Most college students will tell you that their financial situation isn’t great. You often hear them describe themselves as “financially strained” because they have to balance school with part-time jobs, which don’t usually pay much. As a result, investing is rarely on their minds. However, college is actually a great time to start investing, even if you’re not making a lot of money. Here’s why:
### YOU HAVE FEWER FINANCIAL RESPONSIBILITIES
Many college students aren’t married and don’t have kids. Some even get financial help from their parents for tuition. If this sounds like you, you might have some extra money, even if it just comes from a part-time job. Investing often follows a risk-reward principle, meaning higher risks can lead to higher returns. Without major commitments like mortgages or child expenses, you have more money to invest and can explore different opportunities.
### INVESTING CAN BE A SAFETY NET
Many graduates leave college with substantial student loans, and a large portion of their income goes towards paying off this debt, sometimes for years. This makes it hard for young adults to buy homes or save for retirement. But if you’ve already been investing, loans and debt might not seem as daunting. Smart investments can generate profits that help in repaying loans faster. Also, a good investment portfolio can offer financial stability if unexpected expenses arise, though it shouldn’t replace an emergency fund.
### SAVING BECOMES A HABIT
Many young people wait to start saving until they have a well-paying job. But you don’t need a big income to save money. Any savings can be beneficial, and investments can encourage saving. Start with small investments that grow over time. For instance, invest in a 401K if your employer offers it and matches contributions. If not, there are other low-risk options to grow your money.
### SPEND YOUR MONEY WISELY
Many students spend any extra money on non-essential items. Saving might seem boring compared to enjoying your youth with your peers. But consider this: time is your biggest asset in investing. The earlier you start, the more your investments can grow, setting you up for a financially secure future. Choose to invest your extra cash, regardless of the amount. Your responsibilities are likely smaller in college than they will be after you graduate, so take this chance to improve your finances. Embrace risks, aim for high returns, learn from your mistakes, and get used to saving. This will give you a head start in paying off student loans or buying your first home.
Did you invest any money while still in college? If so, how did you choose your investments?