How should young people think about money and budgeting?

Budgeting early in life is about building the person capable of generating wealth. Young people often approach money backwards. Many become obsessed early on with where to invest their first EGP 1k — stocks, gold, savings certificates, or even crypto — before building the skills, discipline, and earning power that will ultimately determine their long-term financial future.

“I always say there are two axes: human capital and financial capital,” psychologist and executive coach Ahmed El Aawar tells EnterpriseAM. A young person’s financial capital is very weak, but their potential is extremely high. That distinction should shape how people think about budgeting from the very beginning, El Aawar argues.

“The time you have when you are young should be invested in building human capital that will later produce financial capital,” he says. Here are the core principles El Aawar believes young people should follow when learning how to manage money early on:

Use budgeting to create priorities

Budgeting should function as a framework for prioritization rather than restriction, El Aawar tells us. A simple starting framework for younger people could involve allocating:

• Around 70% of income toward necessities
• Around 20% toward self-development
• Around 10% toward savings and investments

The exact percentages matter less than the broader principle: continuing to invest heavily in human capital while gradually building financial discipline, he says.

Invest in yourself before obsessing over investments

The money you make today is basically the result of the investment you made in yourself years ago. Education, experience, networking, and skill-building generate far greater long-term returns early in life than obsessing over portfolio optimization, El Aawar notes. “My hour today might be worth x amount of money — where did that come from? It came from education, building experience, and adding value.”

Build the saving muscle early

Budgeting early in life is about building consistency and financial discipline, El Aawar says. “You need to invest in yourself for sure, but slowly and surely build the muscle and discipline of saving,” he notes. Even small allocations toward savings or investing can help young people understand markets, risk, and long-term thinking while building healthier money habits over time.

Focus on income growth before investment optimization

“Your income and your time are your biggest assets in the beginning,” that is the real priority according to El Aawar. Young people should spend less time worrying about how to maximize returns on small amounts of money and more time figuring out how to increase their ability to generate income over time. One of the biggest mistakes young people make is becoming consumed by conversations around returns, currencies, and asset allocation before they are even capable of consistently producing income, El Aawar argues.

Take more risks when you are young

Risk tolerance should naturally decline with age, while saving rate increases, El Aawar says. Young people should use their early years to experiment, learn, and tolerate mistakes while they still have time to recover financially. Small investments early in life are valuable partly because they function as financial education. “It is like building a prototype,” he concluded.