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13 Things You Need To Know About Money In Your Twenties

Yeah, a pension is a good idea, but don't worry if you don't have one.

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And while personal experience can offer helpful lessons, we thought we'd reach out to some experts too.

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We asked three experts for their thoughts on saving in your twenties, what you should do about a pension, and more.

Helen Saxon, chief product analyst at

Rachael Badger, head of policy research at Citizens Advice

Tim Harvey, CEMAP CeLTCI DipFA, of HR Independent Financial Services Ltd

1. Firstly, try to start an emergency fund.

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If you want to start putting some money aside, an emergency fund is a good place to start. Broadly speaking, an emergency fund is something that can support you for two or three months (could be more, could be less), if everything goes wrong and you lose your source of income. This is a good essay about how useful a "fuck off fund" can be.

"After you have some three to six months in an emergency fund you should focus on what you want to achieve. After that, broadly speaking, budgeting should be about 35% rent/mortgage, bills etc should be about 25%, fun/clothes/holidays 20%, and if you can save the rest you will be happy!" – Tim Harvey


2. But don't feel pressure to save if you have bills to pay first.

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Be practical, and consider the pros and cons. Yes, an emergency fund will provide future security, but if saving money now means that you're paying interest on debts, then it's not the right choice – for now.

"It is always useful to have some money saved which could be accessed in an emergency. However it is also worth considering if you would be paying more on the interest on your debts than you would save by putting the equivalent amount in a savings account. This might be the case if you have credit debts such as overdrafts, credit cards, or other loans." – Rachael Badger

3. Investing takes time. And risk.

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If you're interested in investing your savings in stocks and shares, then know that you'll need to be in it for the long haul – ideally, five years. This gives your investment enough time to ride out the highs and lows of the stock market.

If you can't commit to putting your savings away for five years, then saving your money in cash is a better idea.

"In general, if you're going to invest, you shouldn't be in it for the short term. If you're going for stocks and shares, you'll ideally be able to save there for five years, to ride out share and stock market volatility." – Helen Saxon

"Saving money in cash is good for your emergency fund and for less than five years. Over that you need to be investing in real assets and shares to protect you against inflation." – Tim Harvey

4. Put what you can into a pension.

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If your employer offers a pension, then take advantage of it. Pay in what you can afford, and if you can match their contribution then that’s a good idea.

"Unless you'll have other income when you retire (eg, a burgeoning property empire, winning the lottery) then the more you can put into your pension, the better. If you can't, that's OK, but it's always worth at least matching your employer's contribution, as it's effectively giving free money to your future self." – Helen Saxon

"Typically, employer-sponsored schemes will be very good value but there will be no advice available. Yes, pay in what you can afford." – Tim Harvey

5. And if you can't do that now, it's not the end of the world.

If you can't afford to put money into a pension now, that's OK. Just keep it at the back of your mind.

"There's a rule of thumb for pensions – you should always put in the proportion of your salary equal to half your age when you started. So, if you started at 20, you should put in 10% of your salary throughout your career. If you start at 30, however, you'll need to pay 15% of your salary for the rest of your career, and so on.

"Realistically, very few people can pay in that much – or that consistently. In your twenties, if you do have spare cash to start a pension, you should. Pensions tend to be invested in the stock market, and the longer they're in there, the more chance your investment has to grow – remember, it could be 40 or even 50 years until you retire if you're in your early twenties.

"But, if you have expensive debts, or all your cash is taken up by living costs, then it's not the worst thing that you can't start a pension. But, keep it in the back of your mind – next time you get a promotion, see if you can't put some of that extra cash into saving for retirement." – Helen Saxon


6. Want to buy a house? Look into different schemes available to you.

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The first step to buying a house is saving a deposit. There are some schemes that can help you when it comes to this, like Help to Buy .

"The key here is to have a savings plan and stick to it. The new Help to Buy ISAs should help with this if you're a first-time buyer – these accounts allow you to save up to £12,000 and then get an extra 25% on top from the government… easy money, and a no-brainer. You can save £200 per month in them, and that's a good place to start (though you may want to save elsewhere too if you can put more aside)." – Helen Saxon

"Currently the minimum deposit you would need to obtain a mortgage to buy a house would be 5% of the value of the property. This is the level of deposit you would need for shared ownership schemes, or to get a mortgage through Help to Buy. However, the higher your deposit the more likely you are to get a cheaper mortgage deal." – Rachael Badger

7. And remember that money saved is never wasted.

No matter what your savings, they're still yours to do with what you want – you could travel, or start a business.

"Work backwards from the deposit you'll need to see what you can afford. Remember, it is better to have the target and miss as you will still have amassed some money that will assist in whatever you choose to do: buy a house, travel the world, or start a business." – Tim Harvey

8. If you're self-employed, an accountant might be a good idea.

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If you're self-employed, the best piece of advice is to save for your tax bill. Every time you get paid for a job, put a portion of the fee aside. You can dip into this if you need to, but it will make paying your tax a lot easier.

You could also look into an accountant if you find tax returns intimidating.

"If you've a head for numbers, and you're earning less than around £100,000, then you can probably do it yourself. But, if you've set up a company and pay yourself in dividends, or you're not interested or not confident with numbers, then a decent accountant can be worth their weight in gold." – Helen Saxon

"Ask an accountant. They will be able to say, 'Yes, I can help and save you more than I cost' or 'I can't; you should do this yourself.' A word of caution though: You don't know what you don't know and expert advice can frequently cost less than getting it wrong." – Tim Harvey

9. If you move jobs, keep all the paperwork.

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If you have a pension at one company, and then change jobs, it's important to keep an eye on where everything is. You can choose to transfer the old pension to the new one (although there will be costs), or you can continue to have separate pensions.

"There are a couple of cases where it's more difficult to move pensions between schemes, particularly if the job you're leaving offered a final salary pension scheme. In this case, it's just important to keep your old company up to date with your latest contact details so they don't lose track of you – and you don't lose track of your pension." – Helen Saxon

"Keep a close eye on them and save all correspondence. You may have to write to the company/provider once a year to get updated valuations. Do not be tempted to roll all of the pots into one big one for 'administrative' reasons unless you're sure you're happy with the associated costs." – Tim Harvey

"Individuals may end up with lots of different pension pots with different pension providers, so it is important that you keep track of who you have worked for and who you have pensions with. If you do not receive a leaving statement from your provider, you should request one from your pension provider." – Rachael Badger


10. Try to pay off your debts.

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"For the simple reason that your debts cost more in interest than your savings gain you – especially in today's financial world where savings rates are the lowest they've been for decades.

"The only exception is if you still have an interest-free overdraft on a graduate account, though here you should try to pay it off before it becomes one of those expensive debts." – Helen Saxon

11. And if you're really stuck, try to arrange a repayment plan.

If you're finding it difficult to keep up with interest payments, get in touch with the organisation and try to negotiate a gradual repayment plan.

"Paying off debts to keep a roof over your head or your heating and electricity on are the most urgent, including mortgage, rent, council tax, current energy arrears, or money owed to HMRC. If you will struggle to pay these debts, get in touch with the organisation you owe money to in order to let them know this, and see if you can agree a repayment plan to pay it off more gradually." – Rachael Badger

12. Make your bank account work for you.


Banks offer different incentives for current accounts – some might give you a better rate of interest if you pay the same amount in every month (for example if you have a regular salary). Other accounts might give you a good rate, but only if you don't access the money for a set amount of time. Think about what is practical for you day to day.

"Many bank accounts now offer interest rates of up to 5% when you save in them. But it could be too much of a temptation to you to keep cash in your current account, where it's so easy to spend.

"If so, a savings account or ISA (a tax-free savings account) are the best places. If you're going to need to dip in and out, then get an easy access account that allows this. For better rates, you can fix, but in return you can't access the cash for a certain amount of time – could you live without dipping into savings?" – Helen Saxon

"Keep a look out for bank accounts that pay good rates of interest if you pay your salary in." – Tim Harvey

13. And a student loan won't stop you from being able to save.

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"You don't need to pay off your student loan before you start saving. Student loans only have to be paid back when your income exceeds a certain amount, and if you are employed, this is deducted directly from your salary.

"The interest on a student loan rises at the same rate as inflation, and so is usually much less than you would pay for a bank or credit card loan." – Rachael Badger

And if all fails, stick to these simple guidelines.


"As with all financial planning there are no hard and fast rules. However, there are things that will always stand you in good stead such as:

- If something sounds too good to be true, it usually is.

- Don't put all your eggs in one basket.

- When someone says "This time it's different", it isn't.

- Don't rush into making decisions." – Tim Harvey