Every new stage of life brings with it new financial complications, and many twenty-something young adults simply aren’t prepared for the financial challenges they will face once they’re out of college and in the workforce. Most colleges and high schools fail to teach their students about responsible money management, leaving people scrambling to get the answers from well-meaning but misguided friends and relatives.

Here are some of the top personal finance questions twenty-somethings need to know the answer to, both in order to succeed in this stage of life and to avoid causing stresses for themselves later in life.

Q: When should I start to build up savings? How much, how, and why?

A: Ideally, you already should have started to accrue savings, but many individuals are forced to spend it in order to go through college, get a car, and so on. This stage of your life is a chance to save up for the future – in case you ever can’t find a job, want to travel the world and do something crazy, need to buy a house, or some other situation you can’t foresee. It’s the ideal time to build your savings account, as you probably don’t have a family yet, and if you do, your kids aren’t old enough to be borrowing endless amounts of money or eating their own weight in food every week!

Experts recommend that you have three to six months’ worth of emergency savings. This means you should go through your budget (and immediately create one if you don’t already have one, as this is a crucial step for financial health!), calculate your necessary living expenses for a month, and multiply it by three to six.

Three months’ savings are enough to live off for a short time if you are in a very stable and secure job, but if you’re working in retail, have been at all worried about your job, have ever considered starting your own business, or are looking at changing jobs or careers in the next few years, you should immediately begin to save until you have six months’ expenses taken care of.

As for how exactly to go about doing this, opinions vary. Some people say you should pour every available cent into your emergency fund, while others say that putting aside a certain percentage of your paychecks is enough. This also depends on you – if you don’t anticipate needing savings or you already have some, you can take a slower approach to building your emergency fund. If you’re serious about it or you don’t already have any, take the most aggressive approach to building one that is possible.

Q: Should I get credit cards? What rules do I need to follow?
A: This depends on how responsible you are, and whether or not you’re looking to build credit right now. For those who don’t yet have any credit built, credit cards can be an easy way of building it, but it’s also a quick path to credit ruin if you don’t know what you’re doing.

You should always follow the rules of credit cards: don’t take out money until you’re at your limit, and make your payments on time every single month. Definitely don’t let any balance be carried over to the next month if at all possible, as you don’t need to accrue interest in order to build credit.

The smartest way of using credit cards is to get just one or two credit cards, then use them for everyday purchases. Monitor the balance carefully and don’t put more on it than you can afford to pay off this month. At the end of the month, make your payment on time and you’ve received what is essentially an interest-free loan, while building your credit!

Q: When it comes to investments, what should I be looking at and when should I get them?

A: There are many types of investments geared towards people of different ages and risk aversions. The stock market, for example, is a game best played by those who can afford to lose the cash they invest into it, because there are no guaranteed profits in this market.

On the other hand, a CD (certificate of deposit) is a guaranteed investment, but the interest rates are much lower and there may be a minimum deposit before you can get one. Some CDs require a minimum of ten thousand dollars, for example, while others have lower limits like a thousand dollars or perhaps two thousand.

Even so, the interest rates for such guaranteed investments tend to fall when the economy is bad, so if the economy is at all unstable or recovering from a depression, the amount of money you can earn from a CD is lower.

Mutual funds are often a good choice for young people who want to start investing, as they don’t require too much action on your part and there are funds of all sorts out there. You may prefer to divide your funds between more aggressive mutual funds and more conservative funds so you don’t lose too badly if your mutual fund manager makes poor judgment calls.
Q: Is it too early to start saving for my retirement?
A: Never! You may be surprised by how early you should start saving, given that retirement can last a long time, and you should overestimate how much you will need to account for inflation and the fact that you’ll need spare money in case of emergencies once you aren’t regularly employed.

Investing in your retirement through your employer is a very smart move that many twenty-somethings don’t take advantage of and end up regretting later. You don’t have to save as much per year when you start early, and you’ll end up with more than you would have had.

Another thing to consider is that “traditional” retirement simply may not exist by the time you are retirement age. With the booming popularity of self-employment, many baby boomers have come out of retirement to work for themselves and pay for the bills while staying engaged and occupied. If you don’t think you’ll want to do this, you can start building streams of “passive income” now. These include revenue from websites that you don’t have to maintain, royalties from any books, music, or products that sell without your management, etc. Over time, many little streams of passive income can add up into a comfortable income without having to do any work at all!

There are plenty of things you should consider as a twenty-something determined to be financially free and healthy; take these into account when planning your financial future.