The dos and don’ts of financial planning in your 20s

Your twenties are a perfect time to start shaping a financial plan that feels both secure and accessible. It’s all about finding the right balance where you can learn, experiment and lay the groundwork for a successful future. Follow these tips, and you’ll be in an excellent position to start building a strong foundation for your financial future.

By paying back your student loans as early as possible, you’ll reduce the total interest you end up paying. This saves you money in the long run and accelerates your ability to start saving and investing.

You likely just joined the workforce, so it may seem early to think about retirement, but you’d be amazed at how small, regular investments can accumulate. The sooner you begin saving, the more you can take advantage of years of compound interest. For instance, saving as little as $50 per week over a 30-year period could increase your account to $163,740.¹ You can set up a Pre-Authorized Contribution plan (PAC) to make saving for retirement automatic. You choose the amount you’d like to contribute, and how often – for instance weekly, biweekly or monthly.

To outline your goals, start by imagining what you want your future to look like and what you want to do. It can be motivating to write these goals down, set some deadlines, and break them into small, doable steps to keep yourself moving forward. The future doesn’t happen overnight, so remember to celebrate those little victories along the way. A financial advisor can also help you create an achievable plan that works best for you.

Look at your source of income and current expenses to get a clear picture of your financial situation. Review your net pay and consider how different tax rates affect your take-home income. Compare your current financial situation with where you would like to be and make the necessary adjustments to your budget to stay on track with those long-term goals. Begin with setting a budget and tracking where your money goes.

If you are a Scotiabank client, you can access Scotia Smart Money by Advice+ on the Scotia mobile app² which offers a variety of money management features to help you stay on track of your spending. It tracks your cash flow and offers customer insights and advice about your finances. Plus, with the budgeting feature, you can build a budget and track your spending, set up targets for different experiences (like entertainment) and see how you’re doing every month against the budget targets you set up.

Developing solid habits takes some practice. Start by regularly keeping an eye on your budget, checking in on your credit, and staying on top of your finances. Monitor your credit score to make sure it’s in good shape and remember to take advantage of those credit card rewards and perks! Make saving a priority so you can build a solid financial base for your future.

Establishing an emergency fund in your 20s is crucial for being prepared for unexpected expenses. Aim to save three to six months of living expenses so you can be financially secure in an emergency. To grow those savings effortlessly over time, try depositing them into a high-interest savings account (HISA) to maximize your return and secure your financial future.

Establishing and maintaining good credit is so important, especially if you plan to apply for a car loan or mortgage down the line. Use your credit card wisely, monitor your balances, and pay them off on time to maintain a favourable credit rating and debt level you can handle.

Getting the hang of budgeting while you’re still young will help you manage your money better. It’s a great habit to pick up now, and you’ll be glad you did when you see how much control you have over your finances later in life. 

While playing it too safe with your investments in your twenties might limit your potential gains, your biggest advantage is time. Consult an advisor to find the right investment strategy that aligns with your long-term goals.

Following these tips now while you’re in your twenties, you’ll set yourself up for a bright and secure financial future. Every smart money move you make today – whether it’s paying off your student loans, building an emergency fund, or investing wisely – builds a strong foundation for tomorrow. Financial success is a journey, not a destination. And we’re here to help celebrate your progress along the way.

Book your appointment with a Scotiabank advisor today!