Best Money Habits for Young Adults: 10 Habits to Build Financial Success

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Meta Description: Discover the best money habits for young adults – from budgeting and saving to investing early – and learn practical tips to manage money confidently and secure your financial future.

Why Financial Habits Matter in Your 20s

Managing money in your 20s can feel overwhelming – especially if you’ve never been taught financial basics in school. In fact, one survey found that less than half of young adults had any formal personal finance education. It’s no surprise many young people feel unprepared as they start jobs, pay bills, and tackle student debt. At the same time, the cost of living is high: nearly 46% of Gen Z young adults (ages 18–27) still rely on family for financial help, and 52% say they don’t earn enough to live the life they want. These challenges make it critical to develop good money habits early.

The best money habits for young adults can provide a roadmap to financial independence and reduce money stress. By learning to budget, save, and invest now, you’ll build confidence and set yourself up for long-term success. Remember, everyone starts somewhere – even small steps can lead to big improvements over time. Below, we’ll break down 10 essential money habits (with relatable examples and data) to help you take control of your finances in a friendly, practical way.

1. Create a Budget and Track Your Spending

One of the best money habits for young adults is creating a budget. Budgeting is simply making a plan for where your money goes each month. It gives you control over your money and is often called “the foundation of financial success”. Start by listing all your income (paychecks, side hustle earnings, etc.) and then list your expenses. Be sure to include fixed costs (like rent, utilities, insurance) as well as variable spending (groceries, transportation, eating out, entertainment). Many young adults are surprised when they first track their spending – those little coffee runs or takeout meals can add up fast!

Track every expense for a month to see patterns. You can use a simple spreadsheet or a budgeting app (85% of Gen Z already use at least one personal finance tool or app to manage money. Categorize your spending into needs (must-haves like rent and food), wants (nice-to-haves like concerts or new clothes), and savings/debt payments. A popular guideline is the 50/30/20 rule: aim to allocate about 50% of your income to needs, 30% to wants, and 20% to savings or debt repaymentunfcu.org. For example, if you take home £2,000 a month, that would mean £1,000 for needs, £600 for wants, and £400 for saving or paying off loans.

Make adjustments to live within your means. If you discover you’re spending more than you earn (a common issue), look for areas to cut back. Maybe it’s eating out fewer times a week or finding a cheaper phone plan. Small changes can free up money to put toward your goals. Regularly reviewing and updating your budget is key – life changes (like a new job or moving) will affect your finances. Keep in mind that a budget isn’t meant to restrict all your fun; it’s there to ensure your spending aligns with your priorities. By mastering this habit, you’ll avoid the stress of running out of money each month (a problem nearly 41% of young people reportnewsweek.com) and gain confidence knowing exactly where your money is going.

2. Save a Portion of Your Income Automatically

Saving money consistently is easier when you “pay yourself first.” This means treating savings like a fixed expense – a bill you owe to your future self. Aim to save at least 10-20% of your income if possible. According to financial experts, saving around 20% is ideal for young adults, but if that feels too high, start with what you can – even 5% or £50 a month is a great start. The important thing is to make it a habit.

A smart strategy is to automate your savings. Set up an automatic transfer to a savings account every time you get paid. For example, if you receive a paycheck on the 1st of the month, have your bank or banking app move a set amount (say £200) into a savings or investment account on the 2nd. This way, you’re saving before you get a chance to spend those funds. You’ll be surprised how quickly this builds up. If you save £200 per month, you’ll have £2,400 after one year (plus any interest) without even thinking about it!

Automating savings also helps you avoid temptation. You won’t miss money that never hits your checking account. This habit is especially important because many young adults struggle to save at all – only 15% of Gen Z report putting a set percentage of each paycheck into savings. Don’t be part of that statistic. Whether you’re saving for an emergency fund (more on that next), a big purchase, or future investments, consistent saving is key. Remember: small contributions add up over time. Even if you start with just £20 a week, that’s over £1,000 saved in a year. Increase your savings rate whenever you can (for instance, after a raise, bump your automatic savings from £200 to £250). Future you will thank you for every pound saved today.

3. Build an Emergency Fund for Rainy Days

Life is full of surprises – job layoffs, car breakdowns, medical bills – and those surprises can be expensive. That’s why one of the best money habits for young adults is building an emergency fund. An emergency fund is a stash of money set aside specifically for unexpected expenses or financial emergencies. Without this safety net, a single surprise bill can push you into credit card debt. In fact, nearly 50% of Gen Z have no emergency fund at all, leaving them unprepared for financial emergencies and at risk of falling into a cycle of debtinkl.com.

So, how much should you save for emergencies? A common recommendation is to save 3 to 6 months’ worth of living expenses. For example, if you need £1,000 a month to cover rent, food, and bills, aim for £3,000 to £6,000 in your emergency fund. This amount might sound high, but remember – you don’t have to save it overnight. Treat it as a long-term goal and add to it bit by bit. Start with a smaller milestone, like £500 or £1,000, which can cover many minor emergencies (a car repair or a new phone if yours dies). Then keep building.

Keep your emergency savings easily accessible, but separate from your everyday account. A high-yield savings account is a good spot – you’ll earn a bit of interest, and you won’t be as tempted to dip into it for non-emergencies. Make contributing to this fund part of your monthly budget (even £50 a month makes a difference). And only use it for true emergencies, not for things like holidays or shopping splurges.

Having an emergency fund will give you peace of mind. Instead of panicking when an unexpected cost hits, you can confidently say “I’ve got this covered.” Money experts often call an emergency fund a “financial lifesaver” for good reason – it prevents life’s surprises from derailing your finances. Given that over half of young adults couldn’t cover three months’ expenses if they had to, building this safety net is a game-changer for your financial security and stress levels.

4. Live Within Your Means and Avoid Lifestyle Inflation

In our social media age, it’s easy to get caught up in comparison – seeing friends travel or buy gadgets might tempt you to overspend. But a core money habit for lasting financial health is learning to live within your means. In simple terms, spend less than you earn. It sounds obvious, but many people struggle with this. Surveys show that a majority of Americans who budget still end up overspending each monthnerdwallet.com. The goal is to not spend every pound you make, so you have money left to save and invest.

Avoid lifestyle inflation: Lifestyle inflation means that as your income increases, your spending naturally increases along with it (often on nicer clothes, a fancier car, more outings, etc.). For example, if you get a £500/month raise, you might feel like you can upgrade your phone and dine out more. Soon that extra money is gone. To counter this, try to keep your basic lifestyle the same even when you earn more. By all means, treat yourself occasionally, but funnel a good portion of any new income into savings, investments, or paying off debt rather than immediately upgrading your lifestyle.

Be frugal and mindful of spending. Frugality doesn’t mean being cheap or never having fun – it means being thoughtful and getting value for your money. Some tips to live within your means include: cook at home more often instead of expensive takeout (maybe challenge yourself with easy recipes); take advantage of student discounts or sales; and practice the 24-hour rule for impulse purchases (wait a day to see if you still want it). When you do spend on non-essentials, prioritize experiences and things you truly value, and skip the rest. For instance, you might decide that travel is important to you, but designer clothes aren’t – so you budget for trips but buy affordable clothes.

It also helps to surround yourself with friends who respect your financial limits. Many young adults are embracing “loud budgeting” – openly telling friends, “Sorry, that restaurant is out of my budget this month.” In one survey, 38% of Gen Z said they feel comfortable declining plans because they can’t afford them. Real friends will understand, and you might even inspire group activities that are fun and low-cost (like a game night in instead of an expensive night out). By setting these boundaries, 63% of Gen Z report they don’t feel pressured by friends to overspend. Remember, living within your means is about making choices: saying “yes” to what matters most to you and “no” to expenses that aren’t important. Over time, this habit will prevent debt and free up money to achieve your bigger goals.

5. Use Credit Cards Wisely and Build Good Credit

Credit cards can be both a helpful tool and a dangerous trap. For young adults, building a good credit score is important for future goals (like getting an apartment, a car loan, or a mortgage). But mismanaging credit cards can lead to high-interest debt that snowballs. The best habit to adopt is to use credit cards responsibly – meaning pay your bills on time and in full every month. This way, you avoid interest charges entirely and build a positive credit history.

Why does credit history matter? Lenders and even landlords will check your credit to see if you’re financially reliable. A good credit score can save you thousands in interest down the line (with lower rates on loans) and make it easier to get housing or even certain jobs. To build credit from scratch, you might start with a student credit card, a secured credit card, or even become an authorized user on a parent’s card. Charge a small expense periodically (like a tank of petrol or a Netflix subscription) and then pay it off in full when the bill is due. This establishes a record of responsible use.

Crucially, don’t spend more on your card than you have in your bank account. Treat your credit card like a debit card linked to your checking balance. It’s not free money – anything you charge will have to be paid back, ideally right away. If you only make minimum payments, interest will pile up quickly. Consider this: the average credit card APR (interest rate) is around 23% in 2025. That means if you carry a balance, you’re paying 23% more on those purchases on an annual basis – a terrible deal for you. For example, if you have a £1,000 balance at 20% APR and only pay the minimum each month, it could take you years to pay off and cost hundreds in interest. Avoid that trap by only charging what you can pay off.

Another tip is to keep your credit utilization ratio low – in other words, try not to use too high a percentage of your credit limit. If you have a card with a £1,000 limit, it’s better for your credit score to keep the balance under £300 at any time (30% of the limit) and then pay it off. High balances relative to your limit can hurt your score. By using credit cards wisely (on-time payments and low balances), you’ll steadily build a solid credit profile. This good credit will open doors for you later, while keeping you out of the costly cycle of credit card debt that many people fall into. In short: use credit to your advantage, not your downfall.

6. Tackle High-Interest Debt Early

Debt can weigh you down financially and emotionally, especially high-interest debt like credit cards or payday loans. As a young adult, it’s important to avoid bad debt and, if you have some, make a plan to pay it off as soon as possible. High-interest debt is basically the opposite of investing – instead of your money growing, you owe more money over time. For example, a £2,000 credit card balance at 18% interest will accrue about £360 in interest over a year if not paid down. That’s £360 lost to the credit card company, rather than going into your savings.

Prioritize paying off debt with interest rates above ~6-7%, since that’s higher than you could reasonably earn investing with moderate risk. Credit cards (often 15–25% APR) should be tackled first, along with personal loans or car loans if they carry high rates. Make at least the minimum payments on all debts to avoid penalties, but throw any extra cash at the highest interest balance (this is called the debt avalanche method). Every time you eliminate a debt, you free up cash flow and save on future interest. It’s a fantastic feeling to see those balances go down.

If you have student loans, know your interest rates and terms. Student debt is common (about 64% of college-educated young adults have some student loan debt), and interest rates can vary. Many student loans are at lower rates (3-6%), so they’re less urgent to pay off than credit cards, but you should still incorporate them into your long-term plan. Look into consolidation or refinancing options if you have multiple loans – sometimes you can secure a lower rate. Also, if you can afford it, start paying your student loan interest while in school or during grace periods; it prevents your balance from ballooning.

Avoid the debt spiral: The worst habit is paying for one debt by taking on another (like using one credit card to pay another, or taking a payday loan to pay bills). This can lead to a dangerous cycle. Instead, if you’re struggling, consider talking to a nonprofit credit counselor or using strategies like a temporary bare-bones budget to get debt under control. And think twice before taking on new debt. Do you really need that car loan or can you buy a cheaper used car? Is that expensive postgraduate course worth the loans, or are there scholarships and alternatives? Every pound of debt you avoid is a pound (plus interest) you won’t have to repay later.

By developing the habit of debt management early, you’ll save yourself huge headaches. Paying off a credit card in full or finally clearing a loan is incredibly empowering. It builds confidence that you can take charge of your financial life. Plus, once those payments are gone, you can redirect that money toward savings and investments, accelerating your financial growth.

7. Start Investing Early – Even Small Amounts

When you’re in your 20s, retirement or long-term investing might be the last thing on your mind. But one of the absolute best money habits for young adults is to invest early and regularly. Why? Because time is your greatest asset. Thanks to the power of compound interest, even small investments made in your 20s can grow to impressive sums by the time you’re older – far more than larger investments made later in life.

To illustrate, consider two young people, Alice and Bob. Alice starts investing at age 25, putting aside £300 per month for 10 years, then stops contributing at 35 (let’s say she invested a total of £36,000). Bob, on the other hand, doesn’t invest in his 20s. He starts at 35 and contributes £300 per month for 25 years, from age 35 until 60 (that’s £90,000 contributed). Who has more at age 60? Shockingly, Alice comes out ahead, despite investing far less money! This isn’t magic – it’s math. Alice’s early start lets her contributions compound for a longer time. In one scenario similar to this, starting at 25 vs. 35 led to having £183,000 more by age 60, even though the late starter invested more than double the amount. The lesson: the sooner you begin, the more time your money has to grow.

Getting started with investing does not require a lot of money or fancy knowledge. If your employer offers a retirement plan like a 401(k) or pension scheme, take advantage of it – especially if there’s a company match (that’s free money!). Even a 5% contribution is great to start. If you’re on your own, consider opening an individual retirement account (IRA) or a stocks & shares ISA (for those in the UK). You can start with small amounts: many investment platforms let you buy fractional shares, so you can invest £50 in a diversified fund or stock. Set up automatic monthly contributions, just like a savings habit.

A smart approach for beginners is to invest in low-cost index funds or ETFs which spread your money across many companies or bonds. These are generally less risky than picking individual stocks, and historically the stock market has returned around 7-8% annually on average over long periods. Remember, investing is for the long term – the money you put in should ideally stay invested for 5, 10, 20+ years. That means it can ride out market ups and downs. Starting in your 20s gives you a long runway to recover from any market dips.

One more thing: investing early isn’t just about retirement. You might also be investing for medium-term goals (like buying a home in 10 years). The key is to match your investments to your timeline and risk comfort. But do start. A Bank of America study found that nearly 40% of Gen Z are not on track to start investing in the next five years – often due to feeling they lack money or knowledge. Don’t let that be you. Even investing £25 a month is worthwhile. As one famous saying goes, “The best time to plant a tree was 20 years ago. The second-best time is now.” The same is true for investing. Your future self will be grateful you planted those financial seeds early.

8. Set Financial Goals and Plan for the Future

Having clear financial goals is like having a map for your money. It’s easier to make smart decisions when you know what you’re aiming for. Take some time to think about short-term, medium-term, and long-term goals. For a young adult, short-term goals might include paying off a credit card this year or saving £500 for a holiday. Medium-term could be buying a car in the next 3 years or saving for a house deposit in 5–7 years. Long-term usually involves big ones like financial independence or retirement (e.g., “I want to retire at 60 with £X in investments” or “I want to have £1 million net worth by age 50”). These numbers can change as life unfolds, but having targets gives you motivation and direction.

Make your goals specific and realistic. Instead of a vague “I should save more,” set a goal: “Save £5,000 for an emergency fund by end of next year” or “Contribute £200/month to my retirement account.” When you articulate a goal, break it into actionable steps. If you need £5,000 in 12 months, that’s roughly £417 a month, or about £100 a week. Can you allocate that from your budget? Perhaps you realize you can only do £300 a month – then adjust the timeline or find ways to boost income/reduce expenses to close the gap.

Writing down your goals and tracking progress is a powerful habit. People with written financial plans or goals tend to save more and feel more in control. For instance, a study found that households with a written financial plan were far more likely to save at least 10% of their income compared to those without a plan. The act of planning reduces stress because you move from worrying to problem-solving. It’s encouraging to know that the vast majority of Gen Z (82%) have financial goals and over half are actively prioritizing them. You’re never too young to start planning – in fact, your goals in your 20s (even if modest) lay the groundwork for bigger opportunities in your 30s and beyond.

One practical tip: build an opportunity fund. This is money set aside for positive goals (not an emergency fund, which is for “bad surprises”). An opportunity fund could help you seize chances like starting a small business, moving to a new city for a job, or taking a career break to study. It’s essentially savings for your goals and dreams. It doesn’t have to be huge, but regularly putting money toward your goals keeps you future-focused. Every few months, review your goals and check your progress. Celebrate milestones along the way – for example, when you hit the first £1,000 saved for your house deposit, treat yourself to a nice (budget-friendly) reward. By setting goals and planning ahead, you give your money purpose, and you’ll feel great as you see those plans come to life.

9. Continue Learning About Personal Finance

Financial literacy is a lifelong journey. The money world – from taxes and mortgages to investing and retirement – has a lot of moving parts. As a young adult, committing to continue learning is one of the wisest habits you can adopt. Don’t worry, you don’t need to become a finance expert overnight. Think of it as financial self-improvement: each month or year, you aim to learn something new that will help you make better money decisions.

Start with the basics: if you’re not clear on how credit scores work, spend an afternoon reading credible articles or watching videos on it. Not sure how taxes or 401(k)s operate? Make it a goal to understand the essentials. There are countless free resources – blogs, YouTube channels, podcasts (like Planet Money or ChooseFI), and even courses – that break down personal finance topics in clear terms. Bank of America’s Better Money Habits site, for example, offers free educational content that’s “approachable and easy to understand”. Take advantage of tools like these.

Importantly, don’t be afraid to ask for advice. If your parents or a mentor are savvy with money, pick their brain. Many young adults say their parents were a big influence on their money habits– whether good or bad, there are lessons there. If you’re dealing with something complex (like considering an investment or struggling with debt), consider consulting a professional financial advisor or counselor. Some advisors offer free initial consultations, and nonprofit counselors can help with budgeting or debt management at low/no cost. Also, as your financial situation changes (new job, marriage, etc.), seek out advice for that stage. For instance, if you start earning a lot more in your late 20s, learn about tax planning and smart investing for higher incomes.

Staying curious will build your financial confidence over time. Remember how confusing money topics seemed when you were younger? By now, you’ve likely learned a lot more just by managing your own budget or bank accounts. Keep that momentum. One survey noted that 70% of Gen Z feel equipped to handle day-to-day financial basics – partly due to readily available information and tools. The more you learn, the more confident and in control you’ll feel. Even mistakes can be learning opportunities (we all have a story of a dumb purchase or a budgeting slip-up – don’t beat yourself up, just learn from it). Make personal finance education a habit – for example, read one finance book a year or follow a couple of quality finance content creators – and you’ll continuously level up your money game. An informed young adult is an empowered young adult when it comes to money.

10. Protect Your Financial Future (Insurance and Safety Nets)

Part of good money management is protecting what you have. This means having the right safeguards in place so that one stroke of bad luck doesn’t ruin you financially. A key habit here is to ensure you’re properly insured and prepared for worst-case scenarios. As a young, healthy person, insurance might not be top of mind – but accidents and emergencies can happen to anyone.

At minimum, make sure you have health insurance (medical bills can skyrocket if you’re uninsured – one hospital visit could wipe out your savings). If you’re employed, you likely have a health plan through work or national health coverage; if not, look into affordable options for young adults or remain on a parent’s plan if that’s an option. Additionally, if you drive, auto insurance is usually required by law – but carrying sufficient coverage protects you from liability if there’s an accident. Renters insurance is another inexpensive safeguard; for the cost of a couple of coffees a month, it covers your belongings (and liability) in case of theft, fire, or other damage to your rented apartment.

Beyond insurance, think about other safety nets. Do you have a will or at least named beneficiaries for your accounts? It might sound odd when you’re young, but if you have any assets or even a life insurance policy from your job, naming a beneficiary ensures that money goes where you want if something happens to you. Also, take steps to protect your identity and accounts: use strong passwords, enable two-factor authentication on banking apps, and be cautious of scams. Identity theft can set you back financially – it’s easier to prevent than to fix after the fact.

Another aspect of protecting your future is staying cautious with major financial decisions. For instance, before taking on a big debt (like a mortgage or a business loan), fully research and understand the terms. Don’t co-sign a loan for someone unless you’re prepared to pay it if they don’t. Read contracts before signing (be it a lease or a new credit card agreement). These might seem like common-sense habits, but many young adults (and older adults!) skip them and pay the price later.

By instilling the habit of financial prudence and protection, you’re essentially building a moat around your finances. You work hard to earn and save your money – make sure it’s safeguarded. The peace of mind you get from knowing you’re insured, legally prepared, and security-conscious is huge. It lets you pursue your financial goals with confidence, knowing you’ve minimized the risk of disaster. While we hope to never need these safety nets, good money habits include being prepared for the unexpected as part of a solid financial foundation.

Start Small, Stay Consistent, and Reap the Rewards

Embarking on these habits may feel like a lot to take in – but remember, you don’t have to master them all at once. The journey to financial well-being is a marathon, not a sprint. The key is to start small and be consistent. Pick one or two of these best money habits for young adults and focus on implementing them this month. Maybe you create a simple budget and set up a £50 automatic savings transfer. That’s a fantastic start! As that becomes comfortable, add another habit, like tackling a bit of debt or reading a personal finance book.

The wonderful thing about building good habits is that they snowball. Small wins give you confidence to take on bigger challenges. For example, once you’ve saved a £1,000 emergency fund, you’ll feel empowered to invest your next £1,000, and so on. Each habit reinforces the others – budgeting helps you find money to save; saving gives you funds to invest; learning more improves all your decisions. Over time, you’ll notice your financial stress going down and your financial confidence growing.

To recap, we covered a lot of ground:

• Budgeting to take control of your spending.
• Saving consistently (even a little) and automating it.
• Building an emergency fund to stay prepared.
• Living below your means and avoiding lifestyle creep.
• Using credit cards wisely and building a solid credit score.
• Paying off high-interest debt before it snowballs.
• Investing early to harness compounding gains.
• Setting clear goals to give your money direction.
• Continuously learning to boost your financial literacy
• Protecting your finances with insurance and smart choices.

By adopting these habits, you’re laying the groundwork for a secure financial future. Imagine yourself a few years down the road: less worried about making rent, watching your savings and investments grow, and feeling confident to make big life moves (like career changes or buying a home) because your finances are in order. That’s the payoff of the effort you invest today.

Lastly, be patient and kind to yourself. Everyone’s financial journey has ups and downs. You might slip up – overspend one month or miss a savings goal – but what matters is getting back on track. Each paycheck is a new opportunity to make progress. Keep your eye on the bigger picture and celebrate how far you’ve come. With these best money habits for young adults in your toolkit, you’re building not just wealth, but a lifetime of financial confidence and freedom. You’ve got this!