By Teddy Hunt
You’re never too young to start learning about investing money. College students and recent grads might feel more worried about paying rent or the interest rates on their student loans, but investing early can start you off on the path of having money coming in outside of what you make at your job.
Use a Roth IRA to Plan for Retirement.
College students have the luxury of lots of time before retirement, which is essential to good retirement planning. Opening up a Roth IRA will allow you to start saving for retirement early, even if you can’t put much away at first. Roth IRA contributions are from money that’s already taxed, which means that it grows tax-free and when you withdraw it later, you don’t have to pay taxes on that money.
You can only invest money you make as income, but the good thing about a Roth IRA is that you can access the money you put into it at any time. Even if your plan is to save for retirement, if you find yourself in need of it earlier, it’s there for you.
Invest in Stocks.
Before you actually buy stocks, learn about the market. You can do virtual investments to teach yourself how everything works before you put any money into it. You can also contact a broker or a financial planner to help you figure out what stocks to buy and how. If you work for a company like Starbucks that offers you stock options, take them.
By learning how to use the stock market early, you’ll create investment opportunities for yourself for the rest of your life. While investing in the stock market seems like something you need a lot of money to do, it’s possible to start building your investments with a small amount of cash.
Bonds are a safer, if slower, investment than stocks. You can lose money in bonds just like in any other investment, but if you keep a bond until it matures, you will definitely receive your money back with interest. They make your money harder to access while you’re waiting for bond maturity, but if you’re serious about investing, bonds are a lower risk option. You should invest in both stocks and bonds for a balanced portfolio.
If as you’re exploring these investment options you feel like finance is something that interests you, check out things you can do with that interest, like watching this Fisher Investments video and finding out what more you can do with your money and your career.
Open a Savings Account.
First off, being in the habit of putting money away into a savings account whenever you have extra is a great idea. That way you have money saved if something should go wrong, and you’re also accumulating money you can later invest. Savings accounts don’t offer much by way of interest, so look for a high-yield savings account. Online savings accounts tend to offer slightly higher interest rates. You also want to look for an account with no transaction or maintenance fees (or minimal ones, at the very least.)
Invest in a Money Market.
Money markets have slightly higher interest rates than you’ll find with savings accounts. But you probably need a minimum amount to open one (like, say, $1000) and you are limited with how many times you can withdraw a month. That being said, money markets are a good idea for someone who doesn’t feel comfortable or financially secure enough dealing with the risk that goes into stock market investing.
They’re also good if you feel you might need access to your money, rather than a CD which can tie up your money for years depending on the terms.
Entering into the world after graduation can be scary, whether you have a job lined up and a clear career path or not. Money will be a concern for almost everyone, so make it easy on yourself and begin investing now. You’ll be glad when a little extra cash starts flowing in, and you’ll be happy in the future when you have retirement funds.
Teddy Hunt writes about technology and business. His passion to assist nonprofits has led him to work for Goodwill and a Feeding America Food Bank as a social media strategist and web content manager. Teddy is a regular contributor to socialbrite.org where he offers business and marketing strategies for the nonprofit sector.