5 Financial Mistakes People Commonly Make In Their 20s

Graduations are surely a time to celebrate, but for many, it is also a time of uncertainty. For many graduating students, it means it’s time to step into the working world, and time to repay those study loans. From looking for their first job, to learning how the various bank accounts work, becoming financially independent can be daunting.

Yet, having basic knowledge on how to save and manage one’s finances is an essential skill to have once you enter your 20s. By starting right, you can avoid making bigger mistakes and bigger losses further down the road. To help you start on the right foot, here are some of the most common financial mistakes people make in their 20s – so you won’t have to make the same ones.

1. Failing to save for the future

In their 20s, many may still be thinking of living a life of fun and freedom. In Singapore, especially, it is easy to rely on one’s parents for a home and utilities until one gets married. However, it is too late to start thinking about saving for a home only when you begin to plan for marriage. Even if you have no plans to get married, saving up for costly purchases like a home or car should start early. That’s because it takes time to save up for these things, and you don’t want to be hindered by a lack of finances when these items become a need rather than a want.

2. Living beyond your means

Finding your first job is exciting, because it finally feels like you have your own money to spend. Many make the mistake of spending a bulk of their salary on entertainment and leisure, because it’s something they can now ‘easily’ afford. Those insta-worthy cafe brunches and late nights at the bar can easily dig a deep hole into your pockets. While your paycheck may look abundant on paper, what you might not realise are the countless other things it has to pay for – transport, meals, and bills, amongst others.

3. Not learning how to invest

Having a salary and seeing your bank account grow is one of the most satisfying things about entering the workforce. However, many fail to maximise the potential of their income, and simply leave it all in the bank for their spending or saving. Instead, learning how to invest can be one of the best things you do for your financial health. You don’t have to dabble in risky stocks or be an expert – it could be as simple as selecting the savings plan with highest interest rates, or starting with some small investments.

4. Letting debts accumulate

Many people take out bank loans or personal loans for things like education, a home, or a car. While there’s nothing wrong with this, it is crucial to choose these debts closely and make sure you have the ability to service them in time. One of the most dangerous debts to fall into is credit card debt, as its interest rate can compound very quickly. If you are already servicing a debt, you’ll have to think twice about taking up more loans. Above all, conscientious budgeting and spending is of paramount importance.

5. Going without insurance

People in their 20s are typically at the prime of their health and focused on building their lives. But life is unpredictable, and sudden illnesses, accidents, or disasters can strike anyone. Those who have been struck by unfortunate incidents will say that insurance really makes a world of difference. Failing to get covered by proper insurance plans will mean being caught ill-prepared financially when you need it the most for an urgent medical bill or car repairs. Instead, it is best to begin insurance early, as the premiums are usually lower the sooner you start.

If you are entering your 20s, this guide hopefully gives you a clearer roadmap for your financial decisions down the road. Yet, it is normal to make mistakes, even if you are already in the thick of your 20s, or past this age altogether. While long-term financial planning and healthy financial habits is crucial, there are also plenty of loans like personal loans or payday loans you can turn to for a quick hand to tide over some crises in the short-term – just be sure to borrow wisely, and only from licensed moneylenders!

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