How to manage money in your 20s

Managing your money is not a set and forget task. Your approach to personal finance should change and evolve as you get older and move through different life stages. Having a part-time after school job and saving for your first car is quite different from owning your own home and considering dropping to one income while you have your first child. This article will cover what you need to think about when managing  money in your 20s. 

Your 20s is a great time to create good financial habits, and life long savings habits you won’t regret! It’s often the time when you get your first ‘proper’ job and work full-time. Setting a budget and creating financial goals is an important part of organising your finances, but considering your wider personal finances is important too – think insurance, investing and retirement plans.

Young people in their 20s also want to become financially independent from their parents too – proving they can stand on their own two feet. The bank of Mum and Dad is increasingly relied on by young adults wanting to own their own home (half of 18-39 year olds interviewed for this report had parental support to buy their first property) – whether they want help with their home deposit, or their parents to be a guarantor for their home loan. Setting good financial habits early on can help you to avoid needing to lean on others for financial support later. Let’s take a look at top tips.

how to manage money in your 20s nz

How to spend less

First things first – make a budget and stick to it! We strongly recommend understanding how much income you have coming in each month and clearly detailing your fixed, variable and regular expenses. Mapping these out can help you decide where you can make any cutbacks. Could you shop smarter? Cancel any streaming subscriptions you’re not using? Change your utility provider? Here are another 30 handy tips to help you save money on groceries, petrol and utilities and more. 

Once you’re clear on what money you have coming in and what money you have coming out of your accounts, ideally you’ll have a portion that you can save. This is when setting financial goals comes in handy – having a plan and understanding your short, medium and long term financial goals can be really useful for keeping you on track and sticking to your savings plans.  Websites like Sorted have really useful financial advice on planning and budgeting too.

How to save more

The main takeaway for people in their 20s is that any level of saving has the benefit of compound interest. So whether your saving goals are short, medium or long term, the longer you keep saving, the more you’ll earn in interest. In short, don’t be discouraged by saving small amounts each pay day, focus on what that money will buy you in 5, 10 or even 40 years time. That house deposit or retirement fund will start accumulating nicely if you don’t dip into it.

If it’s short term income you’re after, it’s time to review your belongings and household goods and sell off anything you don’t need. This is a great option to get ahead for that next holiday you want to take, or save more quickly for a new car. Only half of 18-39 year olds interviewed for this report could find $5,000 in a hurry if they needed it in an emergency.

After medium term income? Consider a side hustle that provides a steady stream of additional income on top of your regular work. That could mean freelancing in your professional role during the evening or weekends. It might mean starting a small business that you can run outside your normal work hours – importing niche products and reselling them, growing houseplants and selling them on online marketplaces and so on. Medium term savings can be channelled into that first home deposit – a common goal for people in their 20s.

Long term income options include saving for your retirement. It’s a no-brainer to open a KiwiSaver account once you start working. Your employer will top up the contributions you make and even the government helps by giving you $521.43 each year that you contribute at least $1,042.86. That all adds up by the time you turn 65. For many young people though, they’ll realise their KiwiSaver much sooner than 65, as they’ll want to tap into those savings to purchase their first home.

Ways to start investing

Investing is certainly part of your personal finance considerations, even in your 20s when you might not have lots of spare cash available. If you have KiwiSaver ticked off the list, the other consideration you might have is investing in shares or managed funds. Online investment platforms such as Sharesies and Hatch enable you to kick off your investing journey with as little as $5 per transaction.

Reduce your debt 

We often have to incur debt at some point in our lives. Whether that’s to purchase a car, a house, support our tertiary education, or buy the latest edition trainers, you get to decide what you’re prepared to go into debt for.

We’d always recommend paying off high interest debt first. Depending on the extent of your debt and interest rates of the loans and credit cards you may have, it can make sense to see if a debt consolidation loan will make sense for you. A debt consolidation loan can ensure that you reduce your overall interest payments and simplify your debt repayments – one debt repayment each week, fortnight or month, instead of multiple repayments.

When it comes to student loans, so long as you work in New Zealand, you’re making repayments and your loan is interest free. You should certainly prioritise other debt repayments over your student loan in this instance. If you’re considering going on your OE, you’ll want to think through how you manage your student loan repayments. Will you be working enough while you’re travelling to send money home to New Zealand? Should you repay your student loan before you leave the country?

How do couples manage their money?

If you have a partner, you have other considerations when it comes to managing your money.  You may both choose to keep your money separate, until you know your relationship is long term. If this is the case you may want to open a joint account for joint expenses, so managing your household is fair and equitable.

If things are serious between you and your partner, why not consider pooling your resources and setting financial goals together. This will certainly fast track a big ticket item such as saving for a house deposit. Importantly you need to have regular financial conversations. Agree your financial priorities, what you’re willing to sacrifice to get there, and how you’ll both contribute. You may not always agree on things, but healthy financial conversations are another great habit to put in place in your 20s.

Personal finance advice

Unsure of whether to keep saving or repay your personal loan early? You can access free personal finance services or pay for professional personal finance advice.

How much can you borrow with a personal loan? 

With Nectar you can borrow unsecured up to $30,000, or as little as $2,000. Use our loan repayment calculator to find out how much you could get. 

Getting started with Nectar

Do you need a great rate on a personal loan? We’d love to help with your personal loan requirements. Find out how much you could borrow and learn more about our personal loans. You can get started with Nectar and get a personalised loan quote online which will include your interest rate, maximum borrowing amount and repayment options. Borrow better, faster today!*

*Nectar’s lending criteria and responsible lending checks apply.