It’s a financial planner with 5 ways to become more financially literate in your 20s

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• The first step to achieving financial success is to spend less than you earn by creating your own savings.
• Once you have an emergency fund, learning how to invest will help you beat inflation.
• Make sure your money is kept in a high yield savings account with high interest.

Whether you’re a college student, a recent graduate, or you’ve been in your career for years, finding financial security is one of your goals.

Just because you haven’t reached your career goal yet doesn’t mean you can’t make significant progress toward financial security. It’s a financial planner with a few simple steps you can take now that will set you up for financial success.

As you move into your 20s, consider these five ways to become more financially savvy.

1. Spend less than you earn

The first step to becoming more financially literate is learning to spend less than you earn. This can be especially difficult in today’s environment, when inflation has been higher than normal in recent years. However, this principle is still the basis of financial security. It’s important to find ways to keep your expenses lower than your income, giving you flexibility.

Consider using automation to your advantage. Set up an automatic transfer of a portion of each paycheck to a high-yield savings account, separate from the account your paycheck is deposited into. This allows you to save part of your money before you see it, and sooner or later, you won’t miss it.

Additionally, create a budget that includes some savings. A budget helps you know where your money is going and can reveal opportunities to cut unnecessary expenses.

2. Create an emergency fund

Having a rainy day fund is essential for anyone looking to secure financial security. An emergency fund is a pool of money or a separate savings account set aside for unexpected expenses or financial emergencies. These funds should be deposited into an FDIC accessible high-yield savings account.

A general rule of thumb is to save three to six months of expenses, depending on your risk tolerance and your situation. These days, I even recommend that some customers save up to 12 months worth of expenses. Life happens to all of us, and you’ll have peace of mind knowing you have a rainy day fund in case the need arises.

3. Learn the basics of investing

With higher than average prices in recent years, growing your money to achieve financial freedom requires investing. Although investing involves some risk, it is important for building wealth. In your 20s, you have the advantage of time, allowing your money to compound and grow.

To begin, practice investing terms. There are many great resources available, such as books, podcasts, and free or low-cost courses. “The Intelligent Investor” by Benjamin Graham is a great book for beginners.

Online brokerages such as Schwab, Fidelity, and Vanguard also offer many learning resources. In today’s world, investing is a necessity for financial freedom, not an option.

4. Park your money in a high-yield savings account

A common financial mistake people in their 20s make is allowing their money to sit low in checking or savings. This can result in missing out on thousands of dollars in interest earned. Many high-yield savings accounts offer interest rates in excess of 4%.

In comparison, traditional banks offer interest rates as low as 0.01%. The difference can cost you thousands in earned profits. A high-yield savings account helps your money keep pace with inflation.

Remember that online banks offer many high-yield savings accounts, so you won’t be able to get to a physical branch. Additionally, make sure the bank has FDIC insurance to protect your money if the institution fails.

5. Create a savings plan

To avoid credit card debt, create savings buckets for different goals. For example, set up separate savings accounts for vacations, medical expenses, car maintenance and a new car. This way, when it’s time to pay for vacations, the funds are readily available. Set aside a predetermined amount from each paycheck in these accounts. Many online savings accounts, such as Discover, allow you to manage multiple savings accounts under one login, making this strategy simple and easy. more.

These are expenses that you know will come up at some point throughout the year, so saving up in advance is a smart strategy. In addition, you can earn interest on the funds of the savings account of many products, giving you more money to spend. To maximize the benefits, use a rewards credit card and pay it off immediately using your savings.

Being financially literate in your 20s requires making smart and informed decisions. By using these strategies, you can create a successful and secure future for yourself.