College might be considered a time where all you really are thinking about is pizza and partying. However, there is a future that you have to plan for that extends past the next weekend. Just as a student goes to college to provide a better future for a career, a student should also be thinking about their financial future as well.
Most people might not be aware that a person who starts investing when they are 25 will have roughly 30,000 dollars more at age 50 then if they started investing at age 35. While 30,000 dollars might not seem like a lot in the big scheme of things, it is a nice amount of money to have simply for starting to invest earlier.
Starting to invest earlier in life also allows a person to invest a smaller amount of money. An investor who puts in 2,000 dollars a year at age 25 would have to invest almost double that a year if they started at age 40 to get the same return on that investment by retirement.
It pays to start early, but what can a college student do to start some kind of investment portfolio? The key is to start small, and remember that investing is a lifelong endeavor, not something that you get rich quick off of. A great way to invest is to put some money into mutual funds. There are funds available that start off with a minimum investment of 1,000 dollars, and some are even less.
The great thing about a mutual fund is that it is a basket of stocks in different sectors. If the tech sector is down, the stocks in the education sector will pick up the slack. Stocks have returned about 10 percent annually, so this means that your stocks will roughly double in value each decade.
If available, pick an investment option that allows for compounding interest as this will allow the money to grow faster. For example, a 100 dollar investment that gains 10 percent a year will be worth 110 dollars by the end of the first year. The next year, that ten dollars will also start collecting interest, so an investment of 100 dollars will be worth 121 dollars at the end of the second year. While the interest amounts will be small at first, it will add up to a much larger sum of money after several years.
College is a time where dreams are large, but bank accounts are small. It might be hard to find the money to invest but even a small investment can yield big gains over the long term, so it is in the best interest of college students to invest whatever they can now and watch that investment grow.