Savings Mistakes You’ll Make in Your 20’s – and How to Avoid Them

By Dave Clarke

Dave Clarke is the Communications Strategist at Churnless, a company that helps entrepreneurs. He originally wrote this article for Follow Dave on Twitter: @thedaveclarke.

Let's face it - 20-somethings are pretty lousy when it comes to saving money. They simply don't do it all that much. According to the Pew Research Center, less than 3 out of 10 people age 18-29 call themselves "savers." The reasons are obvious: debt (student loan, credit card, or otherwise), rents, car payments, food, internet, cable, cell, insurance, fun ... the list goes on. The typical, in-the-now 20-something lifestyle just doesn't seem conducive to saving.

But that doesn't have to be the case. Implementing good saving habits in your 20s is possible - and it can have an incredible impact on your financial future. To help illustrate, I've identified a few savings mistakes that seem to plague 20-somethings. But instead of just sharing the mistakes, I'll do you one better: I've included some advice on how to avoid them.

1. Not starting. Unsurprisingly, most folks in their 20s - particularly in the years after college - don't make saving a priority. The Pew Research Center also notes that nearly 75 percent of this age bracket says they should be saving more. However, this life stage is one of the best times to build savings as you're usually just on the outside of the kids/family/home ownership phase. Think of it this way: save now before that money goes towards daycare and gutter replacement. Half the battle is just having an account to put the money in, so take the time now to open up a savings account while you're ahead of more expensive life stages and feed it little-by-little.

2. Misunderstanding saving. Keeping a robust checking account is not saving. It's storing. And most people in their 20s tend to use the checking account they opened in college as their primary financial tool. In most checking accounts, money just comes and goes: it doesn't do anything. Money in a savings account works for you by earning interest. And psychologists have shown that people are less likely to make splurge purchases from their savings account. To figure out how much you need to keep in your checking account, total up your usual monthly expenses and make sure you have that as a buffer in your account at all times. Anything left over? Straight to savings.

3. Forgetting the power of small numbers. It doesn't take much to start saving - particularly in your 20s. There's no need to dump $1,000 a month into a savings account - chances are, that will have a serious impact on your day-to-day life. Saving, especially early on, can be done in baby steps. Set up a savings account that automatically withdraws a small amount - as little as $25 - from your checking account each month. At that rate, by the time your near 30, you'll have saved nearly $3,000 plus interest. Also consider setting up an automatic deposit plan from your paycheck.

4. Two words: compound interest. Do a quick internet search on the difference between someone who started saving through their retirement tools (i.e., a 401K) at age 25 versus someone who started at 35. If you want to retire at 65, you'll need to save just about 10 percent of your income if you start at 25; however, if you start at 35, that figure nears 20 percent. The less time you have the harder it is. The thought of retirement seems so foreign to 20-somethings it's often not considered as a saving option, or it's so overwhelmingly full of choice that considering a strategy seems daunting. But your employer's human resources staff is trained to help, so schedule a meeting with your benefits administrator and see what programs they have in place. This can be a great way to get a head start on saving for the long-term in a tax-free way.

Bottom line, your 20s are a great time to start saving. And the best part is you can start small. Examine the financial tools you're currently using, make sure you have a good high-interest savings account, consider signing up for a free personal finance management site like Thrive to get a complete picture of your money, talk to your employer about retirement programs, and, most importantly, start saving!