Investing money while in college may not seem like a priority, especially when you are so busy with studies and having fun. However college is the first place where you start learning the basics of money management; until now your parents likely made all the important financial decisions. Considering that student loans follow you around until you pay back each and every penny that you owe, it is very important to learn to save money in college and to keep debts as low as possible. Just remember that the number one priority of any student in college should be to study. Any investment that you do should not consume a lot of time and effort that interferes with your studies.
Learn to Save Money While in College
A part-time job or a summer job can help pay the bills in college. The experience will also help when you are out in the real world looking for a job. Instead of spending all the money, cut some of the expenses which are not really needed and keep aside some funds every month. You need to save money until you have enough to invest in stocks, mutual funds or other investment opportunities that require a somewhat big initial amount. In the mean time, open a savings account in a local bank to let the money grow with interest.
Young people sometimes put off saving simply because going to the bank and depositing a cheque requires an extra effort. It helps to set up an automatic transfer of money from the salary account to the savings account every month. An automatic transfer makes it less burdensome to save money, at the same time making it easier to budget and plan with the rest of the money. There also some mutual funds that offer automatic investment plans that allow monthly investments as low as $50.
Some Tips On Investing Your Hard-earned Money
Once you have enough funds at your disposal, start looking at other investment options. Research is an integral part of investing since it is easy to fritter away your hard-earned money chasing the latest hot stock. For the beginning investor mutual funds may be a better option than individual stocks because they are more diversified and and have low minimum requirements. Exchange Traded Funds and no-load funds are excellent options for aspiring investors.
Once you are confident enough to trade in shares, enter the stock market but with caution. There are many advantages of investing in shares. Historically, shares have had the highest rate of return than any other type of investment, but they are also inherently risky. Open an online brokerage account and carefully research stocks before investing in them. Online brokerage accounts allow you to open and trade with an initial investment as little as $500.
Anyone will agree that investing money while in college is a brilliant idea. Young adults and kids can take advantage of the long time span for investing and allocate a higher percentage of their portfolio towards investments with higher returns like stocks and shares. Remember that asset allocation and diversification are important aspects of investment regardless of whether you are a beginning investor or an elderly investor in his eighties.
- U.S Securities and Exchange Commission website, https://www.sec.gov/investor/pubs/assetallocation.htm
- FINRA website, https://apps.finra.org/Investor_Information/Smart/401k/401101.asp
Image Credit: Materials Aart