Career & Education

5 financial habits to develop in your 20s

Sunday, April 22, 2018

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Your 20s are the ideal time to set yourself up for a solid financial future, and young people should not underestimate the importance of establishing good financial habits during this period.

“This is when you can build the foundation that you will be able to stand on during your 30s, 40s, 50s and beyond,” says Rose Miller, grants manager at the JN Foundation and head of the JN BeWi$e financial empowerment programme.

Here are five tips you can start with today to begin managing your money and establishing good financial habits in your 20s:


A budget is a plan for spending, saving and investing money to achieve one's financial goals.

“It is the first step towards achieving financial independence. And budgeting does not have to be complicated, simply begin with the 10-10-80 formula',” she advised.

The '10-10-80' formula recommends that: one saves ten per cent of their income; donate 10 per cent to charity or tithing; and allocate the remaining 80 per cent to all their other spending categories.

“This simple formula will help you save, spend within boundaries, and allows you to be generous as well,” Miller said.


Savings generally represent only one part of an individual's assets and, unlike investments, usually comes with minimal exposure to risk and the funds are more readily accessible.

“Aspire to set aside at least 10 per cent of your monthly income. Therefore, if you make $100,000 a month, put aside $10,000 in an account dedicated to saving,” she recommends.

On that note, she also recommends saving with an approved financial institution, as that ensures the safety of one's funds while providing a chance to earn interest.

“You should also bear in mind the fees that are associated with the account you choose. You want to research whether the financial institution charges a fee for using the ATM, and if there is a fee for making lodgments, making withdrawals, or a limit to the number of withdrawals you can make per month,” she points out, noting that, “all these fees add up over time, therefore, it is something you need to bear in mind.”

In tandem with that, Miller says savers should set short-, medium, and long-term goals, as this will help them to save towards achieving specific goals and help to instil the discipline to attain financial independence.


Investing is an important tool in wealth creation, and learning how to use this tool wisely, especially in one's 20s, is a vital step in the journey to financial independence.

“You can unleash the power of compound interest by starting to invest early. In fact, how much you save and invest can become more important than the size of your pay cheque,” Miller asserts.

With the money you earn as your tool and guide, Miller suggests dividing your goals into short-term and long-term buckets, and choosing investments that will help you to achieve them.

She advises, for example, that for short-term investment goals like saving for a car, one should consider conservative investments such as money market funds. And for long-term goals such as retirement, one may want to invest more aggressively, as you have time on your side to withstand the ups and downs of the stock market, she explains.


If your current employer does not provide a retirement scheme, make the effort and open a retirement account with an approved financial institution.

“Ensure you contribute at least 10 per cent of your monthly income to this account,” Miller recommends.

She notes that a retirement account should be considered a need, rather than a want.

“You should take this as seriously as you take any other bill, such as your rent or utilities,” she says.


Understanding finance may seem intimidating, but taking small steps in order to become comfortable with all aspects of finance goes a long way.

“Tune in to a weekly podcast or brush up on the business section of your favourite newspaper to become more informed about financial management,” she advises.

Miller also recommends reading at least one book per month about finance.




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