How to Plan Your Financial Future in Your 20s
It’s the time to kick-start your career, look for your own home and travel. It's also the time to start taking charge of your financial life. Our tips for things you should start and stop doing in your twenties.
The dos:
✔ Pay off your student loans. As soon as you can, repay any student loans. This will help you reduce your longer-term interest payments (a.k.a. you won’t be paying extra money because your interest has built up over the years). Paying off your loans gives you a head start on saving.
✔ Start saving for retirement. The idea of retirement might seem incredibly far away, but the earlier you start saving, the better position you’ll be in. You’ll be surprised how quickly even small amounts can add up over time. Investing as little as $25 per week over a 40-year period could see your savings grow to $161,010.1
✔ Start mapping out your future. What do you want for your future? What do you need to get there? Start by writing down your goals, when you want to achieve each of them and one thing you can do to get you closer. Get in touch with your financial advisor who can help you create a simple, doable plan.
The don'ts:
✘ Don’t abuse credit. Establishing good credit is important, particularly if you want to apply for a mortgage one day. Using a credit card and making payments in a timely fashion will keep your credit rating and debt levels in check.
✘ Don't skip budgeting. Learning this good habit at an early age will make it easier to live within your means, and you’ll thank yourself later in life for picking up a great habit.
✘ Avoid risk. When investing in your twenties playing it overly safe can potentially decrease what you make over the long term. One of the best things you have on your side is time. Talk to your advisor about the right mix of investments for your goals.
1. For illustrative purposes only. The example uses a hypothetical rate of return of 5.0%, assumes reinvestment of all income, compounded annually and does not include transaction costs, fees, or taxes. The example does not reflect actual results or the returns or future value of an actual investment.
Legal Disclaimer: This article is provided for information purposes only. It is not to be relied upon as investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. All third party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
