Investing while in college is key to your future financial freedom! At the moment, it may seem vague, and you feel a bit lost when it comes to starting and growing your investments. Don’t sweat it. You don’t need to be a seasoned investor to increase your investment during college. It is not about the amount of money you put into your investing; it is about investing during college.
College time is the perfect time to begin exploring investment opportunities and saving up for your future. Imagine how much you’ll have in store after your college years if you start now!
As much as the college has a lot of financial challenges and limited time, you can still save and invest. In fact, according to a survey done by Deposit Accounts, 1 in 3 college students have no less than $1000 saved. So, are you captured here? If not, it’s never too late, and you can start now.
5 Tips for College Students to Begin Investing
Adding the pressure of trying to grow an investment while you’re in school can be challenging. But when you start investing immediately you start college say at 18 years to reach $500,000 you’ll need to be investing how much yearly?
Find out in the sample table below:
|Age||Amount To Invest Per Year To Reach $500,000|
|18||$1,050 or $87.5 per month|
|19||$1,146 or $15.92 per month|
|20||$1,260 or $105 per month|
|21||$1,136 or $94.67 per month|
Well, there are many opportunities to do so. They vary from traditional to recent online options. And you can even invest more.
1. Open an IRA (Individual Retirement Account)
The last thing you want to be worrying about as a college student is how to invest your money so that you don’t run out before retirement. That’s why having an IRA (Individual Retirement Account) is a smart move. An IRA gives you the power to grow your money and invest it in intelligent ways.
You’re probably asking, OK, so what is an IRA? And why should I care? An IRA is just a particular bank account that offers a unique benefit. If you have a retirement account at work, you could also have an IRA.
However, when it comes to withdrawing, you’ll be charged heavily because the account is meant to put your money till you’re 59 years old and a half.
We have various IRA accounts, and it is good to know the difference. We have Roth IRAs, which are so typical for college students. With this account, you can be in a low tax bracket as your earnings and deposits increase without tax. There’s a deduction in tax for contribution for a traditional IRA, but they are all taxed during withdrawal.
You can open a Roth IRA or traditional IRA account through your financial aid office. Both are tax-advantaged accounts that allow you to invest in stocks and mutual funds. Or you can open via an investment company, bank, or broker.
2. Open a brokerage account online.
You can also obtain a brokerage account and buy individual stocks! Once you’re ready to start investing your hard-earned cash, the first thing anyone should consider is the best way for them to invest, depending on their future goals.
Operating like a regular bank, a brokerage account allows you to buy and sell stocks, mutual funds, and bonds apart from keeping money. Well, remember selling a stock with this account for a gain is taxable. There are rates for short-term capital gains and long-term for a year or more.
The beauty of it all is that you can have your brokerage account with very little money.
3. Create a High-Yield Savings Account or a CDs
This is among the easiest ways to invest your money while in college. This account offers interest on deposits at rates far beyond what the traditional savings account offers. Besides, you can withdraw at your comfort.
Although, this option is often unthinkable if they are one of the most secure options for any college student looking for investment platforms. For instance, CDs give you interest at a fixed rate in exchange for you being obligated to have money in the bank for a specific time.
So, you want to have some good ransom in the future? It’s the way to go!
4. Micro investing Apps
College students, who are usually short on cash, can make money in various ways. One of which is with micro-investing apps. Saving up for a car, paying for a trip, or just about anything else possible with a little extra cash are all possible.
Micro investing apps allow college students to earn extra cash by managing portfolios and moving money in markets such as the stock market. With easy-to-use features and capable of small capital, students can have a smooth time with such apps.
However, though they help you invest the little cash you can, they shouldn’t be your only option. Learn to invest heavily in stocks to save up well. Examples of investment apps are Acorns, Robinhood and Stash.
In essence, a Robo-advisor is an online financial advisor that will invest your money for you. While some provide guidance and insight into finance and investing, others handle everything for you.
They, by design, make a portfolio for you, purchase some funds depending on your location and time, and the assertiveness you have with the investment. Anyone starting can begin with as little as $20 and increase as they wish without any further operation costs.
Robo-advisor charges a percentage of your asset, usually 0.25% yearly but with a minor waive for small accounts. You can check out Wealthfront and Betterment for those charges.
The good thing is that there aren’t any more charges paid for the advisor even though the funds have fees depending on the total amount you got. But with other benefits from the advisor, like interest rates on cash accounts without locking your money, Robo-advisor is definitely worth your time and money.
Conclusion on Investing While in College
There are a ton of different ways to make money while in college. This guide is intended to help you along the path. I’ve tried to be as thorough as possible so that you have all the tools you need to succeed. Hopefully, this information will help you make intelligent decisions with your finances and help you get out of school without a ton of debt or resentment.