Young adult woman is checking her bank account. She's holding a smart phone with a bank mobile app.

How Much Should I Be Saving in My 20s?

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

Craig Lemoine, Ph.D., CFP®, Director of Consumer Investment Research
and Jamie Hopkins, Esq., LLM, CFP®, ChFC®, CLU®, RICP®,  Managing Partner, Wealth Solutions  

Your 20s signify the beginning of a professional life. Careers, work and responsibility. Possibly a partner or children.  

In other words, your 20s present a financial challenge.  

Typically, this is the decade in which you earn the least. But what you do have is the gift of compounding savings. That means more time to achieve your goals, but likely less money available to save for them. So your 20s is the best time to build strong financial behaviors that will carry with you over a lifetime.  

Consider the following five steps to begin a strong financial foundation.   

1. Invest in Yourself and Your Human Capital

Going back to school in your 20s often has fewer hurdles than waiting until later in life. Plus, investing in yourself early sets you up for higher lifetime earnings and the potential for building greater lifetime wealth.

According to the Social Security Administration, an undergraduate degree will add $400,000–$700,000 when contrasted to graduating from high school. Graduate degrees increase lifetime earnings by an additional $300,000–$500,000. The earlier you invest in yourself, the earlier you will begin building additional wealth.1 

2. Build Positive Financial Behaviors

If you learn to budget in your 20s, that habit will carry with you through your lifetime. An individual who learns to manage $4,000 a month after taxes will be equipped to manage $14,000 or even $40,000 a month as their earnings increase over time. Consider online budgeting tools, spreadsheets or even pen and a notebook.  

Be thoughtful with consumer debt, looking at credit cards as tools for convenience rather than credit. Purchase adequate insurance policies on your car, renters or homeowners insurance and consider life insurance if family members depend on you. Track income, expenses and build in budgeted items for future financial goals. Meeting with a qualified financial planning professional can help you begin building positive and lasting behaviors.   

3. Take Advantage of Retirement Plans and Matching Contributions

The beauty of your 20s is the amount of time your money has to compound. Most employer retirement plans allow you to save on a tax-deferred basis, meaning that contributions into these types of accounts are not considered in calculating your taxable income.  

Retirement plans, such as 401(k) and 403(b) plans, allow employees to contribute a portion of their salary up to a federal limit ($20,500 in 2022). Qualified employer retirement plans allow tax-deferred growth, which means accounts are not subject to taxes on dividends or capital gains until proceeds are distributed at a later date. Employers often match a portion of this contribution to a retirement plan as an employer benefit.  

One guiding principle for this decade: By age 30, clients should have one to three times their starting salary saved for retirement. Consider the following example below:   

Lisa (22) begins working for Social Media, Inc. Her annual salary is $100,000. Lisa’s employer will match any 401(k) retirement contributions up to 4% of her salary. Lisa decides to contribute $6,000 annually (or $500 a month) into this plan. Lisa’s employer will match this contribution by $4,000 (or 4% of her salary). By Lisa saving $6,000 into the plan, she reduces her federal taxable income to $94,000, meaning she will have a lower annual tax liability. Additionally, her employer will put $4,000 in her account annually as a match.  

Compounding interest can be power for Lisa. Assume Lisa continues to put $6,000 in her plan annually and her employer matches this contribution with $4,000 per year. If Lisa earned a net 7% rate of return annually her account could grow to around $138,000 after 10 years, $409,000 after 20 years and over $1.5 Million after 40 years! A 6% return is a conservative long-term return from a portfolio consisting of equities and bond positions. All investing requires risks, past returns are not indicative of future performance.  

4. Determine an Appropriate Risk Tolerance for a Longer Time Horizon 

Younger investors have a much longer time frame before they need investment proceeds. Talking with a qualified investment advisor can help you develop an asset allocation appropriate for meeting your financial goals. A financial advisor can also help you determine what types of accounts, such as taxable, IRA or Roth IRAs, are best to help you meet your goals.  

Take our quick and easy Risk Survey to help determine your risk tolerance >>

 5. Start an Emergency Fund

An emergency fund is liquid cash — generally held in a checking, savings or a money market account, that is available to pay unexpected expenses. Emergency funds also provide powerful provide a safety net in case of unemployment. Target six to nine months of living expenses in an emergency fund.   

Work With a Financial Advisor 

Setting a strong financial foundation in your 20s paves the way to success through your professional life. Consider working with a comprehensive financial planner or a fiduciary financial advisor to help develop a savings, insurance and investment plan. Traveling down a financial road with a plan in place will help you find peace of mind, build strong habits and accumulate wealth as you grow.   

1 Social Security Administration, “Education and Lifetime Earnings,”

Time value of money calculations performed at 

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. 

Craig Lemoine is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig Lemoine is in no way related to Cetera Advisor Networks LLC or its registered representatives.  


facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.


Carson Investment Research’s Outlook ’23: The Edge of Normal

At long last, The Carson Investment Research team is proud to officially release our 2023 Market and Economic Outlook, aptly titled Outlook ’23: The Edge of Normal. You can download the whitepaper here. As you are all painfully aware, 2022 wasn’t pretty for investors – it was the first year …

What Documents You Should Provide to Your Tax Preparer

Mike Valenti, CPA, CFP®, Director of Tax Planning Tom Fridrich, JD, CLU, ChFC®, Senior Wealth Planner It’s January, so it’s officially tax season! One of the most common client questions heard by tax preparers is, “So, what do you need from me?” The short answer to that question is often, “ …

How Much Should I Have Saved in My 40s?

When it comes to saving for retirement, people often ask their financial advisor, “How much should I have saved in my 40s?” Let’s take a look at where you should try to be with retirement planning during your 40s.

What Is a Fiduciary?

Why choose a fiduciary? Find out what makes a financial advisor with fiduciary responsibility different.

1 2 3 48 49 50
Young adult woman is checking her bank account. She's holding a smart phone with a bank mobile app.

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation

TweetsFollow Us