Home > Personal Finance > What I Wish I Had Known About Money When I Was 21

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At 21, young people have all the financial responsibilities of adults…without much experience managing them. So we asked some of your elders (via Facebook and Twitter) what they wish they’d known earlier — or the best advice they’d been given.

Many pointed out that in young adulthood, time is on your side. You may not have much money, but if you put some aside, it has lots of time to grow — and the money you put aside now will have a huge effect on the amount you have when you retire. (And yes, I know how hard it is to think about retirement when you are just beginning your career.) But save — save as much as you can. There will always be killer deals and other temptations, but the money you can save now will be incredibly valuable — whether you are saving it for retirement or for a trip you’ll never forget.

Time is on your side in another way, too. You have time to travel, to decide what’s important to you, to pick a life partner (or not) and to decide where to live. Chances are, you have lots of years ahead of you. You don’t have to rush other life decisions (though getting started on saving is crucial).

How to Save It

Savings tips from Twitter and Facebook included:

  • Learn to cook. It’s easier to save money when you pack lunches and can make tasty and nutritious foods yourself.
  • From financial columnist and author Kathy Kristof: “Start saving young. Even though you think you’re too poor, your financial obligations only increase as you age. And by starting young, you let compound interest do most of the work for you. Consider….if you saved $250 a month starting at age 25, when you’re 65, you would have $1,581,000 (and change). The total amount that you saved was $120,000. If you wait until you’re age 35, your nest egg will be one-third as large — $565,000. In fact, if you save from 25 to 35, you could stop saving completely and still be better off than the person who started at 35 and saved for the rest of their career. That’s compound interest for you….Einstein reportedly called it the most powerful force in the universe.”
  • Putting something aside in your 20s can help keep you from panicking about retirement in your 40s.
  • Live with roommates — and don’t get a car unless you live in a city that absolutely demands it. In that case, drive a beater (hopefully one you paid for with cash). That old car will likely have far lower insurance premiums than a newer model, too.
  • “Start a savings account and pay yourself first. Look up your checking balance every couple days.”

Where to Spend Money

If you’ve economized where you can, hopefully you have some money you can spend. And despite everything we’re telling you about saving, it’s also important to think about how to spend your time and money, even when you have plenty of the former and not so much of the latter. Know what is most important to you, and don’t be afraid to spend money on the things that are!

In fact, travel came up a lot in the financial advice for 21-year-olds. When you’re young, you’re more likely to happily enjoy some of the cheapest options available (less-than-luxurious accommodations, unpopular flights, short-term jobs). And you may be able to fit all your worldly goods in a car trunk or trailer. Done right, travel is not necessarily expensive. It might even cause you to reconsider some of the things you thought you “needed” for a comfortable lifestyle. I regret not traveling more when I was younger. (But as one man noted, it’s not as if you can’t start seeing the world later — it will likely be a bit more complex to arrange it, though.)


If you’ve not had a credit card in your own name before, now’s the time to do that, assuming you have an income. And though the credit card “limit” logically seems like the amount you can spend, if your balance is more than 30% of your limit, your credit scores are likely to suffer. (Keeping it to 10% or less is even better.)

Before you apply for a card, though, be almost certain you will qualify for it. Some cards require high credit scores, and some are geared toward people who do not have them. (The ones judged more creditworthy generally get better terms.) But anytime you apply, it counts as a “hard inquiry,” and that reduces your score just a little for a short time. You can buy scores or get them for free online from Credit.com. Checking your score monthly can give you an idea of where you stand and suggestions for how to improve your scores. Your credit scores come from proprietary formulas using the information in your credit reports — and you can get a look at those for free once a year from each of the three credit bureaus. It’s important to make sure the information on these reports is accurate and to dispute it if it’s not. Checking credit reports is a smart financial habit — develop it while you’re young.

The credit advice from your elders:

  • Don’t charge anything that will be gone when the bill arrives — dinners out, concert tickets, etc. (Yes, we know about rewards cards, but if you’re new at handling your finances independently, it’s smart to establish the habit of paying the balance in full every month before applying for a card that incentivizes spending.)
  • “Make keeping your credit healthy as big of a priority as keeping your body healthy. With a few exceptions, if you can’t pay cash for it, you probably don’t need it that bad.” (We would add that keeping your body healthy can also be good for your finances, with lower insurance rates and health care costs.)
  • “Beware of anyone who is quick to tell you, ‘You can afford the payments, and I know people that can finance almost anyone.'”
  • “Find a banker to explain how loans work. Stay out of debt as long as you can.”
  • “Learn something about auto financing before you are in a dealership buying your first car.”

Have a Plan

You need a budget. No one likes the b-word, so think of it as a spending plan. It’s your road map to those travel adventures and to financial comfort in your old age. If you have never made one, there’s lots of advice online, as well as books and classes to help you learn. If you have a life partner, make sure the two of you are on the same page.

Also know that you will have to make choices and trade-offs. You may be able to do all the things that are important to you, but you probably can’t do them all at the same time.

A couple of observations from people who aren’t 21 anymore:

  • “If you marry and have children really early, you could end up living with your in-laws in your 30s while you finish school.”
  • “Think about where you get your first or second job because you may end up living there forever.”

And last, a couple of warnings — don’t even think of buying a house unless you are pretty sure you’ll want to stay put for at least five years, and don’t spend too much on happy hour or at casinos. (Remember that budget?)

Enjoy — you’re learning about yourself, the world and your finances. Accept that you’ll learn some of it by making mistakes. And before you know it, you’ll be past 25 and offering your own sage advice.

Contributing: Bev O’Shea

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