The ages between 20 and 30 are busy and full of changes. Many have just moved into their twenties and have the opportunity to start their studies, graduate and enter working life. Young people tend to be carefree about using money, and having fun is more than just thinking about money.
Even though life had been full of exciting adventures in my early twenties, many who had already passed their busy stages wish they could have acted more sensibly when it comes to money matters. We have put together the most common mistakes that people under the age of 30 make in their financial matters. By avoiding these mistakes, having fun is even more fun!
Typical financial mistakes of young people
Forget about saving
As boring as it may sound, saving money is important. Whether you are saving for a bad day or investing in your own wealth, after compulsory spending, it is worthwhile to put money into savings. The money left after saving can be freely used for fun.
The first saving should be a buffer fund for a bad day, where you can finance unexpected expenses without resorting to loan money. For an emergency fund of less than thirty, an amount equivalent to two or three months’ expenditure is sufficient.
Once the buffer fund has been saved, it is worthwhile to start thinking about how to increase your own wealth. One chooses a home investment, another one a stock investment. As wealth begins to increase, it is also worth investing some of your money in retirement. Although retirement days seem like a distant idea in the early twenties, it is a good idea to start retirement savings as early as possible to enjoy the interest rate phenomenon.
Saving and investing in student income may not always be successful, but as soon as you get a job, it is worthwhile to start saving and investing for your own future. Even a small income can save you, as a few dozen saving a month is beneficial for a long run.
Not planning for the future
It is worth setting long-term goals for your own economy. In a way, setting goals is linked to saving. It’s worth thinking about what kind of financial situation you want to be in five years’ time and thinking about how to reach that goal. Setting specific goals motivates you to work towards that goal better than the vague idea that it would be nice to have money. However, it is worth setting a realistic target. Becoming a millionaire in five years is a rare success, and it is more comfortable working toward a realistic goal.
Do not compare banking products
Many in their early twenties get their first credit card, and some also get borrowing at this point in their lives. Comparing banking products may seem tedious and time consuming, but in the long run it is worthwhile. For example, many may be ignorant of choosing their bank’s basic credit card when they do not know better, but in practice, a basic credit card is rarely the best choice because there are also credit cards that can accrue numerous monetary benefits from reward points to travel insurance.
When it comes to loans, it is a good idea to consider borrowing long and carefully, but if the situation really requires borrowing money, you should compare the loans and compete. Don’t settle for the first upcoming loan offer as there are huge differences in the total cost of the loan. In addition to the comparison, it is important to make a realistic repayment plan before you take out a loan so that you are able to scale the loan size and loan term.
In addition to credit cards and loans, banking services in general are worth competing for. There are differences in service charges between banks, and interest rates on savings accounts also fluctuate widely between banks. Why would anyone keep their money in a savings account with a 0.05% interest rate while there are savings accounts in the market with interest rates rising up to 1.75%?