A group of financially successful twenty-somethings make dinner together.

How to Be Financially Successful in Your 20s

Picture this: you’re in your twenties, a brand new graduate with your certificate in hand, standing at the threshold of a world brimming with possibilities. Society often paints this decade with broad strokes of optimism and invincibility – a stage in life overflowing with new prospects and opportunities. It’s a time when you’ll often hear phrases like “the world is your oyster.”

However, the truth beneath this sheen of enthusiasm is usually more complicated. Sure, life in one’s twenties is full of excitement and new beginnings, but there are also daunting challenges. It’s not all sunshine and roses. In fact, as the confetti from graduation begins to settle, reality tends to dawn with a stark contrast. Many graduates often find themselves caught in the tug-of-war between burgeoning independence and financial insecurity, between dreaming big and paying off student loans, and between the desire for having fun and the need to plan for an uncertain future.

This is the conflicting narrative for many Albertans in their twenties. This is a group grappling with entry-level salaries, student loans, housing affordability, and trying to plan for retirement, all while keeping up with the expenses of their daily lives. The prospect of being truly independent, whether it’s traveling, owning a car, or hanging out with friends, only adds to the conundrum.

7 Ways to Build Wealth in Your 20s

When you think about building wealth and you make minimum wage it can feel like an impossible task. This is where you need to keep your head in the long game and focus on the small changes you can make that can have a huge impact over time.

  1. If possible, live with your parents for as long as you can. Take the money you would spend on rent and put it into a compound savings account.
  2. Ditch the daily coffee stop and eat in. Depending on how often you buy coffee and order food, you could save anywhere from $50 to $500 in a month.
  3. Use a money tracking app.
  4. Sell your clothes and shop second hand. Vintage is back and so are the 80s, your local thrift store is where it’s at.
  5. Have a side gig like serving, babysitting, or even a paper route.
  6. Explore passive income streams like higher interest investments.
  7. Put a percentage of your income into savings. Typically, it is recommended to save 20% but there’s no hard and fast rule. Even saving 5% of your monthly income will help. If you make minimum wage in Alberta you could save $10,000 over 10 years.

Current Financial Situation of Alberta’s Twenty-Somethings

Our very own highly experienced credit counsellor, Laurel Wyton, sat down with Andrea Jaurez from the Project 25 Podcast to talk about some of these issues and more. You can listen to that episode by clicking here.

Data from 2019 – 2020 paints a vivid picture of the economic reality faced by Albertans in their twenties. According to official statistics, out of all provinces in Canada, Alberta had the highest percentage of employees earning minimum wage in 2019/20. A significant 21.3% of 20-24 year olds, and 10% of 25-29 year olds, find themselves in this bracket. These figures break down into 43% full-time and 57% part-time workers. Interestingly, only a quarter of these minimum wage earners are students.

On average, Canadian graduates step into the world owing over $20,000 in government or non-government loans. This substantial financial burden follows half of all Canadian students as they transition from academia to the job market.

The Mounting Financial Challenges

For twenty-somethings in Alberta, one of the biggest financial challenges is, without a doubt, dealing with debt, particularly student loans and credit card obligations. This is compounded by the cost of education, often inflated by additional expenses such as textbooks and living costs.

As our credit counsellor Laurel pointed out on the Project 25 podcast, one of the best things a twenty-something can do is “staying out of debt…debt steals future prosperity and development. So, living within your means and limiting debt or having a plan to get out of debt are going to be the best steps to becoming financially healthy and secure”.

Furthermore, the Canadian housing market is not doing young adults any favours. The low vacancy rate in cities, coupled with high costs of living, makes it difficult for young professionals to find affordable housing. The combination of inadequate emergency savings, limited job opportunities in some cities, and lower salaries for those who are employed, adds to the uphill struggle for financial stability.

A Silver Lining: Financial Opportunities in Your 20’s

Despite the daunting challenges, there are opportunities for Alberta’s twenty-somethings to regain control of their financial futures. As the saying goes, it’s never too early to start making money work for you. Our credit counsellor, Laurel, points out, “the biggest financial opportunity [for twenty-somethings] is the time advantage – the earlier you start making use of these good habits, the longer the benefits can grow towards your future.”

One of the things you can start building early is an emergency fund. The importance of emergency savings cannot be overstated. Laurel also made this point in the podcast, noting that everyone should aim to have “at least three months of basic living expenses saved up – it’s not money for a trip – it’s money in case you have to miss work or incase you have an emergency like your car broke down or you have to fix something unexpectedly”.

Laurel also pointed out that the younger you are, the more time you have to start learning how to budget. As a credit counsellor who has been helping clients learn how to budget for over 12 years with Money Mentors, Laurel said that “every time someone comes to our office for a debt counseling meeting, they leave with a budget in hand… we do that together and in every single appointment that comes through our offices”. And… It’s free! So if you’re reading this now, thinking “I wish I knew how to budget”, then give us a call and we’ll help!

 

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Not only do we offer a free downloadable spending sheet, but if you’d like to book a free counselling session, one of our credit counsellors will help you go through the spending sheet and fill it out. Give us a call.

 

Then, there’s the powerful tool of compound interest, which can turn a modest, regular investment into a substantial nest egg over time. Utilizing tax-free savings accounts (TFSAs) or Registered Retirement Savings Plans (RRSPs) can help maximize this benefit.

Moreover, living with parents as long as possible can help save on housing costs. The principle of “pay yourself first,” where a set amount is funneled straight into a savings account each month, can boost savings without much effort. Trimming non-essential expenses and building frugal habits can also make a significant difference.

Building Your Financial Future

In their twenties, Albertans face a unique set of financial challenges and opportunities. With the right guidance, this decade can become a launchpad for lifelong financial stability rather than a stumbling block. The decisions made during this period can have far-reaching impacts, for better or worse. And remember, it’s not only your finances you should be investing in, you also need to remember to invest in yourself!

In this journey, Money Mentors is here to help. Whether you’re trying to navigate your financial situation or looking for ways to stretch your budget, we’re committed to helping young Albertans build strong financial futures. After all, the best time to take charge of your finances is now!

 

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Have questions?

Need more information or want to talk to an accredited financial counsellor for peace of mind? Let us help.
Call 1-888-294-0076 or book an appointment. It’s free for all Albertans.

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