INCOME VERSUS GROWTH: Listen to reality in the roaring twenties

Your 20s and early 30s are the time when you need to get your financial act into gear. Once you have got a job make sure that you pay off any outstanding debts you owe, such as student loans or oversized credit card bills.

If you have large sums outstanding, transfer the balance to a low-interest card. There is no point in paying over the odds in interest charges too. The Co-Operative Bank is charging 5.9 per cent as an introductory rate, while RBS Advanta and the People's Bank of Connecticut are charging 6.9 per cent.

Once you have dealt with debt, work out how much you spend each month on rent or mortgage, bills, travel, food and entertainment. List everything from your council tax to your daily paper. What is left over is what you have to save and invest. At this stage it may not be much because you are probably near the bottom of the career ladder but your income should rise year on year as will the amount you can save. Even if it is only pounds 30 a month this is still enough to start many stock market-based schemes.

The first step in saving is to build up a contingency fund that will protect you if something goes wrong, for example, you lose your job or the washing machine needs mending. Set up a standing order to go straight out of your account into an easy access savings account. Top payers at the moment are Egg, which is paying 6 per cent on its postal account, and Virgin Direct, which is paying 5.75 per cent. You want to keep your savings fairly flexible as you're probably going to need the money for another purpose in a few years.

Decide what your priorities are. If you plan to buy a house most of the best mortgage deals demand at least 10 per cent of the property's value as a deposit, so it will help if you already have that when the time comes. If you don't intend to buy somewhere for at least five years, you could consider equity savings in a unit or investment trust, open-ended investment company (Oeic) or an individual savings accounts (ISA).

Warren Perry, senior investment manager at Bristol-based Whitechurch Securities, suggests that you aim for two or three regular savings schemes. And if you are new to stock market investment he advises you to look at unit trusts. Go for growth-based investments because you are unlikely to need an income for at least another 20 to 30 years. If you are fairly cautious stick to UK or European investments. The box on the right shows which investments are worth considering but you may want to see an independent financial adviser (IFA) if you don't know which investments to choose.

Independent Financial Advice Promotion (0117 971 1177) can give you a list of three IFAs in your area. The advice will be free. The IFA gets paid by commission from the product providers, which means there is a fundamental problem at the heart of all "independent" advice. It is surprisingly easy to get to grips with savings and investment topics and you may find you feel comfortable doing your own financial planning and saving money. Weekend papers are useful, and if you have internet access look at sites such as MoneyWorld (www.moneyworld.co.uk).

If you are thinking of buying your first house, there are good mortgage deals around, especially for first-time buyers, but you need to read the small print. Fixed rates give you the chance to plan your outgoings but you are gambling on interest rates. However, many experts don't think they will drop much below current levels.

Saving for your retirement can wait if your finances are stretched. But if your company offers you a pension scheme, you should probably join it if you are eligible. Even if you plan to move jobs frequently, it is often worth it because the employer bears the brunt of the contributions and you also get other perks such as built-in life insurance.

If you have a personal pension, keep paying into it. You've probably only recently started it and as most stack up administration charges at the beginning of the pension's life, the penalties for leaving will outweigh the benefits. Up to age 35 you can contribute 17.5 per cent of your earnings but if money is tight, now is not the time to be maximising your pension fund because once the money has gone, you won't see it again until you retire.

It's far better to look at tax-efficient equity savings, which can be stopped and started at will. This also applies if you haven't got a pension yet.

If you do plan to move jobs frequently, equity-based savings can also be a good way of building up a lump sum to put into a pension fund at a later date or to supplement another pension scheme.

n Contacts: Egg, 0845-600 0292; Virgin Direct, 0845-610 1020; Co-Operative Bank, 0800 126000; People's Bank of Connecticut, 0500 551055; RBS Advanta, 0800 077770; Jupiter, 0171-412 0703; Gartmore, 0171-782 2000; Invesco, 0171-626 3434; Britannia, 0141-248 2000.