Money mistakes in your 20s: 10 UK traps and what they really cost

If you are employed, aged 22 or over and earn more than £10,000 a year, your employer must automatically enrol you in a pension. The minimum total contribution is 8% of your qualifying earnings (pay between £6,240 and £50,270), with at least 3% from your employer. Opt out and you give up the employer's share.

You also lose tax relief on your own contributions, and decades of growth on both. The pension calculator shows how much early contributions can be worth by retirement.

If you are 18 to 39 and might buy your first home (up to £450,000), a Lifetime ISA adds a 25% government bonus on up to £4,000 a year, worth up to £1,000 a year. You must open one before your 40th birthday, and it must be open for 12 months before you use it to buy. Opening one early, even with a small amount, starts that clock. Withdrawals for other reasons before 60 usually face a 25% charge, so only use it for money meant for a home or retirement. See our Lifetime ISA guide for first-time buyers.

A student loan works more like a graduate tax than a normal debt. You repay 9% of income above your plan's threshold (£25,000 for Plan 5 and £29,385 for Plan 2 in 2026/27), and any balance left is written off after 30 years for Plan 2 or 40 years for Plan 5. Many graduates will never repay the full amount, so making voluntary overpayments can mean paying more in total for no benefit. On the other hand, ignoring it completely can mean surprises if you move abroad or go self-employed. Check your plan and run your numbers in the student loan calculator before overpaying.

Student overdrafts are often interest-free, but graduate overdraft terms end, usually within a few years of graduating, and standard arranged overdraft rates are typically high. Find out when your interest-free period ends and make a plan to clear the balance before then, even if it means a smaller amount each month for a while.

Minimum payments are designed to keep you in debt for as long as possible. Paying only the minimum on a card balance can take years and cost a large share of the original balance in interest. Set a fixed monthly payment you can afford, and see how much faster it clears the debt using the credit card payoff calculator.

Buy now, pay later splits purchases into small payments that are easy to lose track of. Since 15 July 2026 most providers are regulated by the Financial Conduct Authority, which brings affordability checks, but it is still borrowing. Car finance in your 20s can lock you into years of payments plus insurance that is often expensive for younger drivers. Add up every monthly commitment before signing anything new, and consider buying an older car outright if you can.

Most people have the tax code 1257L, which reflects the £12,570 Personal Allowance. A wrong code, often after starting a second job or leaving a job mid-year, can mean paying too much tax for months. Check your payslip each month, look at your tax code in the HMRC app and contact HMRC if something looks wrong. Our guide to reading your payslip explains each line.

Your credit file affects renting, phone contracts and later a mortgage. Register on the electoral roll at your current address, pay every bill on time and avoid lots of credit applications in a short period. Check your file for free with the main credit reference agencies once a year. See how credit scores work.

Without savings, any unexpected bill goes on a card or overdraft, which brings back mistakes 4 and 5. Start with £1,000 and build towards three months of essential costs in an easy-access account. The emergency fund calculator gives you a target.

Finally, when your pay goes up, decide before the first bigger payslip how much of the increase goes to savings or your pension. If you save half of each rise, your lifestyle still improves while your savings grow. A daily savings habit with SYM can help the extra money stick.