Getting smart about money is a process that can take time. While some people appear to have their finances in order from a young age, others take a little longer to understand the importance of managing credit responsibly and keeping an eye on that all-important credit score.

Discover It Card

Earn big‑time cash back that never expires.

Check out some of the common financial mistakes to which people who are new to credit may be susceptible and consider these tips for avoiding them:

1. Always Pay Your Bills on Time

From getting a job to moving out of your parents’ house, a lot of important milestones can happen before a person turns 30. But one mistake that young people can make is failing to understand the importance of paying all of your bills on time.

While missing a bill might not seem like a big deal at the time, it could negatively impact your credit score. And if it happens regularly, your chances of buying a house or securing a credit card or loan could be more difficult. While not always easy, paying your bills on time is a simple way to help keep your credit score and financial reputation in good standing.

2. Don’t Be Afraid to Renegotiate With Providers

Robin Abrams, finance director at Trade Finance Global, tells Discover, “Most gas and electricity suppliers offer cheap introductory tariffs for consumers, which end after six to 12 months. You will then default to another tariff, which is normally a lot more expensive.” By staying savvy and keeping an eye on exactly what you’re paying out for household bills, you could continue to save money and ensure that you don’t overspend without needing to.

3. Have an Emergency Fund

Regardless of how much you’re earning, it’s a good idea to have a financial buffer. While this might not seem crucial in your 20s, having some spare cash squirreled away could save your bacon later on.

According to NerdWallet, the value of having an emergency fund is that in the event of a crisis, like a card repair or sudden layoff from work, you could have some coverage to help you manage those unexpected expenses. While these might not seem like pressing concerns when you’re 20, you never know what life is going to throw at you — all the more reason to have an emergency fund.

As for how much cash should be in your emergency fund, NerdWallet suggests that if your financial situation allows, 3-6 months worth of living expenses is a good amount to have saved.

4. Start Saving as Early as Possible

Much like the idea of an emergency fund, many people don’t view savings accounts as an essential when they’re just starting out on their own. However, once you have a regular income, it’s a great idea to start saving for the future.

Flora Maudsley-Barton, managing director of Parsonage Financial Planning, tells Discover, “My advice to anybody in their 20s is not to wait until their 30s to start saving — start now!” Even just putting away $20 a month could make a big difference down the line.

As Maudsley-Barton says, starting a savings account early “instills a savings attitude that will make it easier to continue to put money aside further down the line.”

5. Budget, Even If It Seems Boring

The word “budgeting” may not be in everyone’s vocabulary, but it should be. While learning to budget is somewhat of an acquired skill, it’s absolutely essential to take your spending patterns and outgoing expenses seriously.

Abrams tells Discover that “there are simple online platforms that can pull your bank account details into one place and give you a weekly email update on your spending patterns. It’s easier to set budgets and get notified about your finances in real time.”

Taking your finances seriously as early as possible, can make all the difference to your financial health.

6. Use Credit With Care

Learning to manage your credit and use it wisely can be an important lesson of your 20s. Keeping your credit utilization low, and paying your bills on time, can be beneficial to your credit. Also, it can be important to stay on top of your bills so that debt doesn’t mount.

It’s never too early to start managing your finances and ensure that you’re utilizing your credit effectively.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.