The 10 biggest money mistakes millennials make

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Anyone new to any endeavor makes a few mistakes as part of the learning curve, and millennials — relatively new to both the workforce and investing — are no exception, especially when it comes to socking away their newfound earnings for the future. (Millennials, or Gen Y, are roughly defined as people born in the 1980s and 1990s.)

CNBC.com asked certified financial planner and CNBC Financial Advisor Council member Rianka Dorsainvil, founder and president of advisory firm Your Greatest Contribution, for the most common investing mistakes she sees her millennial/Gen Y clients making. Dorsainvil's top 10 list of such errors follows.

1. Waiting to invest

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Time is our best friend, and we must take advantage of compounding interest. The earlier you start investing into the market, the more your money will grow.

2. Leaving free money on the table

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The days of employer-sponsored pensions are pretty much over. More frequently, employers are offering a contribution percentage match to retirement plans. If you are not taking advantage of the employer match, you are leaving free money on the table. Check out the example below:

You are earning $60,000; your employer offers a 6 percent annual match, dollar for dollar, which equals $3,600. But you are deferring just 3 percent of your salary. That means you are leaving $1,800 of free money on the table!


3. Not optimizing on tax-advantaged opportunities

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Depending on your income level, investing in a traditional individual retirement account (IRA) or Roth IRA may be to your advantage. It is very important to know the difference between tax-deferred and tax-exempt, as it can make a substantial difference to your personal financial situation down the road.

4. Playing it safe

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While we are in our 20s and 30s, investing too conservatively can make us miss out on potential investment growth. The market will go up and down. Historically, however, the market has had an upward trend. The best way for your money to grow over a long period of time is through the market.

5. Not having an emergency fund

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It's inevitable — an emergency will pop up, and access to cash will be needed. Tapping into your investment portfolio should not be your first stop. Make sure you leave money on the side for unexpected emergencies.

6. Not investing at all

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The millennial generation is saddled with a ton of student loan debt, but that should not be a reason to forgo investing. Investing little by little each month can go a very long way. Over the past 40 years, the has averaged 10 percent in investment returns.

Based on historical returns, if you start investing $100 per month today for the next 40 years (a total of $48,000 in out-of-pocket investment), you are estimated to have roughly over $600,000 in your portfolio. Are you sure you still do not want to invest in the market?

7. Not asking for help

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Although we have been deemed the DIYer generation, it is OK to ask for help when setting up your employer-sponsored retirement portfolio.

8. Not taking advantage of a health savings account (HSA)

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If you find you are maxing out your 401(k) and IRA contributions and are looking for other ways to invest advantageously, an HSA account may be a solution.

9. Giving in to lifestyle creep

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As you hit your stride in your career and climb the corporate ladder, hopefully it comes with more money. Although you may have additional discretionary cash flow, do not take that as a sign to upgrade your entire lifestyle. Set a goal of saving at least 20 percent of your salary to investment vehicles such as your retirement account, brokerage account or other qualified accounts.

10. Investing in depreciation assets

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One of the biggest investment mistakes I see millennials make is purchasing luxury cars immediately after graduating from college. If you racked up debt in college — whether student loans, personal loans or credit card balances — pay off those debts before trying to keep up with the Joneses. Paying back these types of debts that have interest rates ranging anywhere from 5 percent to 15 percent may be one of the best investments you can make immediately after college.

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