Your twenties are a fun and exciting period in your life. It is when you explore the world and learn about who you are. Hopefully you will learn some lessons along the way. Some of these lessons will even be financial ones.
Did you learn these 5 important financial lessons in your twenties?
1: The Power Of Compound Interest
Compound Interest is one of the most important financial gems you can discover in your twenties. That’s is because, the earlier you start saving, the better off you will be. Compound interest takes your original investment and gives you interest on that, but also on the interest that you generate. So basically your money will grow significantly by earning interest on your interest.
2: Putting Away A Set Amount
Things cost a lot in this modern world, and if you want to be able to afford to buy them, you need to have some savings. Getting in the habit of putting away a set amount every week or month will teach you really good savings habits for the future. If you get in the routine of doing it while you are young and don’t have much spare cash, then it will be easier to do as you get older and your income grows.
3: Choose Your Debt
If you are buying a house, having some kind of debt is pretty much unavoidable. But that doesn’t have to be the case when you are buying other things. For smaller purchases it is far better to try and save the money to pay for them instead of putting yourself in debt to buy them. Once you factor in the cost of interest then you will end up paying much more in the long run if you borrow money to buy things.
4: Avoid Bad Debt
When the bank approves you for your first credit card it can be tempting to spend up large! But it is important to remember that you have to pay that money back. And if you can only afford to pay the minimum amount due each month then you will end up paying more in interest than your initial purchases cost you in the first place.
5: Choose Good Debt
Some types of debt are considered good. These are the kinds of debt that improve your credit rating. If you are offered an interest free deal on a significant item, then that could be a good debt if you can pay it off within the interest free period. Taking a mortgage to purchase your first home is also a good debt as you are investing in an asset.
Bonus Tip: Insurance
You might not think that the worst will happen, but what if it does? It is important to be prepared with insurance to protect the most important parts of your life - your home, contents, vehicle, health, life and travel insurance are all key overs to consider.