mistakes.
- Financial blunders like saving the bare minimum and keeping too much extra money in your checking account could cost you money.
Whatever season of life you find yourself in, it’s a constant learning experience. During my 20s, I learned a lot – making a lot of mistakes. At that point in my life, I had general financial knowledge, but I didn’t always make the best financial choices. Learn from my savings mistakes, so you can take steps to avoid them.
1. Save the bare minimum
I have always been a saver. Fortunately, I established this habit early in my life. In my twenties, I saved some of my income for emergencies. However, I didn’t save as much as I could have – so I wasn’t always financially prepared when the unexpected happened.
My income was lower at this stage of my life, so my savings potential was limited, but I would have liked to cut out some of my unnecessary expenses and make saving a priority. I was never a big shopper, but I could have spent less on eating out and hanging out with friends and saved more.
If you’re still in your 20s, have fun and spend money on yourself, but don’t have so much fun that you neglect your savings goals.
2. Not automating my savings contributions
While I was saving money in my twenties, I didn’t do it regularly.
If I had automated my savings, I would have been more consistent. If I had committed to saving a small amount of money each week through direct deposit, I probably would have saved more.
In my thirties, automatic savings is a must. I feel less stressed knowing my savings are a priority. By automating the process, I never forget to save or make excuses, and it’s fun to watch my savings account balance keep growing.
3. Keeping too much money in my checking account
Another mistake I made was keeping too much money in my checking account. I’ve never been the girl who only had $2.75 left in her account the day before payday – even when money was tight.
I felt safer keeping more money than necessary in my checking account. But I missed the opportunity to earn more interest by transferring some of that extra money to my savings account.
It’s a good idea to keep extra money in your checking account as a buffer, but don’t make a habit of storing all your savings there.
4. Not paying attention to APY
In my early twenties, I realized the importance of having a separate savings account, but didn’t pay much attention to the annual percentage yield (APY) offered. I opened an account in my local bank because it was easy, and I kept this account for several years.
Fortunately, I paid more attention to APYs and opened a different savings account in my late twenties. If I had done this sooner, I would have earned more interest on my savings contributions and had an even bigger emergency fund.
Pay attention to the APY when comparing bank and account options. High yield savings accounts can help you maximize the interest you earn.
We all make mistakes – it’s part of being human. But by learning from the mistakes of others (like mine), you can set yourself up for greater financial success.
Check out our personal finance resources if you’re looking for tips on making the best money moves.
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