Young and Restless: Why money and saving it matters in your 20s

When was the last time a 20 year old cared about the future, more so as it relates to money, saving it and, heaven forbid, have a budget in mind if they’re finishing up college for example and embarking on the real world.

The truth is saving money and being financial smart with your cash starts before you even reach college, perhaps as young as when mom and dad doled out allowance on a weekly basis, and you had to make that five dollars last for the next two weeks.

Of course as a kid, that little bit of money might be easier to manage than a first paycheck or initial job out of college. The 20 something year old might still live at home, not have a car payment (you still have that car mom and dad gave you), and have very few if any bills.

What you don’t realize is that from a money standpoint, you are the ideal position, one that you want to hang on to and keep as simple and straightforward as it is at the moment.

The only debt you might be in the midst of accruing is your college tuition and any loans you’ll have. That interest rate, however, is remarkably low and shouldn’t be viewed as an albatross of debt but rather a necessity that helps you land a job out of school.

But in your 20s, fresh out of school and having that first job, now is the time for you to start saving your money, while you’re still nestled in your old room and mom and dad still have a fridge full of food.

For starters, you’ll want to put extra money toward your loans, rather than defer them. Skip a few nights out with your friends and stay in for a weekend here and there, and double up on those school loan payments. That is going to cut the customary 10 year loan for schooling in half, leaving you debt free by the time you’re in your mid 20s.

Even though the average college student accumulates up to $5,000 in credit card debt while in school (this typically is due to needing money while in school and not having a job as part of the equation), you have to understand in your 20s, debt and credit is a necessary evil to build up the latter. That isn’t to suggest that you should be taking on thousands of dollars in debt, but opening up a card and starting to charge and subsequently pay off the card makes sense financially to start showing your credit and paying back loans is credible and capable.

Those in their 20s who start thinking about money right away tend to be the success stories, the ones you hear about retiring in their 50s. If your 20s is a backdrop for excess and wasting cash, you’ll consider that time period a failure when 30 rolls around.

Selection Process: What debt is most important to pay?

Nothing is more of a head scratcher in some ways than credit card, but for a number of reasons you might not believe.

Almost 70% of the population in the United States battles back and forth with some sort of credit card debt, and that debt is the kind that builds quickly, particularly when you’re using credit cards to make every day purchases on things like groceries and gas or for emergency buys like repair on the roof, car problems or anything else that has some price point to it that you can’t afford at the moment.

In times of convenience and crisis, and everything in between, we turn to credit cards. Good or bad, that is the hand we’re dealt.

But that debt, the kind from credit, isn’t exactly going away and your struggle continues as you attempt to pay it off in a timely fashion and refute efforts to want to use the card again and thus only compound the issue at hand.

So with credit card debt not going away any time soon, what exactly is your game plan for getting rid of the debt or at least attempting to pay on the right credit card bill at the perfect time?

The most important element of credit card debt is focusing on two aspects: interest rates and closing accounts. The latter is quite simple: you don’t want to close accounts per say, because it will take a chunk out of your credit score but if your card isn’t carrying a balance and you’re paying a annual fee for no reason, then you’re wasting, not saving, money. So in that instance, canceling is the better option.

Obviously, if you’re debating between the 10% interest rate on your Visa or MasterCard bill versus the department store card at Target that is carrying triple that rate, you want to take care of the latter.

Those tricky department store cards also spell trouble in the instance where you use them, you get some sort of introductory rate, usually 0% interest for a certain number of months. The key is not getting hit with backlogged interest rates on those credit cards and thus make those priorities so that 12 months or 24 month no interest plans don’t creep up on you at month 11 or 23, respectively, and you’re suddenly on the hook for thousands in extra money on that so called perks card.

Credit card debt is frustrating and can be avoided in most instances, but if you have it, combat that debt with decisions that don’t put you in a non-winning situation where you’ll never climb out of owing money somewhere.