Most people between the ages of twenty and twenty-nine aren’t thinking proactively about how to save for the future. But therein lies the problem. By the many time people begin to think about how to save for retirement and build a more stable future, the most effective years for doing so are long gone.

But if you are proactive and willing to focus on tightening your belt in the short term for the purpose of long-term gain, you can build a future that includes financial stability. If you’re wondering what you should be saving for in your twenties, read on for my top five tips!

Create and Adhere to a Budget

No one has ever accused the word budget of being sexy. But retiring with money in the bank and a sense of security is ultra–sexy. And if you start building smart spending habits in your twenties, long-term stability is absolutely within reach. Learning to budget every dollar and plan for the unexpected when you’re starting out will put you light years ahead of the curve. Don’t know where to start with budgeting? I’ve got you covered. Check out my post on that very subject right here. (link)

Build and Maintain an Emergency Fund

My emergency fund has gotten me through many unexpected situations. Whether it’s an unforeseen automotive repair or an unplanned trip to the ER, an emergency fund is crucial for quickly bouncing back from whatever life has in store for you. If you aren’t familiar with establishing an emergency fund, check out this article outlining how to do so right here. (link)

Start a Down Payment Fund for Your First Home

If home ownership is of interest to you, one of the line items on your budget should be dedicated to your down payment. Talk to a lender to determine how much cash you will need on hand before you buy. If you qualify for an FHA loan, you will need a minimum of 3.5% down. Whereas, with conventional financing, you can plan to set as much as 20% of the purchase price aside for a down payment.

Set Aside Monies for Retirement

Another line item on your budget should be retirement. If your employer has a 401k, you want to be contributing to that, up to the match point. But that’s not enough. You should have a separate Roth IRA account that you are contributing to, above and beyond your employer-sponsored retirement package. The sooner you start saving for retirement, the better your money will work for you in the long-run. 

Additional Education

If you have any interest in going back to school, plan ahead. Instead of taking out loans that you will spend 30-years repaying, start proactively saving for your future education. This will allow you to rely less on financial aid and minimize your debt. And if you change your mind about going back to school, you can reallocate the funds to retirement or another investment in your future.

That concludes my top five tips on what you should be saving for in your twenties. Let me know your thoughts in the comments section.