How to Build Wealth in Your 20s

If you’re in your 20s right now, you’re probably focused on getting your career off the ground. You might be thinking, What does retirement have to do with me? A lot, actually! That’s because Gen Z has the most to gain when it comes to saving for retirement and building wealth.

 

And while you’re facing some challenges on the road to building wealth—from concerns about affordability and the future of your job—you have one thing other generations don’t: lots of time.  

Listen up, Zoomers: You’re set to become the largest and wealthiest generation within the next 10 years.¹ But to make that happen, you have to use your time and resources wisely to build wealth so you can live and give like no one else later. And that journey starts right now with steering clear of debt.

Why Should You Avoid Debt in Your 20s?

Your income is your number one wealth-building tool. But debt payments hijack it. If a big chunk of your money goes to student loan or credit card payments, there’s none left over to save for emergencies or invest for your future.

While Gen Z doesn’t have as much overall debt compared to older generations, debt is still one of the biggest financial stumbling blocks 20-somethings face as they work toward their long-term money goals.

Gen Z’s average debt balance has grown the fastest among all the generations, increasing from $31,856 to $34,328 per person between late 2024 and 2025.² Student loans, credit cards and car loans are the biggest drivers of debt. And according to our research, 30% of Zoomers have maxed out a credit card!

Generation	Average Household Debt (2025)	Average Household Debt (2024)	Percentage Change
Generation Z (18–28)	$34,328	$31,856	+7.80%
Millennials (2-944)	$132,280	$130,154	+1.60%
Generation X (45–60)	$158,105	$159,390	-0.80%
Baby boomers (61–79)	$92,619	$94,561	-2.10%
Silent Generation (80+)	$38,460	$38,893	-1.10%3

 

If you have debt, use the debt snowball method to kick it to the curb as fast as you can. With the debt snowball, you pay off your debt starting with the smallest balance. Pay as much extra as you can on the smallest balance while making minimum payments on all your other debts. Once you’ve paid off the first debt, roll the payment you were making on it into the payment on the next-smallest debt.

You’ll build momentum as you knock out each balance, and that will keep you motivated to pay off all your consumer debt—credit cards, auto loans, personal loans and student loans. Everything except a mortgage, if you have one. If Sallie Mae is living in your spare bedroom, kick her out ASAP.  

Do You Really Have to Live Below Your Means in Your 20s?

Living on less than you make is the foundation of building wealth. It isn’t optional. No generation gets a pass on this one.

While it’s true that things are more expensive these days, Zoomers are actually doing better in salaries and homebuying than you think. They earn higher salaries for their age than any generation before them—even when adjusted for inflation.⁴ And even more surprising, Zoomers are buying houses at a faster rate than Millennials did at the same age.⁵ But the problem is, according to Ramsey Solutions research, 61% of Zoomers live paycheck to paycheck.

It’s possible to live on less than you make. Just say no to things you can’t buy with cash! That takes a lot of discipline, sure. But the alternative is to keep overspending every month and end up with nothing left to save for retirement.

Ready to take the first step? Cut back on your spending on food delivery and restaurants. Check out your bank account and add up how much you spent on restaurants last month. We’ll go ahead and warn you though—you might be so surprised you’ll spit out that $7 coffee you’re drinking!

When Can You Raise Your Standard of Living?

You can raise your standard of living slowly after you’re out of debt, have a fully funded emergency fund, and you’re investing 15% of your income for retirement. Again, this will take a lot of discipline because it’s tempting to spend extra money from a raise or a new job on your lifestyle.

But your 20s aren’t the time to live it up with big houses or fancy cars. Paid-for clunkers and small apartments will do just fine while you pay off debt, build up your emergency fund, and start saving for retirement.   

As you build your career and your income increases, make the most of your pay raises by putting that money toward your current money goal instead of upping your standard of living right away. Once you’re consistently investing for retirement, you can start upgrading your lifestyle.

How Does Budgeting Help You Build Wealth in Your 20s?

You have to tell your money where to go, or you’ll always wonder where it went. Thay’s why creating a written monthly budget is the most important financial habit you can learn in your 20s.

When you make a budget, you’re giving every dollar a job before you spend it—whether that’s food, clothing, housing, bills or savings. Plus, when you budget every dollar, you can be sure you’ll have money for the things that are important to you, like fun money and retirement savings. 

Like any habit, it takes some time (about three months) to get the hang of budgeting. Don’t give up! Try our EveryDollar budgeting app to make your first budget in about 15 minutes—and find extra money to use toward your money goals.

What Are Some of the Investing Mistakes People Make in Their 20s?

Taking unnecessary risks with your money is one of the biggest mistakes you can make in your 20s.

Gen Z is targeted by lots of really bad money advice. From relentless ads promoting sports betting and prediction markets to TikTokers pushing crypto and day trading as ways to get rich quick, you face a ton of pressure to waste your money on the “next biggest thing.” Don’t do it!

Stick with Ramsey’s 7 Baby Steps, our proven financial plan that has helped millions of people build wealth over time.  

Here’s our investing philosophy in a nutshell:  

1. First, complete Baby Steps 1–3 to make sure you’re completely out of debt (everything except a mortgage) and have a fully funded emergency fund (with 3–6 months of expenses saved) before you start investing. Those steps alone will eliminate a ton of unnecessary risk. 
2. Next, invest 15% of your gross income for retirement in tax-advantaged retirement accounts, like a 401(k) or Roth IRA. (This is what we call Baby Step 4.)   
3. Spread your investments evenly across four types of growth stock mutual funds: growth and income (large-cap), growth (mid-cap), aggressive growth (small-cap) and international.  

That’s it. No timing the market or risking it all on a crypto investment a buddy swears will make you rich. Just a consistent, boring plan that’s helped thousands of people become Baby Steps Millionaires. Slow and steady wins the race every time!

If you start this journey in your 20s while you still have decades to save and invest, you could get there even faster than the generations before you.

Why Does Starting Early in Your 20s Matter So Much?

Time and the power of compound growth are a young investor’s biggest advantages when it comes to building wealth long term. The average rate of return for the S&P 500 is 10–12% annually, so you want to get that working for you as soon as possible! Every year you wait to start saving for retirement costs you more than you think—and the math proves it.

Here’s a scenario: Let’s say you begin investing $200 a month at age 25, and you keep investing that amount every month until you’re 65 years old. At age 65 (assuming a 11% return rate, which is in the middle of the S&P average), you’d have around $1.7 million in retirement savings. And you only made $96,000 in lifetime contributions—the rest was all compound growth. 

But your friends, who leased new cars and came back from dream vacations with credit card debt, had to delay saving for retirement until age 35 while they pay off their debt. Let’s say they finally start investing $200 at age 35 until age 65. Their total savings will only be about $561,000.

That’s the power of time and compound growth! A 10-year head start made you about $1.1 million richer! 

Just for fun, let’s say your friend invests $500 a month—more than double what you’ve been investing—for 30 years until age 65. Their lifetime contributions add up to $180,000, which is almost twice as much as you invested over your working career.    

So, naturally, they must have caught up and retired with a larger nest egg than you, right? Wrong! Assuming they earned the same annual rate of return as you, they wound up with $1.4 million in their retirement accounts—still $300,000 behind your retirement savings.   

Age	Monthly Savings to Reach $1 Million by Age 65 (With 11% Return)
0	$8
18	$54
25	$117
35	$357
45	$1,156
55	$4,609

Alexis, a member of THE Ramsey Baby Steps Community Facebook group shared, “I’m 35 and my husband is 39. We’re at about $1.75 million net worth. We have $1.1 [million] in the market and $600k in home equity. Plus an emergency fund in savings/cash. We work hard, live below our means, and invest money every month.”

It doesn’t take a lot of money to build a million-dollar retirement—especially when you start early! Your goal is to invest 15% of your income for retirement. And the sooner you start, the better. That’s a wealth-building habit that’ll pay off not just in dollars, but also in opportunities for you down the road. You could decide to retire in your 60s (or maybe earlier), and live and give like no one else!