Less than two years ago, it was reported by the BBC that 53% of young people in the UK between the ages of 22 and 29 were living with no savings put aside. This problem has also been reported in other countries and appears to be a new financial global trend amongst younger generations.
This is a worry because your 20s are a significant time to build up financial strength and a platform for a comfortable life. Without savings, younger generations are vulnerable to dips in the economy and job market. The end result could be parents picking up the pieces and offering support.
With that in mind, what financial goals should people in their 20s be aiming for?
Financial Milestones for 20-Somethings
#1: Become Financially Independent
Straight out of university it may be hard to stand on your own two feet while looking for a dream career. As soon as you do land a job, it is time to make an effort to quit the bank of mum and dad. By becoming financially independent, you start to learn the true value of money and start to be more conscious of spending and savings.
#2: Get (Close to) a Mortgage Deposit
Near the end of your 20s, you may be looking to buy a property, and this means you will need a considerable sum saved as a mortgage deposit. Even if you don’t plan on buying soon, starting to save for a mortgage is a long-term goal and a milestone you should work towards early, i.e. in your early to mid-20s.
#3: Build Your Credit Score
Your 20s is also the time where your mobile contract comes back into your name rather than your parents and you start taking ownership of bills and payments. This all comes with the benefit of building your credit score, ready for that house purchase or for financing a new car down the line.
#4: Pay Off Outstanding Debts
Some debts you will not likely pay off in your 20s, such a student debt. Other debts such as a loan you took out for a deserved holiday or a credit card to get you through a tricky period can be paid off. Most people should aim to be free from non-student debts by the time they hit 30.
#5: Improve Your Financial Literacy
You may have found finance and maths a boring topic at school, but that doesn’t mean you shouldn’t brush up on banking terms. Learn what interest rates are, what an ISA actually is and why you should use one to save, as well as your country’s tax system. All of these things will make you more aware of how to make the most of your money.
How to Achieve these Financial Milestones
These financial milestones don’t just happen overnight. There are different ways to make them happen, including:
- Comparing account options with different banks
- Being careful with your spending
- Making a budget that you can stick to
- Paying debts and bills on time
- Making a realistic savings goal each month
For more ways to achieve these five milestones, do your research and check out this guide from Wonga providing specific financial tips for 20-somethings for some further reading. With the right attitude and resources, you can be one of the young people escaping the financial vulnerability of limited savings!