With the cost of education increasing and the surplus of minimum-wage jobs available, college students are known for suffering from a lack of funds. However, even the tiniest budgets can leave room for investing. By making smart financial choices now, paying off student loans and achieving financial security will be easier in the future.
Prepare to Invest
Although investing while young and in college can produce great dividends for the future, it is important to start with a clean slate. Eliminate credit card debts before investing money. This is best achieved by paying down cards with the highest interest rate first. When trying to reduce and eliminate debt, it is important to pay more than the minimum amount due each month and to make sure that payments are made on time. In addition to removing existing debt, begin saving money for the specific purpose of investing.
Start Slow
Because navigating the world of financial investments can be difficult for even the smartest individuals, it is important to start slow when beginning. For college students, that means putting money to work in low-risk investments such as savings accounts and money market accounts that accrue interest over time. Savings accounts are the least profitable of all types of investments, but they require the least amount of an initial investment and the least risk. For example, the average bank requires a minimum of $300 dollars to be in a savings account while the money accrues interest at a low and agreed upon rate. Should the account fall below $300 dollars, the owner may garner additional charges and fees. Money market accounts are another option for low-risk investments. While a higher initial investment is necessary (the minimum balance on a money market account can range from $1,500 to $5,000), the interest rate is higher meaning a higher return for the investor.
Use Mutual Funds and the Stock Market to Gain Momentum
With mutual funds, investors can compound their resources to purchase stocks, bonds and other investments while handing the management of the entire fund over to a professional. Because this investment allows for diversification, it is safer than entering the stock market alone. However, the stock market is another good way for college students to invest their money. Stocks represent shares of ownership in companies. The value of a stock rises and falls as the value of a company changes. Stocks can pay big dividends for investors, but research the companies chosen before entering the stock market.
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