7 Skill to Grow your Financial Literacy in your 20s

Financial Skills 101

7 Financial Skills Every 20 year old needs to learn to beginning growing their wealth exponentially from the very beginning
Financial health begins Early!

Time Is Of The Essence

Growing your financial literacy in your 20s will set you up for wealth generation for the rest of your life. It’s never too early to start learning about financial responsibility. For 20-year-olds or even teenagers, your young, your minds are pliable, your credit is pristine.

This is the perfect time to start building good habits that will last a lifetime. From saving and investing to budgeting and credit management, there are a number of essential skills to master. Some are obvious, others not so much. They all seem daunting at first, but they can be mastered with a time, consistency and effort. And none of them require a financial advisor to get started.

1) Time Management

Time moves on with or without you. Fortunes are made with or without you. Wealth is grown with or without you.

The first Skill you’ll need to master is time management. Pretty much everything flows from this solid foundation. If you learn early about important financial skills, tips and tricks, you will position yourself to achieve your financial goals throughout your life. Knowing this also helps you to prioritize financial choices.

As you you’ll see throughout this article, starting early gives you an advantage in many fields and pursuits. And compressing timeframes, and giving yourself back more time is required to grow your wealth.

Start Early

The first lesson in time management is that starting early gives you a leg up on just about everything.

You want to have a seven figure portfolio, start investing when you’re 18. Want to grow your skills to earn more money, wake up early and tackle self improvement tasks such as certifications, studying for interviews or to pass classes for college etc, do those things first and do them early. Do you want to save money for large expenses, start early, with your first couple of pay checks.

Time Budgets

Time management is important as well. Be purposeful with how you manage your time. You also need to budget time to keep the lights on (that means any work you do for your base income), You need to budget time to fix things that are broken (whether that is repairing your credit, evaluating non-performing investments, etc), that needs to be taken into account.

You also need to budget for relaxation and unwinding. You are not a robot, and you need to relax, decompress, enjoy your hobbies and time with family and people and things you love that recharge your batteries.

That includes scheduling time to binge Netflix, play your favorite video games, attend your favorite sporting events. That also includes setting aside time for vacations, sabbaticals if need be, and purposeful decompression time on the weekends. You can’t grind continuously without burning yourself out, which will affect your health, which will affect your ability to grow your wealth.

Get Some Time Back

Also keep in mind that giving yourself some time back is key to growing your wealth. Reclaiming time manifests itself in a number of ways.


Whenever you can automate a process, whether with a script on your phone or laptop, or just an app on either, definitely consider doing it.

There is usually a financial cost with the app side of it, but definitely consider it. The amount you pay for the automation should be considered you purchasing more time to pursue higher value-add activities.

financial automation can increase your wealth


Hiring someone else to do tasks that you do not have the time or aptitude to do is also a way to purchase back some of your time.


Focusing is another great way to get your time back. A lot of us millennials and zoomers are into apps that just distract us and pull us away from being able to execute efficiently. We talked about Budgeting time a little earlier, add screen time into your time budget. Whether thats your phone or your Netflix account (on your phone). Pick times in the day when you will check certain social media accounts, certain apps that you use frequently and Just leave it at that.

2) Understanding Compound Interest

A dirty little secret about finance in general is that the Rich get Richernot because of tax loopholes, not because of insider deals, not because of political connections, but because of compound interest.

Now having all of those things certainly helps, either kickstarting the process, continuing the process or expanding the process, but ultimately the reason for continued expanse of wealth by people who have wealth and know how to deploy it is the effects of compounding. By the way, this in not an article endorsing tax loopholes, insider deals, or political connections, this is an article about learning the real secret sauce of wealth generation. And no, you don’t need any of those things to start off or continue on the journey to financial success.

How Compound Interest Works

The Equation

The way compound interest is often calculated is by multiplying the initial principle amount by one plus the annual interest rate raised to the number of compound periods minus one. The total initial amount of the loan is then subtracted from the resulting value …

CI: V = P ( 1 + [ r / n ] )n*t

Illustration of Effect of Compound Interest on 1000 dollars after 15 years of consistent investment

Effect of Compound Interest on 1000 dollars after 15 years of consistent investment


  • V = the value of investment at the end of the time period
  • P = the principal amount (the initial amount invested)
  • r = the annual interest rate
  • n = the annual frequency of compounding (how many times a year interest is added)
  • t = the number of years the money is invested

Don’t worry about the equations or the math behind it. While they are important, plenty of people have done just fine without whipping out their slide rules, or scientific calculators, and plugging in numbers into equations.

An even better way to understand this concept is to compare it with simple interest, which is only payed on the principle. If you were to earn 5 Percent annual interest on a deposit you made at a local bank of 100 dollars (a ludicrously high interest rate btw, that few if any banks today would offer) after a years time, the bank would pay you 5 dollars.

Meaning that you would have 105 dollars in your bank account instead of the 100 dollars you started out with. Excellent, you have your money working for you, you just need to come up with a way for it work faster and more efficiently.

Year 2 is when the magic starts to happen though. Since you have 105 dollars in the bank account now, and you are still earning 5% interest on your deposit, the bank will now pay you $5.25 cents on your deposit (5% of one hundred and five dollars).

Year 3 You still only deposited 100 dollars at year zero and have done nothing else, you now earn 5 dollars and fifty one cents. So you now have $one hundred and fifteen dollars and Seventy six cents.

Rule Of 72

This rule of thumb tells you what it takes to double your money . Simply look at the rate you earn and the length of time you will be earning that rate and you know how quickly your money will double.

For example if you put 1000 into a bank at 5 % interest, it will take 14 years roughly for that money to double or 72 divided by 5.

The Benefits Of Compound Interest on your financial future

The more you earn and save, the more you can earn and save. This is one of the most important principles in personal finance. As you earn more, your money grows. And as your money grows, it gives you the ability to earn more. Understanding and using compounding interest will help you create positive financial habits from the start. It’s not complicated. Put $100 in a savings account and see how it grows over time. You may have $110 in a few months, $120 in a year or more.

This is where the topic of time comes into play as well. If you start early, and you start saving and investing aggressively, you will reap the rewards of compound interest more fully! The earlier you start, the greater your gains!

The Risks Of Compound Interest

I am going to take the broad definition of risk here for this part of the discussion. If you save or invest money and do it consistently, compounding interest will grow your wealth.Though there are minor risks that are often realized however. For example:

  • Not starting early enough, not being consistent enough, not investing with enough volume to take advantage. If you start later you risk not being able to take advantage of compounding interests effects. If you are not consistent, yes your investments will compound, but the speed of growth might be slow if you lack patience. If you are not investing enough, yes your investments will compound, but again, the speed with which your investment grows will be limited.
  • Compounding interest really starts providing significant gains after large sums of money have accumulated. This can happen with small nest eggs (again starting early is critical for this). But you cant expect miracles here. You either start off early with savings and investing or start to invest large sums of capital. Which leads us to the last risk
  • Relying on compounding interest in your savings, your 401K or other vehicle can leave you susceptible to not expanding your financial horizons. We’ll talk about that next as a matter of fact.
coins, currency, investment and time are all part of the exponential growth equation

Financial Literacy in your 20 and beyond is about consistency

3) Income Growth Hacking

Consistently growing your cash flow is so important for your financial literacy in your 20s yet so often left out of the discussion I made sure to include it in this article, because it is so important. Too often people achieve a certain income level and they settle at that level and rely on growth in income via yearly raises.

Don’t let that be you! You should always strive to achieve a higher level of income no matter where you are at currently. The more you earn money, the more you save money and the more your wealth will grow.

Are you a recent grand and earning a good wage at a decent job and saving and investing? Well, you should be looking at ways to expand your income. Are you a highly paid executive, social media star, or self-employed entrepreneur making a million or more a year? Well, you should be looking for ways to expand your income.

There are any numbers of ways to grow your income and they are all legitimate.

Gain More Skills Continually

or as I like to call it personal talent acquisition, and trade those skills for currency. This is commonly referred to a salary increase. Gaining valuable skills is the key to earning more money fast. If you are young then you should have time to explore what you are interested in and learn what pays well around that field and then find the intersection of those two to earn a good income.

A lot of people do that at college, but College is expensive and not for everyone. There are other paths, just be sure to commit to continuing education no matter what your stage in life is.

Switch Careers

One of the best ways to get a salary increase is to switch careers.

engineer, code, coding are great Jobs to grow your wealth

If you spend your entire career at one company, even if you climb the ladder successfully, you likely will only see a minimal annual salary increase every year.

One way to break out of that pattern is to job hop, which is a proven way to grow your income. Job hoping is going from one new Job to the next, typically every 2 to 4 years, and each time getting a little bit more of a salary increase (typically more than an annual raise).

But another not so talked about strategy is completely switching careers. Always be on the lookout for your next evolution and be prepared to switch it up when necessary (PRO tip: that is where gaining more skills really comes in handy).

4) Learning How To Budget Your Money

Learning how to Budget so you’ll have enough money month to month to invest and save is a critical skill improve your personal financial literacy in your 20s and later on in life as well. Budgeting Time, Talent and Treasure are all avenues to improve your financial life and arrows in a successful individuals quiver.

With Finances this is especially true, after all money saved is money earned. Knowing about budgeting basics is only part of the battle. You see, Budgeting is basically one Part tracking your income, one part getting your strategy down and two parts discipline.

Tracking Your Finances

Tracking your finances (Spending) is so crucial to your financial success I tried to get it as high up in this list as possible. There are other fundamentals you need to get down to do this right, IE making income, that need to be covered first. But without this one, your finances are likely going to be a mess, unless you have a really good memory.

Knowing what you spend, where you spend it, and with what frequency you spend it is critical to your ability to expand your wealth.

With this knowledge you can make adjustment where necessary, apply the appropriate levers to turn up the firehose on your savings and investments, figure out where you are losing or wasting money, and turn off the spigot.

Having a good memory is good, tracking your finances is better. That way there is no question of what you spent when, how much it was etc. It doesn’t have to be an app, they have their plusses and minuses, it could be real old school pen and paper. But apps help to automate the process which helps to save you time (and time is money, more money more wealth). But tracking is one one of the FOUR parts of Budgeting. You need a strategy.

Getting Your Strategy Down

There are many strategies for budgeting. They all have plusses and minuses. Picking one is crucial For your financial freedom.

Zero-Based Budget

What is zero-based budgeting? Zero-based budgeting is when every dollar a person earns is assigned to a budget category such as transportation or a retirement account . If you don’t use all the funds assigned to a specific category the funds can be rolled over to a different category

50/30/20 Budget

The 50/30/20 budget is a simple way to budget your money. You start by allocating 50% of your income to your essential expenses, such as rent, food, and transportation. 30% of your income is for your discretionary expenses, such as entertainment and dining out. 20% of your income is for savings and debt repayment. This budget can help you get a handle on your spending and make sure you are prioritizing your essential expenses.

Envelop Budget

One of the most common ways to budget is to use envelopes. This is where you would put cash for specific expenses into different envelopes. For example, you may have an envelope for groceries, one for entertainment, and one for gas. This can be a helpful way to budget, because it allows you to see exactly how much money you have for each expense. It can also help you to avoid overspending in one area, because you will only have the cash for that envelope.

dollars, envelope-budget method, money


1 Part Tracking 1 Part Strategy 2 Parts Discipline

Remember budgeting is 1 part tracking, 1 part strategy, and 2 parts discipline.

You have to make sure to stick to whatever plan works the best for you. That is one of the reason that there are so many types of budget strategies. There is no such thing as a one size fits all. Some might be hard to grasp, some might not work for how you get paid. Some might demotivate you to stick to it. But there is one out there that works.

Emergency Fund

Any financial advisor will tell you that an important part of any budget is taking a part of your monthly budget and earmarking it for your emergency fund. I will detail in a little bit how having an emergency fund can be part of the strategy for credit building, which will help power your financial future later in the article.
But just know that putting some money aside every month until you reach a certain level in is crucial to your financial success.

Budgeting Antipatterns

Which takes us to budgeting anti-patterns. There are several financial mistakes or anti-patterns that people get caught up in that keep them from succeeding with budgeting. And cause them to get stuck in bad money habits

Over-Reliance On Technology

There are a lot great app that help you with all of the above. So many that it can become hard to pick which one is the right one for you.

But eventually you need to pick just one (even if it is low-tech like just pen and paper, or just envelopes in the envelop strategy) and then role with it.

Technology is not going to magically make your budgeting work every month. If you spend more than you make every month, it doesn’t matter if you are tracking it with an app, or your budgeting app is telling you that you are not saving money.

Technology is a tool to help you train your budgeting muscles. Think of it as the weights or treadmill in the gym. Just getting a gym membership wont get you that six-pack that you really want will it? Neither will getting an app and still following all your bad habits. Discipline is the key to unlock your financial goals, finance apps are the locks.

5) Investing In Your Future

Investing in your future self really comes in a couple of different flavors, all of which improves your personal financial health. Investing in yourself, or physically taking money that you earn and purchasing physical things that will help you make more money in the future. Its kind of like the old adage, you spend money to make money.


The first thing people think of when they think of investing in themselves is education, and the first thing that comes to mind with education is college. And there is a good reason for that. People that are college educated are on average wealthier than those without college education, and in some studies it is not even close.

But it doesn’t have to be just a college education. College is becoming more and more expensive and there are legitimate questions over whether the expense of student loan debt via federal student loans or is really worth the return. There are many platforms out there, that can and do do a better job of really educating you and providing you the skills you need to succeed and grow your wealth exponentially.

continual education can grow wealth continually

But That is only one type of education. You can be targeted as well to learn more about investing.

Investing In Markets

There is also just straight up investing in your favorite markets: Stocks, Crypto, Options of various kinds, Commodities, Real Estate. This type of investing really is the vehicle that can grow your wealth exponentially. But if you haven’t invested in your education (in this case about these various markets), then this type of investing can be EXTREMELY painful for you.

So make sure you educate yourself before you dive into actual market investments by either taking a personal finance course or speaking with a certified financial planner.

They way you invest can be influenced by your investment goals. Are you simply interested in saving for retirement? Well the vehicle you can use for that includes a couple types of retirement accounts, including 401k’s and IRA’s. For a lot of people that is there retirement plan, and their only retirement account, their 401K.

If your employers has a matching program, which most of them do, you can get what amounts to free money if you invest at a certain threshold. Typically anywhere from a 2-4% match. We talked about this in the compound interest section, but you need to start saving for retirement as early as possible.

And your retirement fund, your retirement savings, your retirement plan really begin with your first job. So if you are thinking about retirement early in your career, your retirement planning later on becomes that much easier.

stock, trading, monitor

Side Hustles

If you are going to make real money in a side hustle, it is going to take an investment of BOTH your time AND your money, but it will pay off in dividends if you invest both consistently. You could grow your side hustle into your full time gig if you do it correctly and you get a little lucky.
Keeping in mind that luck is preparation meeting opportunity. If you don’t get in the game, you will miss all opportunities that come your way because you are not prepared or not even in the game.

But do not be afraid to invest in things like cloud server space, market research on trends and opportunities, SEO tools, etc. All of those things are relatively inexpensive and should be a part of your monthly budget (which we talked about a little bit earlier).

Why Investing And Not Saving?

In todays day and age, it is more important to invest money that it is to save money. There I said it.

Saving is important, saving 3-6 months of expenses as your emergency fund is very important, particularly in times like these or any times really. But the fact is simply saving your money, particularly in certain types of vehicles such as a Checking Account, Savings Account, Certificates of Deposits, is not going to get you the type of return that you are going to need to accelerate you wealth accumulation.

We talked about compound interest a little earlier, and yes, savings will compound and overtime you will accumulate quite a handsome some using savings alone. But I also talk about the fact that to accelerate wealth growth, you need to either start early with your savings, or grow the amount or frequency that save/invest to accelerate your wealth accumulation.

And today’s interest rates on an average checking account or saving account simply will not cut it if you are looking to grow your wealth. In some instances it will cut it if you are simply looking to not lose too much money, but with the inflation rate the way it is today, and with some savings accounts rates, you will be losing money.

There are great savings strategies out there like the CD-Ladder and others, but that should be lower on your priority queue and you should begin investing asap, because ultimately, savings strategies are a lot of effort and complexity, for simply an OK return.

You can’t go broke making a profit, but you should be focused on how to maximize your wealth building potential. Which should include building good credit.

6) Building Good Credit

Building good credit is very important, but not as foundational as the other skills listed here and its more than simply building a good credit score. Some people will tell you that credit is evil and you should avoid it at all cost. Not me, you should avoid being undisciplined in all areas of your life, and being undisciplined with credit is chief among those areas.

disciplined credit history can help to minimize credit card debt and improve your credit report

The Power Of Leverage

Understand that leverage is one of the mechanism that transforms average individuals into wealthy individuals. You need some way to indicate to the individuals that can give you the lever to lift your finances into the stratosphere, that you are the type of person that THEY CAN INVEST IN Because you will make them money.

I have heard in many circles that people shouldn’t focus on building their credit or focus on their credit report, because their credit report is just a number indicating how good you are at making other people money. I say EXACTLY!

If people who have money identify YOU as someone who can make them more money, you can then take advantage of that to make more money for yourself (Growing your wealth).

Investing in things like real estate is really hard when you don’t have cash on hand to buy a property out right, and nobody believes that you will pay them back, or they simply have no way of knowing if you will or if you wont. Find a way to communicate the message that you are the type of person that can be lent Millions of Dollars and pay that sum back with INTEREST. You do that, Slowly, by building good credit and a good credit history.

Credit Building Strategies

All credit building strategies need to start with the fundamentals, and that means paying off your credit card balance in full, every month, without fail.

If you have a credit card to simply pay for your common monthly Bills such as groceries, gas, utilities, that is a perfect scenario for building credit and paying off your balance monthly. There are a couple of scenarios where this can’t happen of course.

  • You have accumulated too much Credit Card debt and you balance is much larger than you can afford to pay back in a month.
  • You have a large purchase that you are planning to make that is again more than you can afford to payoff in a single month.
  • You have an emergency payment that you need to make

If you are in the first situation, then your focus should be getting out of credit card debt as quickly as possible. If you are in your 20s though, you likely are not in that situation. The second and third scenario are actually more common for people in their 20s. And both of those scenarios are ideal for both building your credit and maybe getting some credit card perks as well.

Strategies For Making Large Purchases With Credit Cards

Remember when I said saving is important. Well, it is for reasons just like this. For the third scenario where you need to make an emergency purchase, there is a school of thought that you should be making that purchase using your emergency fund. And yes, you should. But,

if you have saved up your emergency fund, and you have a credit card, you could put that emergency purchase on the credit card, and then pay it back immediately using your emergency fund.

Doing that, you will of course get any of the perks that you are do for that credit card (airline miles, hotel stays, etc), plus since you had the discipline to build up your emergency savings you will not have to carry that balance on your credit card and be in debt for a long period of time, paying interest, which hinders your ability to save and invest.

The same applies for making large purchases, such as Flatscreen TVs, Vacations, anything that you can think of. Set aside money for those things in your budget (which we discussed earlier) and when the time comes to make that large purchase, instead of paying out of your savings directly, put it on the card first, then immediately pay the credit card back.

Now of course, it takes time to build up your savings to be able to pull this strategy off, and you may not have that time in an emergency situation, or when you really need to make a large purchase.

In those instances it is not the worst thing in the world to carry a balance month to month. But just remember, you don’t want to do that in perpetuity. Because carrying debt for consumer goods (bad debt) is among the top reasons why the poor stay poor. Which is why you should avoid it.

7) Avoiding Bad Debt

Bad Debt Vs Good Debt

We talked just a little bit earlier about leverage and its ability to grow your wealth exponentially. Being able to purchase an asset that is worth hundreds of thousands of dollars while only paying tens of thousands of dollars initially is one of the best ways to grow your wealth. So in that sense leverage, which is debt, can power your financial future.

But at the same time, if you are in debt because you have several expensive restaurant on your credit card that you carry month-to-month, those meal you have already eaten and gotten the nutritional benefits out of, but you will be paying interest on it until it is fully payed off.

And every penny that you pay in interest is a penny that is not being saved or invested. And that opportunity costs compounds as well.

Being debt free is a good goal to shoot for in general. Just remember that all debt isn’t bad, but paying debt on consumer goods is. And you should avoid it if you want to grow your wealth. Maybe you don’t want to grow your wealth. Here are some helpful ways to get and grow your debt!


That is a lot to digest, but mastering those skills will undoubtedly put your wealth into the top 1 percent of all individuals on earth. Good luck!

External Resources:

Money Geek Compound interest Calculator

US Securities and Exchange Commission Interest Calculator

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