Your 20s are often a time of discovery, experimentation, and learning. It's a decade filled with the excitement of newfound independence, the challenge of starting a career, and shaping your future. However, it can also be a period of financial missteps and missed opportunities. Reflecting on personal experiences and friends’ stories, here are the financial lessons we wish we had known in our 20s, especially as a Singaporean.

1. Start Saving Early, No Matter How Small

The power of compound interest cannot be overstated. Saving even a small portion of your income from the start of your career can lead to substantial growth over time. In Singapore, where the cost of living is high, it's easy to fall into the trap of spending everything you earn. However, setting aside a fixed percentage of your income each month can create a financial cushion for future needs.

2. Understand CPF and Maximise its Benefits

It's essential to understand how Central Provident Fund (CPF) works, including the different accounts (Ordinary, Special, and Medisave) and their respective uses. Consider making voluntary contributions if possible, as this can significantly boost your retirement savings due to the attractive interest rates offered.

3. Live Within Your Means

It can be tempting to keep up with the latest trends, dine at the newest restaurants, and travel frequently. While it's important to enjoy life, it's equally important to live within your means. Creating a budget and sticking to it can help you track your spending and avoid debt. The goal is to balance enjoying your present while preparing for your future marriage, home, renovation where applicable.

4. Increase Financial Education

Financial literacy is not typically emphasised in our education system, but it's one of the most valuable skills you can develop. Read books, attend seminars, and follow reputable financial blogs and podcasts. Understanding concepts like inflation, investment diversification, and risk management can empower you to make informed decisions.

5. Start Investing Early

Investing can seem intimidating, but starting early gives your investments more time to grow. Begin with low-risk options like Singapore Savings Bonds or T-bills. As you become more comfortable, you can explore other investment avenues such as stocks / exchange-traded funds (ETFs), real estate, or even cryptocurrency. The key is to start small and gradually increase your investment as your knowledge and confidence grow.

6. Avoid Lifestyle Inflation

As your income increases and career progress, it's natural to upgrade your lifestyle. However, this can lead to lifestyle inflation, where your expenses rise in tandem with earnings, leaving you with little to save or invest. Instead, maintain a modest lifestyle, spend where necessary and save or invest the additional income. This approach will help you build wealth more effectively over time.

7. Plan for Big Purchases

Whether it's a home, car, or a wedding, big purchases require careful planning. For instance, buying property in Singapore is a significant financial commitment. Research the market, understand the various loan options, and consider the long-term implications of your purchase. Similarly, plan for other significant expenses by saving in advance rather than relying on credit.

8. Build an Emergency Fund

Life is unpredictable, and having an emergency fund can provide peace of mind. Aim to save at least three to six months' worth of living expenses in a liquid and easily accessible account. This fund will serve as a financial buffer in case of unexpected events like job loss, medical emergencies, or family’s needs.

9. Be Mindful of Credit Card Use

Credit cards can be a useful financial tool if used responsibly. However, they can also lead to much debt if mismanaged. Always pay off your balance in full each month to avoid interest charges, and be mindful of your spending. Remember, credit card debt can quickly spiral out of control, so it's essential to use them wisely. Read here if you are stuck choosing between a credit or debit card.

10. Seek Professional Advice When Needed

Sometimes, professional financial advice can make the difference. Whether it's for financial or asset planning, investment strategies, or retirement, consulting certified professionals who can provide personalised guidance will help you to make more informed decisions.

Your 20s are a pivotal decade for setting the foundation of your financial future. By adopting good habits early on, you can enjoy the present while preparing for a secure and prosperous future. Remember, it's never too late to start, but the earlier you begin, the better off you'll be.

Master Your Finances Wisely,

Value Vaulter