Contrary to popular belief, college students are not too young to invest. With high tuition fees and expensive costs of living, many college students opt to work while simultaneously keeping up with their academics. Most college students look into finding part-time jobs, side hustles, and other ways to make money, but end up spending their hard-earned bucks on frivolous or materialistic wants. Students often perceive investing as something adults do, ones who have a stable, predictable, and timely income. They seldom think about investments as a viable option to make money because of the perceived risks associated with the stock market. However, students who begin investing early on have the added advantage of achieving early financial independence and learning important skills like reading balance sheets and assessing risks.Understanding and assessing markets and risks
Students have one of the greatest advantages of investing on their side – time, as they can afford to spend time and energy understanding stocks, markets, and the life cycle of money. There are many investment courses and materials that students can access with a single click on platforms like Udemy and Coursera. In addition, there are many YouTube channels run by financial advisers, investors, and economists to help the beginner learn to read stocks and charts, do fundamental and technical analysis and guide one through the stocks that are safe or risky to invest in.Lower financial responsibility = Lower risk
A majority of college students are typically unmarried and do not have children. Sometimes, students also have the added privilege of having financial help, as scholarships or their parents are paying their tuition fees. In such scenarios, any extra income that a student earns through jobs is a surplus income.
A general rule of thumb in investing is that the larger the risk, the larger is the reward. A person has the least financial responsibility as a student, hence they can afford to invest up to 60% or more of their income in stocks. This might not be viable for a working professional who has a family to care for, or other forms of financial expectations.Serves to build healthier financial habits
Investing early means investing when a student typically has very little disposable income. This means that a student is then forced to budget diligently and not indulge in frivolous expenditure. Investing also involves doing ample research to identify different options, and it can help students appreciate money going in and out of their pockets much more.The power of compounding
Compounding and compound interest are powerful, yet often overlooked. When money is being inverted from an early age itself, it has the power to grow exponentially and generate a higher return on investments. This is primarily due to the fact that early investments allow money to grow for longer periods of time, and combined with higher return rates and compounded interest, more money is accumulated. Even a delay of 5 years in beginning an investment journey can lead to over 50% lost returns on the principal invested amount.Investing generates a secondary passive income
Investing generates a secondary, passive source of income. College students are always looking to earn money through doing part-time jobs and, sometimes, multiple of them. Students work as baristas, servers. Some students monetize their grasp over languages by offering essay writer plagiarism free services to their peers. Essay writing is a well-sought skill that students can monetize, as many students struggle to express their ideas and put them into words effectively. Similarly, students should look into investing, and set aside a part of their monthly income to build up their financial independence.Space to find mentoring support
A college is a safe place where students get to be mentored by their professors and course seniors, who have likely been in their shoes, i.e. in financially difficult circumstances. Student loans, credit scores, budgeting, and financial planning can be a daunting space to explore, and having trusted professors and friends to support students who are starting out definitely makes the idea is investing easier.
College can teach students a lot about investing, however, there is undoubtedly a gap between theory and practice that students have to bridge. Managing a portfolio of investments is the best way to bridge that gap. College is a safe space for students to begin their financial journey, make mistakes and learn, so that in their 20s or 30s they are already on their way to financial independence.Author’s Introduction – Barbara Fielder
Barbara Fielder is an economics enthusiast and personal finance advisor. She started her personal investing journey at an early age in order to achieve financial independence, and today she lives a comfortable life without having to worry about a 9 to 5 schedule. She is also a writer, financial advisor, and mentor, and wishes to pass on the knowledge she has gained from her own mistakes to students of today.