5 Money Milestones To Work On in Your 20s, According to Michela Allocca

RyanJLane / Getty Images

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

In your 20s, building a strong financial foundation can feel daunting — and it might even be the furthest thing from your priorities. Thankfully, it doesn’t have to be overwhelming and can be broken down into manageable, very digestible steps that can be tackled one at a time.

By this stage, you likely have the basics down already — understanding debit and credit, saving money, and creating a budget. But this decade is more than just knowing the financial ABCs; it’s a crucial time for setting the groundwork for lasting financial success. 

Michela Allocca, founder of Break Your Budget, recently shared an Instagram reel in which she highlighted five essential money milestones every 20-something should aim for to set themselves up for financial stability and growth before turning 30.

Here are five milestones to tackle in your 20s, according to Allocca. 

Save an Emergency Fund (Ages 22-24)

In your 20s, life can be filled with unpredictable twists and turns, as these years are often filled with travel, new career ventures and bigger life purchases. To give yourself a buffer should unexpected expenses arise, Allocca recommended setting aside three to six months’ worth of expenses in a high-yield savings account during your early 20s.

These “rainy day” funds are meant to tackle unexpected expenses you can’t plan for, protecting you from having to take on unnecessary debt and giving you peace of mind. According to research conducted by Empower, 21% of Americans don’t have any emergency savings, and 37% can’t afford a $400 emergency.

Start Retirement Contributions (Ages 22-26)

At 22, retirement probably feels like it’s light-years away. However, the key to building a hearty retirement fund is starting early and letting compound interest interest work its magic over time. 

According to Allocca, aim to add 1% to 3% of your annual income to a retirement account when you land your first job and grow from there, increasing the amount over time.

If you start saving for retirement in your 20s, you are already ahead of the game. Keep in mind, however, many financial experts recommend saving 10% to 15% of your annual income for retirement. Start small and incrementally increase your contribution percentage to get closer to this target before turning 30. While it may seem like a low priority now, your future self will thank you.

Boost Your Credit (Ages 25-27)

A decent credit score is essential for life’s big milestones — buying a house, financing a car or even renting an apartment. It can also help you secure better interest rates and show off your financial responsibility.

Building a good credit score doesn’t happen overnight, but by your mid-to-late 20s, aim for a credit score above 700, according to Allocca.

If your credit score is currently in the red zone, don’t panic. It’s never too late to turn things around. Establishing a solid credit score means practicing good habits over time. Pay your bills on time, minimize debt and practice responsible financial behavior. These habits will help you not only build a strong credit score but also establish a solid financial reputation that can open doors for future goals.

Add an Income Stream (Ages 26-28)

Thinking smarter — not harder — is key to building wealth in your 20s. By building another income stream, especially one with passive income potential, you can diversify your finances and build wealth at a faster pace.

Your late 20s are a great time to start thinking bigger and adding an income stream — whether it’s a part-time gig, a side hustle or even a business, Allocca advised. She recommended exploring your passions and choosing something you enjoy doing. After all, if you can make money doing something you love, why not? 

With fewer financial obligations and more flexibility to take on risks in your 20s, this is the perfect time to experiment with new ways of achieving financial stability. Options like real estate investments, freelancing, online courses and affiliate marketing are some popular avenues to start from, but pick something tailored to your interests and have fun with it.

Plus, side hustles are more common than you might think. According to a LendingTree survey, 55% of millennials and Gen Zers have one.

Invest Beyond Retirement (Ages 28-30)

The final milestone to tackle before 30 might surprise you. While investing is one of the most widely recommended ways to grow wealth, Allocca suggested holding off until your financial foundation is solid.

“Once you’ve paid down your debt, [and] are comfortable with your retirement contributions, this is an [opportunity] to invest BEYOND retirement through a brokerage account,” Allocca said.

Investments made in your 20s benefit from compounding growth, allowing your money to work for you over time. So it’s important to be intentional with your choices so you can reap the rewards later. For young investors, popular investment avenues include stocks, bonds and mutual funds. Stocks offer higher risk with potentially greater rewards, bonds provide low-risk stability, and mutual funds offer broad diversification and minimal oversight — making them an excellent choice for beginners. 

Share This Article: