Skip to content

How to Invest Money In Your 20s (And Become a Deca-Millionaire!!)

Wondering how to invest money in your 20s? And also, in the same vain, you might be wondering where to invest and how much to invest in your 20s. These aren’t easy answers for a 20 year old! But let me tell you, the benefits of investing in your 20s are unbelievable! 

Not only should you learn how to invest and save in your 20s, but you should take action as well! Even if you need to start with very little, it will be worth it.

Start investing in your 20s. You’ll never regret it!

This post was written by our staff writer, Lindsey Smith!

Investing Early In Life – How About In Your 20s?

Many 20-year-olds push off the idea of investing, especially for retirement, to the future. After all, you have rent, utilities, car payments, student loan payments, and still need to have a little room for fun. But investing in your 20s puts you at the biggest advantage for the future.


The smartest time to invest for a 20-year-old is right now. Time is the most important asset when it comes to investing, and you have all of it in front of you. This is the biggest benefit to investing in your 20’s. The power of compounding means that the opportunity for growing your wealth exponentially starts early.

Related: Why You Should Start Investing at an Early Age

How to Invest Money In Your 20s (and WHAT to invest in in your 20s!)You’re probably thinking that’s great, but…

  • How can a 20 year old start investing?
  • How should I invest my money in my 20s?
  • Where should I invest money in my 20s?

The most basic thing you need to know now is to just start.

It doesn’t matter how small the amount, put your dollars to work for you right now. If you want to know the how and the where, follow along with this step-by-step guide on how to invest money in your 20s.

Related: Worst Suze Orman Advice to Date

Benefits to Investing in Your 20s

Too many people wait till they’re in their late 30s or early 40s to start investing. It’s not a terrible thing, but it’s much more difficult that way.

There are two huge benefits to investing in your 20s:

  1. the power of time and compounding interest
  2. the power of long-term habit

The biggest benefit to investing in your 20s is time

While you may not make as much money in your 20’s as your older peers, your age gives you a huge superpower. And that is the power of compounding. Your money will grow exponentially on itself. So a person who starts investing just a few years earlier can end up with many times more money when they retire than they would if they’d started later in life. Even small amounts can amass a ton of wealth. 

Here’s a quick example. 

If you earn 10% a year, you’ll double your money every 7 years. If you start investing $1,000 a month at age 35, you’ll have approximately $2.7 million by the time you’re 67 years old. Pretty good, right?

What if you started investing at age 28 (ie. 7 years earlier)?

You could have had roughly $5.5 million.

What if you started investing at age 21 (ie. yet another 7 years earlier)?

You could have had $11 million!

THAT’S one of the biggest benefits to investing in your 20s! Compounding interest is just insane.

Investing in your 20sThe next largest benefit to investing in your 20s is habit

Habit is a powerful thing. It can either make you very wealthy (with the right habits) or incredibly broke (with the wrong ones).

If you start out your life with the habit of investing $1,000 a month at age 21 and do it for 15 years, do you think it would be pretty easy to make that $1,000 contribution at age 36? 


But what if you never saved or invested any money until you turned 36? Do you think it might be tough to start dishing out $1,000 a month at that point? 

Yup! That’s why the older people get, the less likely they will be to start investing. 

Want to become wealthy! Start investing NOW! Even if it’s a small amount each month, you’ll start the habit and investing greater amounts in the future will just be that much easier!

Related: How a Tiny Habit Can Change Your Whole Life

How to Invest Money in Your 20s

Now that you know why you should invest in your 20s, it’s time to learn how to invest money in your 20s.

It’s safe to assume that you’re pretty excited about the prospect of getting ahead by starting now, but what do you do first?

If you want to know how to invest in your twenties, take note of the steps below!

1) Know Where You Stand

Before you start investing as a 20 year old, you first need to take an account of where you stand financially.

Start by getting really clear on what your finances look like right now. Before you can figure out where you’re going, you need to know where you are. There’s no sense setting grandiose goals on a shoestring budget, essentially setting yourself up for failure. Success comes in manageable bites, so it’s time to get really honest about what you’re earning, spending, and saving.

  • Write down what you’re making,
  • what your non-negotiable expenses are (things like rent, insurance, utilities),
  • what you spend on fun (dining out, shopping),
  • and how much (if any) you’re currently saving.

If you, like most people, have student loan debt, you’ll also want to start putting a significant amount of money towards that to pay them down as quickly as possible. You don’t want this debt increasing exponentially, so making a substantial effort towards this debt now is wise.

Related: Should I Pay Off My Student Loans? (Or Will They Be Forgiven?!)

Emergency Fund2) Emergency Fund

Next, you’ll want to save up a couple thousand for an emergency fund. This will help protect you from going off the rails in your budget and investment strategy when something inevitably happens. If your car breaks down, or you lose your job temporarily, having an emergency fund to fall back on is essential to keep all your hard work safe.

How much you decide to save for your beginner emergency fund can vary, but to start I’d recommend $2,000. That should cover you for most emergencies, and you can continue to add to it slowly over time if you’d like it to be a little bit bigger, like 3-6 months worth of expenses. 

Related: How to Build an Emergency From Scratch

3) Decide What You Want to Accomplish With Your Money

Wondering, “How can a 20 year old start investing?” It all starts with a simple decision. First you decide, then you take action. It’s that simple.

Knowing what you want your money to achieve for you is really important to firm up. Of course we all want to have fun, but what else do you need and want? Think about the top three things you want to accomplish, and then you can better shape your investment decisions around it.

For example, if you’re thinking about investing for shorter-term goals, like saving up a down payment for a house, you might pick more conservative investments or simply saving the cash. But if you’re looking long-term, like retirement, you can have a small amount of conservative holdings and a large amount of stocks. 

Keep in mind that one of the ways to be most successful with investing is the time you spend in the market, so in your 20’s you have the advantage of being able to take on more risk. You have the time to wait out market volatility and the most opportunity for growth (so start investing sooner rather than later!!)

Related: How to Become Rich – 9 Actionable Steps!!

Make a plan with your money4) Make a Plan

If you’re asking yourself, “How can I invest myself in my 20s?” It’s actually fairly simple. Do a little research and make a plan. Then do it!

Just like when we looked at our current budget, writing down a step-by-step plan that maps to your financial goals is essential to help you reach them. Like before, small manageable steps are much easier to realize than only seeing the big picture.

So whatever your goals may be, reverse engineer them to find out how much you need to set aside to meet that goal.

You’ll want to:

  • lock down your investment strategy (your mix of investments, where your money is going),
  • how much you’ll invest (15% is a good target),
  • and how often you’ll contribute (weekly, monthly, etc.)

Related: How to Make 2 Million Dollars (Realistically)!

5) Get Your Employer Matched 401k

Many people have asked me how to invest money in your 20s to be wealthy in your 30s…and most often this starts with the 401k match!

The 401k match is often the easiest way to just start investing.

If your employer matches your contributions, it’s a no-brainer to start here. That is free money, so you don’t want to walk away from it!

Many people are automatically enrolled in the program, but it’s not a bad idea to talk to Human Resources to find out how much is being contributed. A good number to start at is 10-15%.

Often times, you need to reach $3,000 in your 401k to be eligible for the employer-match, so put as much as you can into this account to reach that.

Investing your money6) Roth IRA/IRA

If you don’t have a workplace plan, you’re self-employed, or you’ve reached the amount to receive your employer-match in your 401k, you can allocate some funds to a Roth IRA. What’s great about this account is that it grows tax-free forever. You’ll also get to choose where your money is allocated, something that’s not always an option with a 401k. 

How should I invest my money in my 20s? Our top tips:

  1. Just start. Don’t get hung up on all the specifics. It’s better to get your money into the market and doing something for you, and you can always adjust as you learn. 
  2. Even if you can only put a tiny bit into investing every month, it will add up in your favor. Contribute what you can until you can contribute what you want.
  3. Use the 50-30-20 rule: 50% of your income should go to needs, 30% to wants, and 20% to saving/investing.
  4. AUTOMATE. When the money is automatically taken out of your pay or your account, you won’t miss it. And this is the way to guarantee growth.
  5. Diversify your investments. You want to avoid holding trendy investments, and make sure that your investments cross a wide variety of industries and sectors.
  6. Start with passive investments. You’re not likely going to beat the market, so the best thing you can do is put your money in, and keep your hands off. 

Where Should I Invest Money in My 20s?

We first started with the benefits to investing in your 20s, then we went into how to invest money in your 20s, and finally we’re going to discuss where you should invest money in your 20s.

Smart investments for 20 year olds

There are smart investments for 20-year-olds to make to maximize the compounding and time potential that you have on your side. Like we mentioned above, start by maxing out your retirement accounts, since they offer tax-free growth and free money (like employer matching). 

Stocks to Invest in in Your 20s? 

You’re young and you might not know much about investing. So what’s the right answer? What stocks should you invest in in your 20s?

Target-date retirement funds

They take a lot of the guesswork out of investing for you. All you need to know is how much you want to put in and what date you want to retire. The fund adjusts for you, so now, when you have a lot of time before retirement the investments will be more aggressive, but as you get closer to your retirement date, it will automatically adjust to more conservative investments. 

index investingIndex Funds

As we said in our tips above, passive investments are one of the ways to all but guarantee successful investment growth.

Index funds, which are stocks and bonds that track the performance of the market, don’t require anyone to manage them. They have some of the lowest expense ratios (the fees levied for fund management) and are easy to buy.

Something like the Vanguard S&P 500 ETF (VOO) would be a solid choice for a new investor. It tracks the S&P 500 market index, which is the 500 top performing companies in the U.S. By owning this fund, you’ll own small pieces of the top 500 companies, including Apple, Tesla, Google, and Amazon.

Related: How to Invest in VOO (…And What Is It Really??)

Real Estate

Real estate is another popular choice, though it can range from hands-off to very hands-on, and from a stable investment to a volatile one. It’s all in the execution.

If you want to dip your toe in, you can purchase REIT ETFs, or Real Estate Investment Trusts Exchange-Traded Fund.

A REIT is a group of investors that buy bigger properties, like apartment buildings and commercial office buildings. An exchange-traded fund is simply an index fund that can be traded like a stock.

You could also invest in physical real estate, perhaps by purchasing a duplex and living on one side while renting out the other. 

Related: Top Sources of Passive Income For Wealth! (It’s Time to Be Rich!!)

Young girl on computerHow Much to Invest in Your 20s

So you know it’s a good idea to invest in your twenties now. And you know how and where to invest in your 20s. Now there’s really only one bit of info that’s yet to be answered: How much to invest in your 20s!

There are potentially two answers here, and they depend on your current financial status. 

If you have consumer debt (ie. any debt other than your home mortgage), then you shouldn’t invest more than your 401k match amount. Instead, you should focus on getting out of debt (free debt snowball tool here!).

If you don’t have any consumer debt, then the answer is even simpler. Invest as much as you can (while still having a little bit of fun here and there)!! At minimum, you should be investing 15%. If you can, I would encourage you to save and invest 25% or more. Believe me, you’ll never regret having hundreds of thousands of dollars in your retirement already in your 30s!

How to Invest Money in Your 20s – You Know How, Now Do It!

It’s time to sit down and assess what you’re working with, and create some goals. Maybe you decide to live in a cheaper house or drive an older car, so that you can still have some fun and start investing.

What is most important to you?

This is your chance to design the life you want in a simple and efficient way. 

Remember, you don’t have to do it all in your 20s either. You have time to learn and grow, to try different investment strategies and allocate more money to savings. The point is to start now, set aside what you can, and never stop learning about investing.

Are you read to save and invest in your 20s? I sure hope so! It’s the absolute best time to start!

Grow Rich Investing Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

Related posts