During the rollercoaster ride of our 20s, financial stability often takes a backseat to experiences and adventures. However, Vivian Tu, popularly known as “Your Rich BFF,” emphasizes the importance of hitting key financial milestones during this defining decade.
During a recent video message, Tu offers her advice. Here are the five money milestones she says everyone should reach in their 20s.
1. Open the Right Bank Accounts
You might have a bank account from your high school days, but is it the right one? Banks often entice students with goodies, but it’s crucial to see beyond the freebies. Your money isn’t just sitting there – it’s effectively a loan to the bank. So, why not earn from it? Tu recommends opting for a high-yield checking and savings account. One of Tu’s top choices? SoFi, an FDIC-insured platform that offers interest rates way above the national average, ensuring your money works for you.
2. Get Your First Credit Card
Tu believes it’s important to have a credit card so that you can establish a credit history. But with myriad options out there, which one do you choose? Tu stresses the importance of starting small, especially if you have little to no credit history. Consider secured credit cards, like the Discover it Secured. After building a credit foundation, you can venture into cards with more perks and benefits.
3. Create Your First Real Budget
Acquiring a credit card doesn’t mean an unlimited shopping spree. It’s vital to manage your finances. Tu recommends the 50-30-20 method. Fifty percent of your after-tax income should go to necessities, 30% to luxuries, and 20% to savings. Customize it according to your lifestyle and earnings, but always aim to save more.
4. Pay Your Own Rent
Living on your own is a significant rite of passage in your 20s. When doing so, ensure you get your security deposit back and leverage your timely rent payments to boost your credit score. Platforms like creditmyrent.com or rentalreporters.com can report your on-time payments, potentially improving your credit score.
5. Start Investing
Your 20s are the perfect time to start your investment journey. The magic of compound interest means the earlier you start, the richer the rewards. For beginners, Tu recommends a Roth IRA and buying a target date retirement fund.
Starting Your Financial Journey
While each person’s 20s will be unique based on individual circumstances and priorities, building a stable financial future should be a universal goal. Even if you haven’t reached all these milestones yet, it’s never too late to start. As Tu says, every effort you make today in managing your personal finances brings you a step closer to a prosperous tomorrow.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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