[Financial Planning for the 100-Year Life] The Golden Era of Asset Management: People in Their 20s and 30s

“Save More Than 50% of Your Income First”

Jinwoong Kim, Research Fellow at NH Investment & Securities 100-Year Life Research Institute

Asset management is not just for those with substantial wealth. Even if you are starting your economic activity with a small income, the process of generating income, spending, and then saving or investing what remains is necessary for everyone. Even when starting out under similar economic conditions, how you manage your money can dramatically affect your future. In particular, for people in their 20s and 30s who are just entering the workforce, this is a very important period that serves as the starting point for lifetime asset management, as they have ample time ahead to accumulate assets. Let’s explore asset management strategies tailored for those in their 20s and 30s.

First, save at least 50% of your income before spending the rest.

Spending is also a crucial part of asset management since the scale of consumption ultimately determines your capacity to save. Rather than saving what is left after spending, it is more effective to set your target asset goal for three to five years ahead first, and then plan your spending budget only after setting aside the required savings amount. Especially since expenses increase after marriage or when raising children, it is important to save more than 50% of your income in your 20s and 30s, so you can build up initial capital quickly. For example, in 2024, the average annual disposable income for a household in their 30s is 59.77 million won. Saving about half of this, or 30 million won per year for five years, results in a principal of 150 million won. Once you have accumulated your seed money, you should focus on maximizing the long-term returns on that capital. After this, rather than maintaining an unsustainably high savings rate, it is better to find a healthy balance between rational consumption and saving.

Second, divide your financial assets into four different accounts, each with a distinct purpose.

Throughout life, you will face many financial events, such as marriage, buying a home, supporting children, and preparing for retirement. Rather than managing all these through a single account, it is much more effective to separate your money according to each purpose. The four accounts are: (1) a seed money account for asset accumulation, (2) a pension account for retirement, (3) a dedicated account for specific goals such as marriage or buying a house, and (4) a regular household expense account for day-to-day spending. You should keep your seed and pension accounts for the long term, and change the purpose account to your next goal once a current goal is achieved. Early in your economic life, you may lack the capacity to fill all four accounts, so start with the purpose, pension, and household expense accounts, and try to add the seed account as soon as possible. Managing assets by purpose ensures that funds set aside for important goals are not used for unintended expenses.

Third, start your pension with a minimum annual contribution of 3 million won as early as possible.

Preparing for retirement is the financial goal that requires the longest time. Rather than trying to prepare a large amount at once, it is vital to begin making steady contributions, however small, from the onset of your working life. If you save 3 million won per year for 30 years, assuming a 7% annual return, you can accumulate around 280 million won for retirement. As your income increases, your contributions should also rise accordingly. Individual Retirement Pension (IRP) and retirement pension savings accounts have the advantage of allowing long-term management using various financial products, as well as providing tax credits. However, developing a consistent savings habit without early withdrawals is even more important than the tax benefits. Pension assets should be managed solely for retirement and not diverted to other goals such as home purchase or a child’s education.

Your lifetime asset management journey begins from the moment you receive your first paycheck. You need to determine the asset amount you want to build in the future and decide on your current level of spending to match that target. For the 2030 generation, the greatest asset is not the money they have yet to accumulate, but the ample time ahead to grow their wealth. Saving first, managing assets according to their purposes, and starting pension contributions early – putting these three strategies into action is the surest way to secure your future financial capacity.