[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 who are already wealthy. Even if you begin your economic activities with a modest income, the process of earning, consuming, and then saving or investing what is left over is essential for everyone. Even when starting with similar financial circumstances, your future can change dramatically depending on how you manage your money. In particular, for people in their 20s and 30s who are just beginning their economic lives, this period is extremely important as the starting point for lifelong asset management, given that they have ample time ahead to accumulate wealth. Let’s explore asset management strategies for those in their 20s and 30s.

First, save more than 50% of your income before spending the rest.

Consumption is also an important part of asset management because the scale of your spending ultimately determines your ability to save. Rather than saving whatever is left after spending, it is more effective to first set a target for the assets you want to achieve in three to five years and then plan your consumption budget within the remaining funds after securing the necessary savings. In particular, since spending tends to increase after marriage and as children grow, you should try to save at least 50% of your income until your 30s to quickly build your initial capital. For instance, in 2024, the average annual disposable income for a household in their 30s is 59.77 million won. If you save about half of this, or 30 million won per year, for five years, your principal alone will be 150 million won. Once you have built up your initial capital, you should focus on maximizing its long-term returns. However, rather than forcing yourself to maintain an excessively high savings rate indefinitely, it is better to strike a reasonable balance between saving and spending.

Second, divide your financial assets into four accounts based on their purpose.

Throughout life, you will encounter various financial events such as marriage, buying a home, supporting children, or preparing for retirement. Rather than managing all of these through a single account, it is more efficient to separate them by purpose. The four accounts are: (1) an account for building your seed money, (2) a pension account for retirement, (3) target accounts for specific goals such as marriage or buying a house, and (4) a daily expense account for routine spending. The seed money and pension accounts are maintained over the long term, while the purpose-driven accounts are repurposed as each goal is achieved. In the early stages of your financial life, you may have limited capacity, so starting with the target, pension, and daily living expense accounts, then adding a seed money account as soon as possible, is a good approach. Purpose-based management ensures that assets intended for one purpose are not diverted to other uses.

Third, start your pension savings with at least 3 million won per year.

Planning for retirement is the financial goal that requires the longest time horizon. Instead of trying to set aside a large sum all at once, it is crucial to start setting aside even small amounts early in your career and contribute consistently. If you save 3 million won each year for 30 years at an assumed annual return of 7%, you could accumulate approximately 280 million won for retirement. As your income increases, you should also increase the amount you contribute. Individual Retirement Plans (IRPs) and personal pension savings not only offer tax deductions but also allow for long-term management through a variety of financial products. However, what matters even more than tax advantages is developing the discipline to contribute consistently and not withdraw the funds early. Unlike for purposes such as home purchases or children’s education, your pension savings should always be managed separately and exclusively for retirement.

Lifelong asset management begins the moment you receive your first paycheck. Determine the scale of assets you want to build in the future and tailor your present spending accordingly. For Millennials & Gen Z, the greatest asset is not the money you have yet to accumulate, but the ample time available to grow your assets moving forward. Saving first, managing assets according to specific goals, and starting your pension early—putting these three strategies into practice is the surest way to secure your future financial capacity.

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

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