Top 5 Money Mistakes Young Adults Make in Their 20s (and How to Fix Them)
Top 5 Money Mistakes Young Adults Make in Their 20s (and How to Fix Them)
Your 20s are full of opportunities, challenges, and choices that can shape the rest of your life. Career, relationships, independence - it’s all happening at once. And while money might not feel like the most urgent priority right now, the habits you build in this decade will echo for years to come.
Here’s the reality: most young adults stumble into a few predictable money mistakes. The good news? Once you know what they are, you can avoid them (or fix them) before they cost you years of stress and wasted potential.
Let’s break down the top five money mistakes young adults make in their 20s, and more importantly, how to fix them.
1. Living Paycheck to Paycheck
The mistake: Spending every cent you earn as soon as it hits your account.
It feels normal, especially when rent, food, and social life swallow most of your income. But living with no buffer keeps you stuck in survival mode. One unexpected bill, car repair, or lost shift at work can push you into debt.
The fix:
Automate saving. Even 5–10% of your pay matters.
Open a separate “safety buffer” account and set up an automatic transfer on payday.
Think of it as paying yourself first. Before bills, before fun.
It’s less about the amount and more about creating the habit. Once that muscle is built, you can increase the percentage.
2. Relying on Credit Cards & Buy Now, Pay Later
The mistake: Treating credit as free money.
Credit cards and BNPL apps (Afterpay, Zip) make it dangerously easy to spend money you don’t actually have. The trap? You’re paying for today’s lifestyle with tomorrow’s income, plus interest. It costs way more than you think.
Why it matters:
Interest rates on credit cards average 15–20%.
BNPL late fees sneak up quickly.
Constant debt means your future pay is already spoken for.
The fix:
Build a $500–$1,000 emergency fund as soon as possible so you’re not forced to rely on debt.
If you have a card, commit to paying it off in full every month. No excuses. This habit alone will save you thousands in interest through your adult life.
Can’t do that? Cut it up, delete the app, and go debit-only.
The real power move in your 20s isn’t buying stuff to show off, but building a strong financial foundation for the future.
3. Not Tracking Where Your Money Goes
The mistake: Spending blindly and wondering why your account is always empty.
It’s easy to underestimate daily spending. $8 coffee runs, Uber Eats, weekend blowouts - they add up faster than you realise. When you don’t track, you can’t improve.
The fix:
Use a simple framework: 50/30/20 (50% needs, 30% wants, 20% savings/investing).
Download a budgeting app or even track manually for 30 days. The awareness alone is a game changer.
Give every dollar a job: rent, savings, food, fun. When you know your numbers, you’re in control.
Budgeting doesn't need to be restrictive. Knowing where your money goes means you can enjoy life and still make progress.
4. Ignoring Investing & Wealth Building
The mistake: Believing you’ll “start later” when you earn more.
This is probably the biggest opportunity cost of your 20s. You might think investing is for people in their 30s or 40s with “real” money. Wrong. Your biggest advantage right now isn’t the amount you invest. It’s time.
Why it matters:
$200 a month invested in your 20s can grow to over $200,000 by age 40 (thanks to compounding).
Wait until your 30s? You’d need to invest almost double to catch up.
The fix:
Start small. Even $20 a week into a micro-investing app is better than nothing.
Learn about superannuation, ETFs, and index funds - simple, long-term wealth builders.
Focus less on “picking the right stock” and more on building the consistent habit of investing.
Wealth is built in decades, not days. Starting early gives you a head start most people never catch.
5. Not Building Money Confidence
The mistake: Believing money is “too hard” or that you’re just “bad with money.”
This belief stops you from asking questions, learning, and improving. It keeps you relying on partners, parents, or banks to make decisions for you, and that costs you independence.
The fix:
Shift your mindset: money isn’t about being a maths genius, it’s about building habits.
Read one book, listen to one podcast, or take one course on money each month.
Talk openly about money with friends. Break the taboo and learn together.
Confidence isn’t built overnight. But every small win, whether its paying off debt, saving your first $1k, investing your first $100 - builds proof that you can do this.
Final Thoughts: Your 20s Are the Launchpad
Here’s the truth: your 20s aren’t about being perfect with money. They’re about avoiding the big mistakes, building simple habits, and setting yourself up for freedom and independence.
Most people don’t take money seriously until they hit 30 and feel behind. By starting now, you’re years ahead.
👉 Ready to build money confidence, independence, and the life you actually want...? Join The Compound Club. It’s a community designed for young adults who want practical coaching, accountability, and the tools to avoid these mistakes for good.
