5 Mistakes to Avoid: Tips on Saving Money in Your 20s

College days, first job – your 20s can be the beginning of many adventures. Because this can be a busy decade, it might be tempting to postpone long-term financial plans. But the strategies you put in place now can create habits that will not only help you by saving money in your 20s, but for years to come. Here are five money-saving mistakes people in their 20s tend to make.

Mistake 1: Passing up 401k matches Planning for retirement is one of the biggest challenges facing young earners. You just started working, after all, so why would you begin tucking money away for 40 years in the future? But if you skip the contributions to a 401k, you may be giving up on employer matching funds, which means you’re turning down free money.

Even if your job doesn’t offer a match, you still need to establish retirement savings. Now is the time to start planning for retirement. The sooner you start, the more savings you’ll build up through contributions and dividends.

Mistake 2: Being too conservative regarding investment risk Your company’s retirement plan may allow you to choose your investment mix, and now’s the time to be aggressive, advises Keli Wragge, Vice President, Operations West, at SAC Federal Credit Union. “When you are young, that’s when to diversify a portfolio,” she says. “You can take bigger risks because of the longevity of the investments.”

Mistake 3: Misusing credit cards (or avoiding them) People in their 20s have the lowest credit scores of any age group and tend to carry significant debt according to credit reporting bureau Experian. It can be tempting to secure multiple cards and run up balances with a mix of everyday necessities and splurges. On the other hand, some young people make the mistake of avoiding credit cards altogether – missing out on the chance to build good credit – while others miss payments and hurt their credit scores for years to come.

Strike a better balance by using one card, and charging only what you can pay off every month. That establishes good habits and sends your credit score upward.

Mistake 4: Having a short-term job view “If you are looking to be promoted, be a solid understudy,” says Wragge. “Be effective at the roles and responsibilities in the position you desire.” Taking the time now to build the next few rungs in your career ladder will lead to a higher salary, probably faster than you might think.

Mistake 5: Not negotiating your salary When you do get hired or promoted, know the market rate for your position and don’t be afraid to negotiate, Wragge suggests. “If an offer has been given that’s below your expectations, it’s acceptable to make a reasonable counter for more.”

When taking on the big and small adventures of your 20s, set aside some time to think about the decades ahead when it comes to financial health – your future self will thank you.

What financial mistakes have you seen people making in their 20s? Share them in the comments below.

Learn more about building a solid financial foundation by downloading the free e-book Financial Basics Made Easy.