5 Savings Mistakes I Made In My 20s (And How To Avoid Them)

Most people make plenty of savings mistakes in their early 20s

Financial or savings mistakes made in your 20s could impact you later in life. Key points Most people make plenty of mistakes in their early adult years — especially financial mistakes. Financial blunders like only saving the bare minimum and keeping too much extra money in your checking account could cost you money.

No matter what season of life you’re in, it’s a constant learning experience. During my 20s, I learned a lot — by making plenty of errors. At that point in my life, I had some general knowledge regarding financial matters, but I didn’t always make the best financial choices. Learn from my savings mistakes, so you can take steps to avoid them.

1. Saving the bare minimum

I’ve always been a saver. Luckily, I established this habit early in my life. In my 20s, I saved some of my income for emergencies. However, I didn’t save as much as I could have — so I wasn’t always financially prepared when the unexpected happened.

My income was lower at this stage of my life, so my savings potential was limited, but I wish I had cut out some of my unnecessary expenses and made saving more of a priority. I’ve never been a big shopper, but I could have spent less money dining and going out with friends and put more into savings.

If you’re still in your 20s, have fun and spend money on yourself — but don’t have so much fun that you neglect your savings goals.

2. Not automating my savings contributions

While I saved some money in my 20s, I didn’t do so regularly.

If I had automated my savings, I would have been more consistent. If I had committed to saving a small amount of money each week through automatic transfers, I likely would have saved more.

In my 30s, automatic savings are a must. I feel less stressed knowing that my savings are a priority. By automating the process, I never forget to save or make excuses, and it’s fun watching my savings account balance grow consistently.

3. Keeping too much money in my checking account

Another savings mistake I made was keeping too much money in my checking account. I was never the girl with only $2.75 left in her account the day before payday — even when money was tight.

I felt safer keeping more money than necessary in my checking account. But I missed out on the opportunity to earn more interest by transferring some of that extra money to my savings account.

It’s a good idea to keep some extra money in your checking account as a buffer — but don’t get into the habit of stockpiling all of your savings there.

4. Letting credit card debt pile up

Credit cards come with great responsibility. When used appropriately, it can be a tool to build a credit report and help you obtain loans in the future. When used irresponsibly, it can harm your credit, cost you money on the interest you could have otherwise avoided, create problems for obtaining future credit, and more. The biggest savings mistake young adults make with credit is letting debt accumulate. When debt is not managed, it becomes harder to reach other financial goals.

One important signifier that you’re accumulating too much debt is not being able to pay your balance in full at the end of the month. Don’t think of credit as something you will deal with later. Focus on using credit only to buy what you can afford and live within your means. Budgeting and planning will once again be essential in helping you make responsible choices that will help you establish good credit.

5. Not paying attention to APY

In my early 20s, I understood the importance of having a separate savings account, but I didn’t pay much attention to the annual percentage yield (APY) offered. I opened an account at my local bank because it was simple, and I kept that account for several years without knowing that it is a savings mistake.

Luckily, I paid more attention to APYs and opened a different savings account in my late 20s. If I had done so sooner, I would have earned more interest from my savings contributions and had an even bigger emergency fund available.

Pay attention to the APY as you compare bank and account options. High-yield savings accounts can help you maximize the interest that you earn.

We all make mistakes — it’s part of being human. But by learning from others’ mistakes (like mine), you can set yourself up for better financial success.

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