College is fun and stressful, but there’s no better time to consider investing. You might feel like you have too much on your plate already, but just like your degree sets you up for the future, so does investing for college students.
College may not feel like the best time to invest, but the earlier you start investing, the more time your money has to grow. So even if you can only invest a little money at a time, every penny counts.
12 Best Ways to Invest for College Students
Here are the best ways to consider investing for college students:
- High-Yield Savings Account
- Certificate of Deposit
- Money Market Accounts
- Micro-Investing Apps
- Robo-Advisors
- Bonds
- Stocks
- Index Funds
- Online Brokers
- Roth IRA
- Real Estate
- A Side Hustle
1. High-Yield Savings Account (HYSA)
A high-yield savings account is a good option if you want a safe investment that won’t risk any money. In addition, HYSAs pay interest rates much higher than typical bank accounts, helping your money grow faster.
The nice thing about HYSAs is the money is there and available should you need it. In addition, there aren’t any penalties for withdrawing funds; with electronic transfers, you can have the funds almost instantly.
2. Certificates of Deposit (CDs)
CDs are another safe investment. The largest difference between CDs and HYSAs is the time you must leave the funds in the account. HYSAs don’t have a timeline; you can withdraw funds anytime.
CDs tie your money up for a specific time, but you choose how long. So, for example, you could put your money in anywhere from a 3-month or a 10-year CD.
The longer the CD term, the more competitive the interest rate you’ll receive.
3. Money Market Accounts (MMAs)
Money market accounts are a cross between savings and checking accounts. They offer more competitive interest rates than checking accounts, but you can write checks and make deposits like a standard bank account.
Like savings accounts, MMAs have withdrawal limits. Typically, you can make up to six withdrawals (or write six checks) per cycle without facing a penalty, and the APYs paid are competitive to CDs and HYSAs.
4. Micro-Investing Apps
Micro-investing apps, such as Acorns or Public.com are a great way to get started investing. College students can invest their spare change and let it add up. Then, all they need is a $5 balance for the app to start investing for them.
Micro-investing apps stop the excuses that you don’t have enough money to invest because you can invest pennies at a time to reach your goals.
INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
5. Robo-Advisors
Robo-advisors are great for college students who want a hands-off approach to investing. If you don’t want to pick your investments or the responsibility of monitoring and rebalancing your portfolio, a robo-advisor can do the work for you.
Most robo-advisors charge a flat monthly fee, but some charge a percentage of your assets under management. Determine which robo-advisor fits your budget and offers the features you need before choosing.
6. Bonds
Bonds are one of the most conservative investments for college students next to bank products like savings accounts and CDs.
College students have many options when investing in bonds, including I bonds, corporate, and municipal bonds. I bonds are nice because their interest rate keeps pace with inflation, so you don’t have to worry about purchasing power when inflation rates increase.
Municipal bonds are less risky because state or local governments back them, and corporate bonds fall somewhere in between. Of course, there’s always the risk of default from corporate bonds, but the tradeoff could be higher returns.
7. Stocks
Investing in stocks is good for college students with a growth mindset. Putting money in a CD or savings account is safe and will grow your money slowly.
On the other hand, stocks are riskier but offer the potential for higher rewards. You can invest in one stock or many, but it’s always a good idea to diversify your investments so when one stock performs poorly, another makes up for it by performing well.
Many online brokers allow investors to purchase fractional shares, which means college students with only a few dollars can buy a small piece of stock like Amazon or Disney if they want.
Remember, you’ll need a brokerage account to buy stocks, but you can open an account in a few minutes online.
8. Index Funds
Index funds, such as the S&P 500 Index Fund, are a great way to naturally diversify your investment. When you invest in index funds, you buy a basket of many different securities meant to mimic an index, such as the S&P 500.
When you hold a well-diversified fund, your gains can offset your losses, and you won’t have to conduct any transactions, such as buying or selling stocks, to meet or beat the market.
Index funds are a great way to break into investing without risking too much or putting too much responsibility on your shoulders.
9. Online Brokers
College students are busy, so expecting them to have time to reach out to brokers on the phone during regular business hours could be tough. That’s why online brokers are a great option.
College students can manage their accounts when they have time and even make trades or send messages to the broker should they need help.
As a bonus, online brokers usually cost less than full-service brokers because you do most of the work yourself.
10. Roth IRA
It’s never too early to think about retirement, and a Roth IRA can be a great way to set yourself up for success in retirement. With a Roth IRA, you contribute after taxes, but any money you contribute and the earnings grow tax-free. In addition, if you wait until age 59 ½ or older to withdraw the funds, you don’t pay taxes on your withdrawals.
To qualify for a Roth IRA, you just need a little income, even if it’s a part-time job you only work in the summer.
11. Real Estate
It’s never too early to invest in real estate. While you probably don’t have the money to buy a house and rent it to tenants, you can invest in real estate through real estate investment trusts.
Some REITs allow investors to start with as little as $10. With the money you’d spend on coffee or lunch, you could call yourself a real estate investor and earn monthly dividends and capital gains.
12. A Side Hustle
Working a side hustle in college might not feel like investing, but you’re investing in yourself.
You can do any side hustle, investing your time to earn money. Consider things like freelancing if you’re good at web design, writing, or editing.
If you’d prefer something more physical, you can drive for Uber, deliver for DoorDash, walk dogs, or house sit and make money.
To make the most of your money, consider investing the money earned in the side hustle for the best return on your investment.
Why Investing Is Important for College Students
College students should consider investing because of the long time horizon between their current age and retirement. You’ll never get time back, so if you invest now, you’ll give your money more time to grow.
If you invest now, you’ll set yourself up with healthy financial habits. Learning the ropes early and even making mistakes now can pave the way for a successful financial future.
Of course, you can make up for financial mistakes made early, but the older you get, the harder it is to make that happen.
You Don’t Need a Lot of Money to Start Investing
This is the best part; you don’t need much money to start investing. As I said, you can invest your spare change or a few dollars and become an experienced investor.
There’s no reason college students can’t invest. It just requires a little commitment, sacrifice, and the desire to succeed.
Benefits of Investing for College Students
You might wonder why you’d put anything else on your plate. Isn’t college stressful enough?
I get it; I was there too, but there are some serious benefits you can earn by investing now while you’re in college.
Build Good Financial Habits
If you start investing now, in college, you’ll build better financial habits moving forward. Investing will feel natural and like something you must do, just like eating breakfast and going to work. You’ll get the learning curve out of the way when you have time to explore your options, and by the time you’ve graduated and entered the real world, you’ll have a decent portfolio that sets you up for the future.
Help Achieve Financial Goals
There’s no better way to achieve your financial goals than by investing. Savings and CDs make your money grow a little, but investing can provide much larger gains.
Of course, there’s never a guarantee you’ll come out ahead, but investing has risks and rewards. The higher the risks you take, the greater the rewards, and vice versa.
If you have big financial goals, such as retiring early or letting your spouse stay home with your future children, you should invest now to reach those goals. The longer you have to meet your goals, the more likely you will have the portfolio and funds you need when the day comes.
Embrace High Tolerance for Risk
In college, you’re more likely to take risks than when you’re out on your own. However, if you build a tolerance for risk early, it won’t feel so difficult or even impossible when you’re older.
Naturally, your risk tolerance will change as your life changes, but if you have a habit of handling risks, you may increase your chance of earning more rewards.
Investing Will Get You to Retirement Sooner
As I said earlier, savings accounts and CDs will help your money grow slowly, but you won’t earn enough for large goals, such as retiring early or on time.
Investing, however, can help you reach those goals, especially if you invest aggressively and diversify across many different assets. Moreover, the more aggressively you invest when you’re young, the faster your money can grow because as you age and near retirement, you’ll need to dial down to less conservative investments to avoid a total loss.
Considerations Before Investing as a College Student
Before deciding to invest as a college student, consider these factors.
What’s Your Main Goal?
You might not have your life completely planned out yet but think about your reasons for investing. For example, if you’re investing to buy a house, that will happen much sooner than retirement. But you’ll invest differently if you’re planning for retirement or early retirement.
You can have multiple goals and multiple investment accounts to reach each goal. Try to think short and long-term to help decide where and how to invest.
How Frequently Will You Invest?
You might not frequently invest if you’re in college and don’t work except in the summer. But, if you work part-time, you may be able to invest more often. This determines where and how you should invest.
The more frequently you can invest, the faster your portfolio will grow. You can also set up automatic dividend reinvesting for accounts that pay dividends so that your portfolios grow faster.
How Much of a Risk-Taker Are You?
Investing in college is important, but you shouldn’t take more risks than you can handle. Instead, think about the risk you can handle that won’t keep you up at night worrying about money. If you’re not a risk taker, there are plenty of conservative investment options, but diversifying your investments is a good idea.
What’s Your Budget?
As a college student, you might not have a large budget, and that’s okay. You can invest spare change if that’s what it takes. Be honest about how much you can afford to invest, and then set up automatic deposits, so you’re consistent in your efforts.
What Type of Account Should You Open as a College Student?
College students have many options regarding the type of account they should open, including the following.
- Cash Account: A cash account is a brokerage account with a cash balance. You can keep your balance as cash or choose to invest it. If you use a cash account, ensure the broker pays interest on uninvested balances so your money grows.
- Margin Account: A margin account allows you to borrow to invest. Your account is the collateral for the account, and you must have ‘skin in the game’ to offset the broker’s risk. Be careful, though; margin accounts charge interest, so your rate of return must exceed the interest charged to be worth it.
- Traditional IRA: A traditional IRA is a retirement account. You get tax benefits during the year you contribute, and your earnings grow tax-deferred. You pay taxes at your current tax rate when you withdraw the funds. If you wait until age 59 ½ to withdraw funds, you won’t pay any penalties. However, if you withdraw sooner, you may pay a 10% penalty.
- Roth IRA: A Roth IRA is another retirement account. However, unlike the traditional IRA, you don’t get tax benefits in the year you contribute. Instead, you contribute post-tax, but your earnings and contributions grow tax-free. When you withdraw funds, you don’t pay taxes as long as you wait until age 59 ½. If you withdraw sooner, you may pay a penalty and taxes on the earnings.
What Is the Best App to Use for College Student Investing?
While there are many great apps for college student investing, Plynk is one of the most user-friendly apps that offers everything college students need, whether you’re investing a few dollars or a few hundred.
Plynk offers the option to invest in stocks, bonds, crypto, and ETFs, giving college students many options to invest in their future. Students can buy fractional shares for as little as $1, and the app walks you through every step of the process, using straightforward language and helping you understand how to invest.
If you don’t know what to invest in, use Plynk Explore. After answering a couple of questions, it will suggest the best investments given your timeline, risk tolerance, and capital to invest.
Plynk offers recurring investment options to take advantage of dollar-cost averaging, and you can also turn unused gift cards into money you can invest in your future.
The app is free, but some of its advanced features cost $2. Overall, it’s the most user-friendly, affordable educational app to help college students invest.
Tips for Investing as a College Student
Investing as a college student is important; here are the top tips to help you make the most of it.
Set Your Goals
Before you consider investing, think about why you want to invest. Write down your goals and the timeline, and consider your risk tolerance.
Be realistic about your goals, but don’t be afraid to dream big. Think long-term and determine what goals you want your money to help you achieve. Your goals will help determine how you invest, so be as specific as possible.
Open Account
Choose the account(s) you want to open. Next, determine what it takes to open an account and what minimum deposits are required. For example, if you open a CD or money market account, choose the account that pays the highest interest rates for what you can deposit.
If you open a brokerage account to invest, make sure it offers the investment type you want, such as stocks, ETFs, or bonds.
Decide on a Budget
Work regular contributions into your budget. The more regularly you contribute, the faster your money will grow. Do it even if you can only budget $5 at a time. Every dollar you contribute today has the potential to be worth more tomorrow.
As your income changes, revisit your budget and consider larger contributions to grow your investments.
Choose What to Invest In
Research what you want to invest in and how it works. There are plenty of ways to learn about different investments, including stocks, bonds, ETFs, mutual funds, and cryptocurrency
Think about diversifying across different asset types and industries. Don’t put all your eggs in one basket. Instead, try to invest in different assets to protect your money.
Think Long-Term
It’s never too early to save for retirement, so think long-term. Even though you’re in college, retirement will be here before you know it. If you start saving now, you’ll have more than enough to retire, or you might even be able to retire early.
Sign Up for a Robo-Advisor
If you don’t want to monitor your account often, set up a robo-advisor account. Then, you can ‘set it and forget it,’ knowing that it considers your risk tolerance, timeline, and goals. Most robo-advisors rebalance your portfolio as needed, but don’t be afraid to revisit your portfolio and consider other options if you want something more or less aggressive.
Monitor and Review Your Accounts
Work with an adult, either a financial advisor or an educated relative, and review your accounts. If you choose something like a robo-advisor, consider doing this at least once a year, but if you go the DIY route, you’ll want to monitor your investment accounts more often.
Frequently Asked Questions
Investing while in college is one of the smartest moves you can make. You’ll set yourself up for financial success before you’re in the real world, allowing you to get ahead of your peers and realize your goals.
Should you invest if you have student loans?
You should invest if you have extra money after paying your student loans and other obligations. However, if you are having trouble making ends meet, hold off on investing until you have a little freedom in your budget you can invest.
How much money should college students invest?
No two college students will have a different amount to invest. Pay your bills on time and have an emergency fund saved before investing. If you have extra money after caring for both, invest it.
What is the best investment plan for a college student?
There isn’t a right or wrong way for college students to invest. Instead, consider your risk tolerance, how much you can invest, and how long you have to reach your goals when choosing the right investment plan. For example, a college student focused on retirement may choose an aggressive portfolio, while a student thinking about buying a home in five years may choose something more conservative because the timeline is much sooner.
Is a Roth IRA or traditional IRA good for a college student?
A college student can open an IRA if they have some income. The limits are low, $6,000 for 2022, but it’s a step toward retirement. Of course, college students (or anyone) can’t contribute more than they make a year, but if you only have a part-time job, it can be a great place to start.
Why is it good to start investing for college students?
College is a good time to start investing because there’s a long time between now and your goals. Sure, some goals may be shorter-term, but if you’re investing for retirement or other long-term goals, you’ll never have as long of a timeline as you do now.
Is it worth investing in stocks with little money?
It might not feel like much to invest spare change or a few dollars, but it all counts. The key is to start the investing habit. Of course, once you have more money, you can increase your contributions, but for now, start the habit.
What is the best investing advice for a college student?
Don’t wait for tomorrow; invest today. If you can only invest spare change or are afraid of loss, find a conservative investment and invest what you can. Every penny you put away for tomorrow will be worth more than it is today.
Should You Start Investing as a Student?
Investing for college students is just as imperative as graduating with a degree. The piece of paper you walk away with will get you the job you want, but the money you invest while in college will help you in all other aspects of your financial life.
So consider investing as soon as possible in college, no matter how little you have to invest, and set yourself up for a bright future.
No comments yet. Add your own