5 Essential Financial Tips for Young Adults

Nina Takona

Nina Takona

Published on: 01 February, 2023

Young Adult

Many of us grew up in households that didn't talk much about how to manage money. Schools weren’t required to teach us personal finance, money never came up when hanging out with friends, and some of our parents didn’t know much about how to have healthy finances either. This lack of financial education has left a good deal of young people unprepared to be financially independent. 

So you’re probably here because you want to improve your financial literacy. Learning more about personal finance is the first step to taking charge of and bettering your financial future.

There are many ways to improve your finances, but when it comes to being young and ambitious, here are the 5 most essential financial tips that will help you start that journey on the right foot.

1. Start saving now

Let me in on a little secret. According to Insurance News, over 70% of Americans regret not saving more for retirement…seventy percent! Savings accounts, investments, emergency funds, and more have helped people for ages get out of precarious financial situations. And when it comes to retirement having a little extra in the bank makes it so much easier to enjoy those impromptu vacations.

Think about the last time you found a $5 bill in an old coat pocket. Weren’t you excited? You probably thought about what you could spend it on. But what if that same feeling could be experienced by saving it? 🤔

Ironically enough, you can experience that same excitement when you save money for the future. How? Well experiencing that joy may come as instantaneously as finding money in your coat pocket, but when life happens, or you are in the mood to treat yourself, you can dip into your savings account and find more than just a $5 bill tucked away.

Saving money can be as simple as opening a high-interest or high-yield savings account that doesn’t have any monthly fees and setting up an auto-deposit system with your bank account to help you reach your savings goals. And if you’re feeling like you want a little extra boost in your savings, financial advisors suggest putting your parked cash in a certificate of deposit or money market account to increase growth via compound interest.

💡 Tip: As of Jan 2023, PayPal, Ally, and SoFi all offer high-interest savings accounts above 3% APY.

Create a rainy day fund ☔

Apart from your regular savings account, it’s wise to open an emergency savings account. Most accounts set aside for emergencies will limit you to withdrawing from it - typically once or twice per month or year. It should be used purely as an emergency fund! Wanting to take advantage of a 90% off sale or a take luxury vacation is not an emergency.

An emergency is an urgent, unexpected expense. A robust savings account can supplement your income in the event of job loss or a health emergency.

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Plan for your retirement now

Ask any retired person and they’ll tell you that Social Security retirement benefits are never enough

To qualify for Social Security benefits, the Social Security Administration (SSA) requires you to have worked for at least 10 years. When you retire, the SSA will calculate the average of the 35 highest earning years of your life to determine how much you’ll receive per month.

According to the SSA, in 2023, the maximum possible amount awarded to you at retirement is $4,555 per month - and that’s only if you retire at 70 years old and meet certain income requirements. Most retirees receive around $1,500 per month, which isn’t enough money, given the average cost of living in America. 

So, you might ask, what can I do to avoid this unfortunate future? Well, do yourself a favor and start making retirement plans now! 

A simple step toward preparing for retirement early would be to open and fund your own retirement account. Opening up an Individual Retirement Account (IRA) allows you to save up to $6,500 a year (as of 2023), which is roughly $500 per month. Another option for you might be to add money to your employer’s retirement savings plan. In the US, most companies have employer-sponsored retirement options that you can contribute to via what’s called a 401(k). Company-sponsored retirement plans often match your contribution and even let you add in pre-tax dollars, allowing you to save more compared to doing it on your own. 

2. Start budgeting

If you’ve read this far, you probably guessed this would come eventually. It's time to talk about the B-word.


Many of us avoid looking at our bank account balance. Thoughts like, “If I don't see the charge on my card, then it didn't happen. Right?” or “I bet it wasn’t that much money I spent in the grand scheme of things”. Well ironically enough, in hindsight, those questions and those thoughts have never served me well, and won’t serve you well either.

When budgeting, it’s best to think about your expenses through the lens of a framework. 🤓

50/30/20 Rule

The 50/30/20 rule is a widely used budgeting framework. It suggests that 50% of your net monthly income should go toward your needs, 30% to your wants, and 20% toward your savings and debt repayment. 

80/20 Rule

The 80/20 rule is another percentage-based budgeting framework. Simply save 20% of your net monthly paycheck, and use the remaining 80% for your needs and wants.

0 Based Budgeting

Zero-based budgeting encourages you to allocate every dollar you earn to a specific purpose. It sounds intimidating, but it's super achievable! 


With all these different ways of budgeting, it's important to find a method that works for you. Your monthly needs may cost more than 50% of your income, making the 50/30/20 rule hard to implement, so it might be best to avoid this framework. Or, the 80/20 rule might not be ideal for you because you prefer a budget with more structure, and uniformity for each paycheck. 

No one budgeting framework is better than the other. Stick with the one that supports your short and long-term goals. Whatever framework helps you stay on track for your financial goals is the right plan for you!

3. Use credit wisely

Personally speaking, the best two pieces of advice I ever received about using credit are: 

  1. Only borrow money if you can pay it back within a week (if you won’t have it don’t ask for it).
  2. Don’t take out loans for leisure spending. 

When you’re young, it’s easy to overspend and accrue credit card debt - oftentimes because you assume you can just pay it back later. However, if you aren’t careful, debts like these if not attended to, can become unmanageable and may ultimately leave a scar on your credit history.

Opening multiple cards, going above your credit utilization, and missing payments will reflect negatively on your credit report. It might not seem like a big deal now, but it will come back to haunt you when you want to move into a nicer apartment, take out a mortgage, or get lower interest rates on an auto loan.

Credit scores typically range from 300 to 850. Many lenders consider scores of 670 and above as good credit. Ask yourself, where do you fall?

Credit bureaus calculate credit scores based on 5 factors: 

  • Payment history (35% of your score)
  • Amounts owed (30%)
  • Length of credit (15%)
  • Credit mix (10%)
  • New credit (10%)

You can always order your credit report from any of the three major bureaus (TransUnion, Equifax, or Experian) to get detailed insight into what’s negatively affecting your score.

Here are some proven methods to increase your score:

  • Pay off balances on your cards before a statement is due
  • Set up automatic payments with your creditors so you never miss a payment
  • Spend less than 30% of your combined credit limit
  • Consider applying for a secured credit card
  • Prioritize paying off maxed-out cards
  • Use credit for small purchases (e.g. coffee, lunch, gas) since it will be easier to pay them off
  • Don’t close unused cards
  • Limit hard inquiries if unnecessary
  • and more!

Assuming you have a stable income and aren’t deep in debt, it’s relatively easy to raise your credit score. You’ll see results within a few months of following some of the tips above (not financial advice).

✍️ Bonus Note: If traditional credit is not an option for you, don’t forget you always have your loved ones to turn to for help. Although sometimes awkward, funny enough, asking for money from your parents is the most common type of loan that exists! So if times get tough, and you do need some form of credit, ask for some help from your loved ones. We’ve written a whole guide on how to have that conversation with your friends or family comfortably when the time comes.

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4. Invest early

You’ve probably heard the phrase, “you should invest your money”. Investing money well can do a lot of good things for your financial health! Making the right investments can make you rich, accrue more gains than keeping money in a savings account, and potentially save you money when filing taxes.

Despite knowing this, a lot of people still don’t invest their money. But here's the thing: the best way to learn about investing is to just do it. 

If you’re curious about how investing works, feel free to just jump right in. Browse through Investopedia, to learn about all the ins and outs of investing jargon. Download a stock trading app like Robinhood and play around investing in or learning about companies you know about in your day-to-day life. From there, if you want to get more complex, begin to assess your risk appetite. Is it conservative, meaning you never want to gain money too fast at the risk of losing more money than you are comfortable with? Or are you a high-risk investor, meaning you are willing to put it all on the line for life-changing gains in wealth?

If you’re overwhelmed or uncomfortable by the thought of investing, first know that you are not alone, and then second, simply start by only dipping your toes in the water. Learn about how markets work and try out trades on a stock simulator. There's plenty out there, like this one from Investopedia or this one from WeBull. The simulator will give you fake virtual money to practice trading with. It works just like a real market, sans the real profits.

And if trading individual stocks aren’t your vibe, you can also invest in a mutual fund and give a fund manager the authority to build an investment portfolio on your behalf via best money management practices. Mutual funds are usually low-cost, low-maintenance, diversified trading options for you but you’ll need to do your research to understand what fund might suit your needs. 

💡 Bonus Tip: If you don’t necessarily have the money to invest, and can’t see yourself buying full shares in companies like Apple, Nike, or McDonald’s, alternatively, you can invest in what’s called fractional shares. This means that instead of buying an entire share, you can buy a fraction of it. You can start trading with as little as $5 or put it in any dollar amount you want. We should note that investing via fractional shares probably won’t make you wealthy. Additionally, fractional shares are not as easy to liquidate as full shares. 

Advice and Planning

5. Beware of bad advice

There’s a plethora of financial advice out there. Your parents, friends, and social media will all have financial tips, some of which will be good; others not so good. 

You might glean advice from YouTube, your classmates, a celebrity you look up to, your neighbors, TikTok, or even this article. You might already know a lot about your finances but want to learn more about the things that your parents weren’t able to teach you.

Advice will come in many shapes and forms, but it’s ultimately up to you to determine which tips to integrate best into your financial planning.

The bottom line

If you take away anything from this article, it’s this: the best financial advice for any young adult is to plan. 

Planning is honestly the secret to pretty much all self-made financial success. Young people will benefit from opening a high-interest savings account, emergency savings account, and retirement accounts, but also budgeting, investing, and learning will be keys to succeeding in your financial journey.

As a young adult, it’s important to take control of your own financial life! 

Get rid of bad spending habits by creating a monthly budget, and put away a few dollars every week toward your retirement. Don’t make extravagant purchases on credit if you can’t afford to. Use your debit card or cash for purchases if you are wary of the negative effect of compound interest with credit cards or predatory loans. These are just a few tips to get you started on your journey. Remember, it will take time and a lot of self-control to stay on track toward achieving your financial goals but it will be worth it. 😄

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About the author

About the Author

Nina Takona


Nina Takona is a financial and business journalist based in Seattle. She holds a Bachelor of Arts degree in Communications and Media from Daystar University and a Master of Arts in International Relations from United States International University. She has written for numerous sources on the topic of business and personal growth; she has extensive experience in the financial services industry. Nina is passionate about helping readers make smart financial decisions and uses Pigeon to share her knowledge and insights.