Starting out on your own as a young adult and professional means more freedom. It also means more bills, budgets, and big decisions. From saving for a deposit on a new apartment, planning a vacation or wedding fund, or saving for a new home, there are a lot of financial firsts to look forward to. Figuring out how to save money and stay on top of it all doesn’t have to be stressful.
In this guide, we’ll share personal finance tips for young adults that you can put into action today. Golden 1 is here to help you plan for the future and build greater financial independence.
1. Create a Budget
A budget is a flexible, realistic plan for your money and your future. Start by tracking money coming in and money going out, including rent, food, streaming subscriptions, and all the small purchases you make that add up. Next, you’ll create a budget plan and use it to track all spending and income. Regularly review your budget and make adjustments when needed. Your budget is a living document, not a one-time task.
Your budget acts less like a set-in-stone rulebook and more like a compass that guides your financial decisions. With that clarity, you’ll be less likely to waste money on late-night impulse buys, get hit with surprise expenses, and neglect your savings and financial goals. A budget doesn’t put you on a path to scrimping and saving and no fun. Personal budgets reduce decision fatigue, protect your priorities, and create a financial cushion for Future You.
2. Set Short-Term and Long-Term Financial Goals
Short-term goals are specific targets you’re looking to fund within the next 3 to 12 months. They include practical moves like paying down a credit card, saving for a planned purchase, building a starter emergency fund, or starting a vacation fund. Long-term goals, on the other hand, are 3+ year targets you’d like to contribute to over time. Examples include saving for college, buying a home, or a dream destination wedding.
Having short- and long-term goals helps you keep a clear vision of your future, cut impulse spending, and balance your wants, needs, and priorities. When creating your goals, be sure to write them out, give dollar amounts and deadlines to each, and review your savings progress regularly to stay on track.
3. Pay with Cash
The phrase “cash is king” has stuck around for a good reason. Paying for purchases with cash just hits differently. Paying with cash lets you see and feel what you’re spending, making you more likely to stick to your budget. When you open your wallet and pull out actual dollars, you see how much you have left over until your next pay period, making you more mindful of your purchases. Paying with cash also offers young adults the opportunity to sidestep compounding interest on credit cards when you don’t pay your balance in-full each month.
4. Save Money and Open a Savings Account
One of the most convenient ways for young adults to save money is to open a savings account.
Here are a few basic pointers for young adults just getting into saving:
- Save at least 20% of your income. Can’t swing it? Saving between 5–10% builds a good habit and momentum.
- Build up 3–6 months of living expenses for your emergency fund. Sound overwhelming? A starter fund with $500 to $1,000 helps in a pinch.
- Put 10–15% of your income toward retirement. Need motivation? The compound interest you’ll earn from starting early could grow into six figures by the time you retire.
- Set the rest aside for your short-term goals. What’s on your 6 to 12 month list? Think about travel, a move-in deposit, tech upgrades, and other things you can look forward to.
Don’t be discouraged and give up if you can’t hit the recommended targets. Starting small and consistently saving will pay off in the long run. If you’re looking for a simple answer on how to start saving, Golden 1 offers a Growth Savings account. This is a great option for young adults looking for an easy, low-stress way to build consistent savings and work towards financial goals.
5. Have Frugal Habits and Control Your Spending
Being frugal doesn’t mean you can’t have fun. It means being strategic in prioritizing your wants versus your needs. Figuring out which nice to-haves you can cut to free up money to put towards savings will free up mental bandwidth so you’re not stressed about every dollar.
A few small changes can make a big difference. Here are some simple steps to saving money:
- Sign up for loyalty programs to get discounts from grocery stores, gas stations, and other shops.
- Buy generic or store brands, which often offer the same quality as name brands at a lower price.
- Join warehouse clubs, like Costco or BJs, to get bulk discounts.
- Opt into autopay programs, especially if the company offers discounts.
- Cut streaming services and subscriptions you no longer use or don’t really need.
- Use student discounts (if applicable). A surprising amount of companies offer lower prices for everything from clothes and shoes to computers and streaming services.
- Use manufacturer coupons or prescription discount cards for prescription medications.
- Skip the restaurants and food apps, cook at home when possible. Meal prepping is a great way to save money and time when you need a quick bite to eat.
6. Implement the 50/30/20 Rule
The 50/30/20 rule is a simple budgeting framework that recommends splitting your income into three buckets:
- 50% for needs: These are essential expenses, like rent, utilities, groceries, insurance, and transportation.
- 30% for wants: This is for lifestyle spending and includes subscriptions, ordering out, hobbies, and other discretionary expenses.
- 20% for savings and debt repayment: Use this portion to pay down debt and the rest for savings, retirement, and emergency funds.
The flexibility of the 50/30/20 rule makes it ideal for young adults who want a budget guideline without having to count where every nickel and dime goes. This allows you to focus on your financial goals and see where your money is going.
7. Create an Emergency Fund
Things break down, accidents happen, and emergencies pop up. These are the inevitabilities of life and you need to prepare and insulate yourself from the financial impact as best you can. This begins with creating a dedicated emergency fund you can dip into without going into debt.
The ideal emergency fund will have enough savings to cover 3 to 6 months of living expenses until you can get back on your feet after the unexpected, such as job loss, medical bills, or other major expenses. If you’re just beginning your budgeting journey, it’s okay to take small steps with a goal of $500 to $1000 for a starter fund.
8. Manage Debt and Maintain a Good Debt-to-Income (DTI) Ratio
Debt isn’t always bad. Borrowing can help improve your long-term financial situation with “good debt” like student loans, mortgages, or business loans. On the flip side, try to avoid taking on bad debt, which is taking out loans or using credit cards to pay for vacations, the latest tech gadgets, and food delivery services.
With debt, the quicker you pay it off, the less interest you’ll need to cover. Making minimal payments is a trap and keeps you in debt longer. It’s better to pay off the principal faster and save on interest.
If you ever need a loan, a lower debt-to-income (DTI) ratio makes things easier. Your debt-to-income (DTI) ratio is your total monthly debt divided by your total gross monthly income and then multiplied by 100. Lenders will look at a few key factors before extending credit, which include your:
- Income: How much do you regularly make?
- Current debt: Do you owe on credit cards, car loans, student loans, etc.?
- Payment history: Do you pay your bills on time?
- Credit score: What does your score say about your financial reliability?
9. Build Your Credit Score
Building credit is important for your financial freedom and affects your ability to rent an apartment, get approved for a credit card, buy a car, or land a job in finance or with the government. To build and maintain a good credit score, be sure to:
- Use a starter credit card.
- Pay your bills on time.
- Keep credit card usage low and below 30% of your limit.
- Avoid applying to too many credit cards at one time.
- Check your credit score once a month.
Achieving a good credit score takes time, but steady effort will be essential for hitting your bigger, long-term goals, like buying a house or starting a business.
10. Invest for Your Future Early
If you understand how compound interest works, you’ll understand why you should start investing early for huge future gains. Compound interest works by earning interest on the money you originally put in plus any interest the money earns. It’s like an avalanche that exponentially gets bigger as it picks up more snow and debris—or money, in this case. Putting even $100 a month into an account that gains compound interest now will result in tens of thousands of dollars, or more, in a few decades.
11. Understand How Taxes Work
When you get your paycheck, you should see an itemized list of tax information showing withholdings from your gross pay. The main tax categories include:
- Federal income tax: Amount is based on your income bracket and the filing information you filled in on your W-4. The range is roughly 10–37%.
- State income tax (if applicable): 43 states have an income tax. The type and rate you pay will depend on which state you’re in and how much you make. This ranges from 0% (states with no income tax) to ~13% (CA).
- FICA taxes: This includes payments to Social Security (6.2% of wages from employer and employee each), Medicare (1.45% from employer and employee), and additional Medicare tax (0.9% which applies to individuals exceeding a certain earning threshold).
- Other deductions: While not taxes, these are pre-tax deductions for contributions towards retirement accounts, health insurance, and other voluntary benefits.
12. Start Saving for Retirement
Start saving for retirement by opting into contributions to your employer’s 401(k) plan, especially if they will match what you put in. Keep in mind, not taking advantage of matching contributions is leaving money you’re entitled to on the table. If your company doesn’t offer 401(k) plans, consider opening an Individual Retirement Account (IRA) which lets your money grow tax-deferred (traditional IRA) or tax-free (Roth IRA).
13. Learn Financial Literacy Skills
Only 49% of U.S. adults can answer basic money questions correctly. That means most people are vulnerable when it comes to their finances. Don’t be one of them. Poor money skills can lead to higher debt, bad loans, missed opportunities, and zero savings when you need it most.
Boost your financial IQ with books like The Millionaire Next Door, popular money podcasts such as Planet Money, and practical courses. For hands-on tools and financial independence tips, check out Golden 1’s Financial Wellness Center. It features ways to manage your credit, run a financial wellness check, and take charge of your money.
14. Connect with a Golden 1 Expert
Even thinking about dealing with your finances for the first time can feel overwhelming. Don’t put it off. Every day you wait is money you’re not budgeting, saving, or using to pay down debt.
Want to start planning today? Talk with a Golden 1 expert—we’ll walk you through it step by step, help you open a student checking account, set up a growth savings account, build credit, and answer any questions about making the most of your money.
Saving & Investing FAQ's
How much money should a young adult have saved?
A young adult should aim to have 3 to 6 months’ worth of living expenses in a high-yield savings account. This creates a comfortable cushion to live off of in case an unexpected emergency arises. Ideally, they should also have at least 1x their annual salary saved up for retirement by the time they’re 30. For example, if their annual salary is $60,000, they should have $60,000+ saved up by age 30.
What is the best way to invest money as a young adult?
Prioritize retirement accounts (401(k) and IRA), start investing in low-cost, diversified index funds and ETFs. Avoid concentrating all your money into a single stock or speculative bets — diversification is essential. Think long-term and be patient with your investments because time and compound interest will do most of the work.
Should a young professional open a Roth IRA?
Yes, most financial experts recommend that young professionals open a Roth IRA account. They will have many years of tax-free growth ahead of them meaning even small, consistent contributions will make a dramatic difference come retirement time.
