How much you should be saving in your 20s

How much you should be saving in your 20s
11 May 2021    Tammy Sofranic    1 comments

Your 20s can be full of firsts. Living out of home, handling your own finances, dealing with the share-house bathroom sink, failing at fitted sheets, surviving on a massive noodle stash, encountering the wonders of a 9 to 5 job for the first time... 

Frankly, with all this “first time” stuff going on, you also may want to reward yourself for surviving by splurging all your hard-earned cash. But your 20s are also a super important time to set yourself up financially for the years to come. But how do you even invest in your 20s? How much savings should you have by age 25? Should you really start saving for retirement in your 20s?

Here’s some tips on how to save those dollars

Experts advise that putting away about 25% of your total income per month will give you a great start at saving a decent amount in your 20s. The 25% rule states that you shouldn’t be spending more than 75% in total on necessities (your phone bill, rent, utilities, travel and dining out) and nice-to-haves (flashy clothes, new kicks, that new guitar you really want but don’t need) combined.

If you need a more streamlined approach, you could try that famous Barefoot Investor’s “Bucket” strategy:

  • Spend only about 60% of your total income on daily expenses
  • Save 10% in a “Splurge” account (for random, unnecessary “reward me” spending)
  • Leave 10% in a “Smile” account (for longer-term treats like a holiday or new car) 
  • Leave 20% in a “Fire Extinguisher” account for emergencies or really big purchases, such as saving a deposit for your own home. This makes saving a lot easier, AND allows you money to treat yourself, too.


Food for thought: You can also “discover” extra money to save if you have a think about your lifestyle choices. Could you perhaps use public transport instead of a car, live with a roommate to share the cost of housing and utilities, or revamp your diet by eating more affordable, healthier foods? You might have to make some tough choices in order to prioritise saving in your 20s, but it is doable. Just stick to a budget, plan ahead and learn to prioritise saving.

                                Saving money

Pro tip:  make sure that you save is to automate the process by setting up monthly (or weekly) debit orders to your savings accounts. This will automatically push the amount you choose into your savings account each month. A nifty way of making sure you can’t spend it! Make sure to choose a bank account with low or no fees, and a high interest rate for your savings, which means you’ll be making money on whatever you’re putting away - that’s the magic of compound interest!

Here are the 10 financial commandments for your 20s from our friends at

  1. Develop a marketable skill - before you can start worrying about what to do with your money, you need to earn some.
  2. Establish a budget – once you’re bringing home that cash money you will need to work out how much you have to spend on necessities and how much you can realistically save monthly.
  3. Get insured – in case of emergencies, insurance may save you from shelling out thousands and thousands of dollars. Read more on why you need travel insurance here and if you are renting why Renters Insurance is a great idea.
  4. Make a debt-repayment plan – debt is a reality for most young adults, and it’s important you get on top of it early. Make a plan to tackle your debt and stay away from credit cards!
  5. Build an emergency fund – Insurance alone won’t cover all of your problems so make sure you have an emergency fund on hand as an extra precaution.
  6. Start saving for retirement – we know it may seem forever away but the sooner you start saving for retirement the better. For example if you are 25 and put away just $100 a month (on an 8% return) with quarterly compounding (interest earned) you’ll have $346,039 by the time you turn 65.
  7. Build a credit history – It’s a double-edged sword, having no credit is as bad as having bad credit, so you’ll need to take on some debt. Think a mobile phone plan rather than a 10K credit card, though.
  8. Quit the bank of Mum and Dad – this one is pretty self-explanatory, but try and stand on your own financial feet as much as you can.
  9. Clean up your online presence – Delete the party pictures, delete the dodgy Halloween costumes.  
  10. Get your financial documents in order – File and save your birth certificate, household bills, insurance policies etc.

Find out more about how to do your taxes here:

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