Investing for Students

Students can invest to grow their funds while still in school

Finances can be frustrating for college and graduate students in many ways. It can be discouraging for students to watch their debt increase each semester while feeling like they can’t earn money when in school full time. Fortunately, even though full-time students can’t typically work enough hours to earn meaningful money, investing is another way that they can help their bank account balances move in the right direction.

Finding the best loans is only one part of the financial equations for proactive students who wish to put themselves in the best financial situation as soon as possible. Although your schedule may not leave you enough hours to hold down a steady job, the random hours you have speckled between classes is perfect for managing a beginner investment portfolio.

“The biggest resource and advantage college students have is time,” states investment executive Paul Feldman for USA Today College. “It’s important to take the maximum advantage of how much time you have — that’s one of the main things that’s going to drive success.” Feldman recommends that students start investing right away by making contributions to a Roth IRA.

An IRA, Roth IRA or 401(k) are great options for students who have a little extra cash that they would like to invest. They are perfect for young investors because compounding returns make it drastically easier to save for retirement if you start early.

“The compounding of the investment returns is huge when you’re looking at decades rather than months or years,” states Eric Tyson, author of Investing for Dummies. “Young people [might] only need to save six to eight percent of their annual income each year [as opposed to 10-12 percent] to be able to accomplish a given retirement goal. I wouldn’t go overboard with it, but it certainly is a reasonable thing to begin to think about.”

Before throwing all your spending money into the stock market, it’s important to learn how the market works and begin the process slowly. According to USA Today Collegiate Correspondent Jennifer Kline, students looking to learn how to invest should make sure to spend time brushing up on the current events in the finance world each day. Creating or joining an investment group at school is another way that students just dipping their toes into the stock market can find support and advice.

Kline also notes that taking a business class can go a long way toward preparing students for financial success. “Understanding the fundamentals of running a business is invaluable when you’re navigating and analyzing the stock market,” states Kline. “After all, the purpose is to invest in strong companies, and finance classes can help you determine a winner from a dud.”

So, once you’ve taken a few business classes and gotten into a habit of reading the finance news each day, you can begin tightening your budget so that you can put aside money to invest. Be sure that you’re not investing money that you need readily available, however.

“Before jumping into an investment, the experts agree that young adults should have adequate savings to cover an emergency or unexpected expense,” cautions Fox News Business.

One benefit of being a young investor is that you have more time to allow market processes to work in your favor. Even investments that have a strong upward trend will experience dips and increases, sometimes dramatically. Fortunately, students, compared to people on the verge of retirement, have the time needed to weather any temporary dips in order to cash in on the long-term upward trend.