For College Students

Investing for College Students

Lost when it comes to investing? Don’t worry! Here are some basics to get you started.

college-kids-investing

The next generation of investors has arrived!

…and you may have heard of them.

Dubbed as the official “digital natives” and America’s largest generation-to-be by 2034, they’re none other than Generation Z. 

The ever-present population is making a groundbreaking statement in the “investophere” and has made themselves known as the rapidly growing force in the finance realm. 

Some blame it on the pandemic, but whatever erupted the awakening has opened up a world of inconceivable heights…

If you are a college student and don’t feel you precisely relate to this ravenous, freedom-driven, finance-minded pack of new-age wolves, consider yourself lucky, but you could be out of the loop.

It may be that you’ve always been curious to try investing on your own, but weren’t given a formal introduction. 

Or that the hype alone wasn’t enough, and what you really needed was more lawful reasons to join the obstinate yet rather dynamic herd.

Or maybe you weren’t interested at the time because you found your sole focus was to study. If you are looking to invest right now, but can only explore investing without the slightest potential compromise of your exceptionally beloved grades, I’ve got great news – there’s such a thing as passive investing! We will get further into this, so stay tuned.

If you are looking to start investing more aggressively, unleashing that inner wolf lying dormant, you can do so while keeping a few key, cautionary measures in mind, and on paper.

Ready to get started investing as a college student? Now’s a perfect time. Here’s what we’ll cover:

  • How investing works
  • Why you should start investing while in college
  • Types of investments 
  • Easy ways to start
  • Best investments for college students
  • How your parents can help you invest
  • Common investing terms/definitions
  • Books and resources for college students to learn about investing

How Investing Works

Ever bought a used vehicle at a bargain price, drove it for over a period of six months while maintaining its upkeep, and later decided it was time to part ways?

If you sold it to someone at a higher price than what you originally paid, you made a profit, or capital gain, or return

This transaction of a physical asset (the car) that you invested in – after buying with the intent to sell for more than what you paid for – made you a bonafide investor, regardless of the amount you profited. If you transacted a similar scenario, but on a smaller scale, you’re still badass.

To be less technical and more straightforward, investing is when you buy an asset at a low price and sell it at a higher price.

Why You Should Start Investing While in College

So you’re in college, and your life’s affairs round up to this: making sure your phone bill is paid, your laptop is charged, and your grades stay above sea level.

Academics alone is justifiably all-consuming, but being reminded every once in a while that your ability to learn is not limited to your brain’s storage capacity can be a stark eye-opener that’s not to be taken lightly.

The chokehold of money reminds you of college loan payments, weekly groceries, phone bills, credit card balances, and more. And even though budget planning has gone a long way in helping you avoid a complete loss of financial control, you feel as though you could still use a money cushion to fall back on. If you haven’t created a budgeting plan for yourself as a college student yet, here’s how. *Note: It’s advisable to do this before starting to invest.

What if there was something that could potentially increase pocket money instantly or build up your account overtime where you could pay off debt before it even becomes “debt”?

Well, that’s one reason to invest…

Here are some other reasons for you to start investing while in college:

  1. Less financial responsibility – Being in college grants you the liberty of being primarily responsible for yourself. If you have a part-time job or steady income flow from allowance, paying for a few expenses such as car insurance, phone and credit card bills, and groceries should give you ample room to flex your finances between starting an emergency fund, having a savings plan in place, and starting to invest.
  2. Start with very little money – There came a time when investing meant you had to put in all or nothing. Hypothetically speaking, if you were looking to buy one share of an Apple stock at the price of $100 per share, that used to mean you had to buy nothing less than a whole share of $100 just to get a piece of the pie. Today, if your desired investment into Apple is $50, you would own half of a share! Get started with investing in stocks as big as Amazon on any budget! 
  3. Build healthy financial habits/prep for the future – For some reason, the stakes of being financially responsible become high during the college years, putting your financial limitations to the test. If you are able to withstand the pressure, keep a responsible budget in place, and designate a certain amount of your spending money to your investments, you are practicing healthy money habits that will stick well into your future.

Types of Investments

The scope of investing can seem river deep and mountain high, but don’t let that perturb you from testing the waters. We made it easier for you to take it all in by narrowing down a list of the best investment types for college students and beginners today. Take a look!

  • High-Yield Savings Account. This yield is higher than your regular savings account, offering federally backed insurance and more protection on your principal investment. It’s also a great place to store your emergency fund that’s secure and can cover you when problems arise.
  • Index Funds (ETFs or Mutual Funds). Great for all investors, this low-cost, low-risk, and diversified option allows you to broaden your investments while getting in on the top 500 companies on the stock market that are known to generate high returns over time. There is no need to crack your brain on top of school work by spending hours researching the web for what to buy.
  • Real Estate/REITs. I know what you’re thinking. You don’t have anything close to the upfront costs required in buying a property. Even if you did, you wouldn’t dream of knowing the legal implications of a property deal or handling legal documents, buyer/seller contracts, property renovations, or repairs. But you can invest in real estate investment trusts by purchasing shares of a real estate portfolio. Most REITS offer long-term gains and high dividend payouts that constitute monthly or quarterly income. 
  • 401(K). A 401(K) plan is a savings account offered by your employer for retirement savings purposes. The money put into a 401(k) is taken from your paycheck with the purpose of building up your retirement fund. If you are currently working, and your job offers this program, you may want to consider it as an investment option for your future.
  • Cryptocurrency. Known as a higher-risk investment, cryptocurrency is a digital, peer-to-peer payment system that doesn’t rely on banks to verify transactions. Ever thought of owning bitcoin? You now have the opportunity to buy fractions of the currency on various crypto platforms such as Robinhood or Coinbase.

Easy Ways to Start

Today, investing is made incredibly easy for any money-conscious person who cares to know what it’s like to grow money without lifting a finger. 

Quite literally, you can start building wealth with as little as $10. 

Before getting started on your merry way to investing, go down this quick checklist beforehand to know if you’re ready:

  1. Do some research on the investment type(s) you are interested in. If it’s cryptocurrencies you’ve been itching to buy, look up things like, “how does blockchain work?”, “does crypto have the future of sustainability?”, “Is it destined to take the place of regular fiat?”. Keep in mind that some answers will be speculative so do your due diligence in using proper judgment with thorough research of reliable and credible sources. 
  2. Check your budget plan to know how much money you have to invest on a one-time or recurring basis. Having a budget plan in place gives you the assurance of knowing what primary responsibilities were taken care of, what money was put aside, and what money you have to pay yourself back. 
  3. Talk to your parents. If your parents have had their share of investing and are currently doing so, you may want to get their insight or direct knowledge on how it works, how you should do it, and how it’s worked for them. 
  4. Find the right platform/apps to get started. Just as there are many ways to invest, the same goes for where to invest. Look up some of the most reputable, well-trusted apps ideal for beginners. 
  5. Make your first investment. The first investment is always the most nerve-wracking and intense. Once you get through it, keep tabs on its progress and continue to stay up-to-date on any news of the assets and also their financial reports. Be sure to do the same for all of the subsequent investments you make.

Best Investments for College Students

All investments are not created equal and aren’t for everyone.

When investing for the first time, choose low-risk, low-cost, long-term investments as a more suitable and safe option. These types of investments generally require little effort to start, as well as to maintain. Here are some specific investment types to potentially pursue as a college student when new to investing:

  1. Roth IRA – Although this account is used for retirement purposes, it is still an awesome saving and investment tool for college students. Since the idea is to save for retirement rather than college, there are penalties for withdrawing the funds prematurely (before age 59 ½). If you plan to take out money to assist with college expenses, you will have to pay taxes on the amount you withdraw. If you keep the money growing, you’ll reap the maximum benefits of this no-frills retirement account. All in all, with the multitude of perks – tax-free growth, flexibility, an array of investment choices, and no age limit – you’ll wish you would’ve opened up a Roth IRA sooner!
  2. ETFs – An exchange-traded fund is a collection of securities that trade on a regular stock exchange. They are bought and sold just like an individual stock, but are considered to be less of a risk. ETFs also offer a diversified approach, allowing you to invest in the largest companies in the country with a high probability of long-term returns. You can purchase ETFs through a robo-advisor or a traditional brokerage and get started today. 
  3. REITs – Investing in large-scale, income-generating real estate is a great option for young investors who would like to have a piece of the real estate empire. Shareholders of a REIT receive dividends, which are paid out to shareholders when the business collects rent from tenants. These dividend payouts are a creative passive income source that anyone can tag on as income!

How Your Parents Can Help You Invest

Believe it or not, your parents have experienced many gains and losses in their lifetime. 

This makes them experts at sifting through what could potentially be a profitable investment, a hit or miss, or a downright bad move. This doesn’t mean they know everything there is to know about investing, but truthfully, their past experiences, natural intuition, foresight and age-derived wisdom lend them incredible know-how. It could also be that they are investors themselves, and in this case, consider yourself lucky. 

Keep a few things in mind when finding out from your parents how they can help you invest:

  • Regardless of their status in the investment realm, ask them questions to know what they know and what they’re willing to share. 
  • Keep an open mind to any insight or opinions they may have, regardless of how contrary they may be to your own. 
  • Since most parents today are up on current events and news, ask general questions about these events and how they can and do affect the NYSE, Nasdaq, and the stock market overall.
  • Ask them questions. What are their preferences with investments? Do they consider themselves a conservative or active investor? Short-term or long-term? What motivates their decision(s)? What are some recommendations they have for how you should start investing?

Common Investing Terms

  • Investment: An action you take with your money to make it grow
  • Stock: Owning a piece of a company 
  • Stock Market: A venue where buyers and sellers meet to exchange equity shares of a public corporation
  • Interest: What you pay when someone lends you money or what you earn when lending money to someone else.
  • Brokerage Account: Account for storing cash, liquid money intended for investing in stocks, bonds, mutual funds, and other investments
  • Compound Interest: An interest calculated on the amount of money invested or borrowed as well as the interest that has been added to it
  • Diversification: Investing in a variety of stocks, bonds, cash, real estate, commodities, and cryptocurrencies.

Books and Resources for College Students to Learn About Investing

Related Reading

About the Author

Christina Ezeagwuna

Christina is a professional writer with 7+ years in entrepreneurship, opening a rental baby furniture business in 2016 that she still runs today. Christina is a mom of three budding, financially savvy kids and works as a content manager for the Hispanic Alliance for Career Enhancement.

Last updated on: April 22, 2022