9 Good Money Habits I Wish I Had in My Early 20s

Renee Layberry
May 4, 2021

You know that paying for college means you need financial discipline – and that goes way beyond buying used textbooks and saving for next semester. You need to identify and develop good money habits that'll serve you long after you graduate.   So, where do you start? We've compiled a list of smart money habits most people wish they had in their early 20s, and it includes everything you need to know.  

9 good money habits for college students – and everyone else 

The top best money habits you can develop all involve keeping track of where your cash goes:
  1. Open a savings account.
  2. Pay yourself first.
  3. Pay off high-interest debt (and don’t accrue more).
  4. Plan your purchases.
  5. Go generic where you can.
  6. Shut down a spending category once in a while.
  7. Stash your spare change.
  8. Live on less than you make.
  9. Keep track of your progress.
  Here’s a closer look at each.  

Good Money Habit #1: Open a savings account (and use it)

Set up a separate savings account – one that’s just for saving, and that you won't dip into. If right now you use your checking account to save, you know it's just too easy to lose track of how much you can spend.   Most banks have high-interest savings accounts. While you won't make millions in interest, keeping your money in a savings account that pays at least a little bit can be beneficial.   Remember to transfer any savings to that account, too. For example, if you bring your lunch to school all week rather than buying it, deposit the amount you would have spent eating out into your savings account.    You can and should – micromanage your savings. If you use coupons at the store, or find deals on in-store apps, for instance, transfer those savings immediately into your savings account. You’ll be pleasantly surprised at how quickly it all adds up.   Photo by Joshua Rawson-Harris

Good Money Habit #2: Pay yourself first

The key to growing your savings, whether you’re looking at paying for a semester of college or coming up with cash for a significant purchase, is to pay yourself first. That means before you spend a dime of your paycheck, you need to take out the money you want to save.   Set up an automatic transfer so that a set amount of money from each paycheck goes directly to savings before you even see your payment in your account. These deposits can make a big difference, even if they’re small.    In fact, some experts say that smaller, more frequent deposits are better than large ones anyway; that’s because you’re unlikely to notice them as much.   

Good Money Habit #3: Pay off high-interest debt

If you have high-interest debt, such as a credit card, pay it off as quickly as possible. Prioritize your debts by how much interest you’re paying on each.    For example, if you’re carrying balances on two credit cards with different interest rates, pay down the one with the higher interest rate first. Continue making your minimum payments on the second card to maintain your credit rating.  

Good Money Habit #4: Plan your purchases

Most people spend a few bucks here and there without noticing – but that’s where you can get yourself into trouble. Stop making quick runs to the store for a few items. Instead, plan all your shopping trips to get everything you need.    Create a list that includes what you want to buy (and how much it should cost) and stick to it. That way, you’ll avoid impulse purchases and make sure you’re not over-buying or forgetting items that you’ll have to run out to get later.   Pro Tip: Be careful about what you buy online. When you add something to your shopping cart, ask yourself if it’s essential. If it’s not, leave the item in your cart for a month – and if you still need it, then buy it. If you don’t need it in a month, take it out of your cart and pat yourself on the back before putting the money you would’ve spent into your savings account.   Photo by Morning Brew

Good Money Habit #5: selectively substitute expensive brand names

Figure out what’s most important to you, at least from a shopping perspective, and think about what doesn’t matter. Do you really care what brand of mustard you use, or do you buy the name-brand because it’s just what you’ve always done? Find spending areas where it won’t hurt you to buy generic, from socks to gourmet treats, and make the switch. For most people, this is one of the most painless ways to save cash.   Pro tip >> If it doesn’t matter to you whether your jeans came out last season or this season, head to the outlets and department stores that sell overstock items next time you go clothes shopping. You'll be delighted with how much you save.  

Good Money Habit #6: Eliminate one spending category (temporarily)

Spreading hard-core saving and budgeting habits over your whole life is stressful, and it can leave you feeling deprived. Instead of going lean everywhere, cut one spending category more drastically.    For example, if you can do without new clothes for a while, you can free up the money you would’ve spent in that category for other pursuits. And if you still have money left over, you can add it to your savings account.   Pro tip >> For some people, the best way to slash overall spending is to stop eating out or getting take out and food delivery – or at least cut back on how much you spend. For one month, track your fast food spending. If you're like most Americans, you'll be forking out well over $200 on restaurants. If you're able to reduce the amount you spend, you could add it to your grocery budget, and then put any leftovers into savings.   Photo by Charles Deluvio

Good Money Habit #7: stash your spare change

Make a plan for your change. Each time you hear a jingle in your pocket, empty it into a coffee can or glass jug. When it’s time, take it to your bank and run it through the coin machine. Avoid the coin machines at major grocery stores, though. Your bank is unlikely to charge account holders a fee, while those at the stores charge everyone a percentage of the payout.   If like most of us, you're living on your debit card, you can still save your change. Many apps exist that get you to invest (and grow) your spare change from everyday purchases. Acorns and Chime are two of these mobile banking apps you can look at.  

Good Money Habit #8: Live on less than you make

Living within your means is a good practice – but what if you could live below your means? Just because you can afford something doesn’t mean you should make room in your budget for it. It can certainly be challenging to live below your means, but if you keep the big picture in mind, it’s entirely possible. It’s a good habit to get into, because it'll make paying your student loans and saving for your retirement that much easier.  

Good Money Habit #9: Keep track of your progress

Take a little time each month to check your progress. Access your savings account dashboard online to see how much it’s grown and check how much debt you’ve paid off. There will be other progress you can track too, such as seeing your cooking skills improve because you’ve stopped grabbing fast food at lunchtime and are cooking more at home. Reaching any goal is easier when you can see results.  

How do I get into the habit of saving money? 

When you start putting these good money habits into practice, you’re on the right track to developing lifelong financial skills. But like anything rewarding, you don’t develop these habits overnight.    For many people, the best way to build a habit is to use the 21/90 rule. That means, in general, it takes 21 days to develop a habit and 90 days to turn that habit into a permanent lifestyle change.   If you commit to at least one of these goals for 21 days, you’re on your way. If you can keep it up for three months, you’ve created a lifestyle change that will literally pay big dividends in the future.   Photo by Robert Anasch

The Abridged Version: How to be good with money 

There are plenty of online guides and even full college courses on how to be good with money, but these are the basics:
  1. Start budgeting. Know how much money you have coming in and how much goes out each week, every two weeks, or every month.
  2. Pay down your high-interest debt first. Debt can drag down any budget, so the sooner you pay it off, the better.
  3. Put money aside for savings. Whether you can pay yourself a small amount from every paycheck or you simply stash away cash you’ve saved during the week, you should always have a stream of money (even a minimal amount) heading directly to savings.
  The bottom line is that when you make it a point to save money and when you remain conscious of where you’re spending the most you’re ahead of the game. It's much harder to develop these smart money habits later in life when you have less time to save.