The 11 Worst Money Habits Of 20-Somethings And How To Fix Them

20-somethings aren’t always as careful with their money as they should be.

I reached out to my coworkers and friends to see what they consider to be their worst money habits, and have highlighted the most common ones here.

Research shows that they aren’t alone in their bad habits … and full disclosure: I’m guilty of some of these, too.

1. Not saving enough -- or at all

Keep some money in the bank.

There's a difference between knowing you should save and actually doing it.

According to a USA/Bank of America Better Money Habits poll, about 20% of Millennials haven't started saving. While 69% have a savings account, most have less than $US5,000 in it.

When it comes to saving, retirement contributions can be a great place to start.

You can contribute to your employer's 401(k) plan if it offers one -- and if it matches your contributions, you'll want to seriously consider it -- or you can look into other account options, such as a Roth IRA.

By having your contributions automated, either to your 401(k) before you get your paycheck or from your checking account to an IRA or Roth IRA once your check hits, you can stash away some cash without even noticing.

2. Not being educated about their student loans

Know the costs before you enroll.

The class of 2014 is the most indebted class thus far. The average class of 2014 graduate will be stuck paying off $US33,000 in student loan debt.

With numbers as high as these, you would think students and graduates would be well aware of their debt. Turns out many of them aren't.

A report issued by the Brookings Institute found that 28% of students with federal loans reported having no federal debt, and 14% with federal loans said they had no student debt at all.

Student loan debt accrues interest, meaning the longer you take to pay it, the more you pay overall. Even if you need a while to make those payments, the sooner you start, the better.

Take some advice from a man who paid off $US74,000 of debt in two years, or another in his mid-20s who paid off $US81,000 in under three years.

3. Spending unnecessary money on the short term

Riding the subway won't kill you.

When I asked my friends and coworkers for their worst money habits, they all agreed on drinks out and subsequent Uber and cab rides home. Many also admitted to frequent lattes and buying lunch every day.

Moderation is key, here. There's no problem with doing these things when you can afford it, but if you find yourself doing them all the time and feeling a little tight in the wallet, it might be time to find some alternatives -- even those as simple taking the subway, walking, and packing a lunch.

Here's how I keep my expenses down while living in New York City.

4. Using credit cards to pay for bills and daily necessities

Budget for groceries.

A survey conducted by the American Institute of Certified Public Accountants found that almost half of Millennials surveyed had to use their credit cards to buy necessities such as food, or to pay utility bills.

Just using credit cards isn't necessarily problematic, but if you can't pay the bill when it comes, you might be on a fast track to credit card debt.

Many people use credit cards to buy now, pay later, but it's not a smart habit to take on. Besides the fact that this mindset might allow you to essentially spend money you don't have, public utilities often charge higher fees for those who use a credit card as opposed to a debit card to pay bills.

If you find yourself unable to cover your necessary living expenses without relying on a credit card, it might be time to restructure your budget -- or make one.

7. Being too risky with investments

Millennials are a little too eager to take risks.

While many Millennials don't invest, the ones who do might be doing so a little too aggressively.

Data collected by investing app Openfolio shows that out of 2,500 of their users, those under the age of 25 are taking the most financial risk, but receiving returns three times lower than older users who aren't taking on nearly as much.

According to the Openfolio data, younger investors often buy stock in 'favourite companies' and try too hard to win big fast.

This is in direct opposition to investing strategies recommended by experts such as Warren Buffett, who recommends putting money in index funds to grow it slowly and surely.

8. Not having enough insurance

It only takes one accident.

When you're young it's easy to think you're invincible -- but the fact is, you're not.

According to a survey from, 18-to-29-year-olds are the generation least likely to have any type of insurance, including auto, renters or homeowners, disability, or life insurance. And only a quarter of that age group has health insurance -- arguably the most important kind.

Under the Affordable Care Act, those without health insurance are fined for their lack of coverage. In 2015, the maximum penalty for an adult without health insurance is $US325 (up from $US95 in 2014).

The young adult's guide to affordable health insurance can help you figure out where to start.

10. Being overly influenced by how their friends spend

You don't have to do everything your friends do.

You've probably heard of 'keeping up with the Joneses.' Here's the 20-something version of that: basing decisions such as where to live, what to wear, where to eat, and what gadgets to buy on their friends.

A survey conducted by the American Institute of Certified Public Accountants found that over three quarters (78%) of 25-to-34-year-olds use their friends' financial habits to determine their own.

Be aware of friends who tempt or pressure you to spend too much money. Just because your friend can afford to buy the latest iPhone and live in a high-rent neighbourhood doesn't necessarily mean you can, too. And besides, research has shown that if you and a friend both turn down an expensive purchase you can't afford, it will actually strengthen your relationship.

11. Being financially illiterate

Take the time to learn it.

A study conducted by FINRA found that only 24% of older millennials could answer four or five questions correctly on a five-question financial literacy quiz. That number dropped to 18% for people ages 18-26.

The most common response I get from friends when I tell them I write about personal finance is something along the lines of, 'Awesome; you need to teach me how to manage my money!'

The more you educate yourself on financial topics, the less likely you are to develop bad money habits like the ones on this list. Make sure you know these basic money concepts first, and then check out some of the free websites that give sound money advice.

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