For many young adults, heir first experience with investing doesn’t happen until sometime after they get their first job. But if your goal is to maximize your returns, then it would be better to begin sooner.
Although most young people don’t have much money to start out, it doesn’t take much to begin investing in stocks and mutual funds, which can then grow over time through compounding interest.
Of course, college students usually have other expenses that require their cash flow such as student loans and textbooks – and we all know those can be extremely expensive. The good news is you don’t have to do all the work just by yourself. For example, it’s never been easier to, say, hire an academic essay writer who can help with writing and editing academic papers. After all, they’re professional editors who love what they do.
The fact is, there’s no ideal time for young adults and students to start investing. Every individual has a different financial situation, and every person’s needs change as they grow older. Saving and starting early can be good for building wealth, but the same strategy might be bad for a later-in-life saver.
In other words, the best time to begin is when you can afford to do so without putting your education or career goals at risk.
Students have several options when it comes to investing, such as putting money into:
- an exchange-traded fund (ETF)
- a college savings plan, like a 529 Plan or a Coverdell education savings account (ESA)
- a checking account or savings account with the intention of buying shares after graduation
It’s up to each individual to decide when is the best time for them to start underwriting their money. However, if maximizing your returns is important to you and you have enough cash flow to start investing, then it’s probably wise to start as soon as possible.
With that in mind, let’s take a look at some basic recommendations from experts about student investing:
Start Early
Experts agree that it’s never too early to begin investing in yourself – and it’s never too early to start building up a nest egg for retirement. If you’ve got the discipline, now is the time to kick off saving for your future financial security. You don’t want to wait until things get tight later on in life, or until it’s too late to build up your savings.
To this expert opinion, we add: Your “early” may be entirely different from someone else’s “early.” So make sure you’re comfortable with the money you have before making your first move.
Do Your Research First
You should also take some time to do some research before you jump right into investing your money. It might be tempting to just buy whatever’s popular at the moment, but if you don’t know what makes a good choice – and what doesn’t – then maybe it’s better to wait and study up before making any decisions.
Treat this process as a learning experience. It’s important to put your money into something that you understand and that has growth potential. When choosing potential projects, do some research on the company and its fundamentals. Research the competition or other companies in the industry. Also, check out whether there is any news regarding the company that may affect its stock price either positively or negatively.
Consider Future Plans/Goals
Investing for the long term is important, but so is planning for short-term goals. Doing so for retirement is great, but you need to also plan for your present needs. Who knows what will happen in the future, but certain things are necessary now that shouldn’t be put off because of your desire to start early.
Budgeting for a house, a car, or even a special trip should never be put on hold because you want to put money into something right away. Instead, be sure to do both: Save early and often and do so smartly so that you can build up your nest egg and also budget for short-term goals.
Here’s a quick tip: Consider opening an additional savings account if you still haven’t done it – one specifically dedicated to investing. This will help ensure that your savings are going toward successful opportunities and not everyday expenses that can be covered by another account.
A Few More Key Points to Consider
The stock market can be a scary place for students. After all, you can lose money. Most experts agree that the time to kick off investing is when you have enough money to be able to take the risk of losing it. If you have a couple of thousand dollars in savings – or are willing to get a part-time summer break job to save up – you’re probably ready to start investing.
The first step is choosing an investment account. If you’re under 18, your parents will probably have to help set it up so that you can open an account with their permission. Some banks offer special accounts for young investors, but there are other options available. You might be able to open an account at your school or job (if you’re employed); you can also ask a family member to help you set one up.
Once you have your account set up, there are two basic strategies to follow: growth and income. Growth investing means buying stocks of companies whose products and services you like and believe in the future of. Income investing means buying bonds from the government or from corporations that promise regular payments on your money – in other words: interest.
The Bottom Line
The bottom line is that it’s never too late – even if, right now, you’re at the beginning of your journey. You may not have as much money to play with as someone who’s been doing so for years, but any amount helps. The earlier you begin, though, the more time your investments will have to pile up – and as time passes, you’ll be able to sit back and watch your portfolio grow.
Photo Credits: unsplash
When is the best time to invest? I give the same answer to anybody who asks me when is the best time to plant a tree: “Twenty years ago!”
I don’t have any children so luckily I’m not constrained by contact with reality. If I had children I’m going to assume (See, not having to cope with those pesky facts makes life easier!) that he/she would have our hard work ethic and hopefully the thrift gene.
My children would start doing work for others at an early age as I did: weeding, picking berries, picking up soda cans to recycle for cash (I’m so old it was deposit bottles, 2 cents for smalls and 5 cents for the big ones), mowing lawns, shoveling snow for neighbors in exchange for cash.
Children today come home from the hospital with a Social Security number so they are prepared for a career at a few days old. As soon as my children started to earn money we’d open a ROTH IRA for each one and declare whatever cash income they earned. It’s not going to be so much money that a lot of taxes are confiscated from them, but they might as well learn that sad fact of life early. Then they would contribute 1/3 of their earnings and I’d kick in the rest up to the maximum allowed according to how much they earned.
With a TD Ameritrade ROTH (Talking about what I know.) a person can buy a single stock if they are so inclined, and there is no cost to buy and sell stocks. I’d start them off early learning to work hard, to save some of their money by contributing to a ROTH, learning to buy and sell stocks (“A stock is a little piece of a company Sweetie Pie, and yes, you own part of Coca Cola and part of Pfizer the big drug company.”) When prices dipped instead of panicking they would learn that’s a good time to buy, when prices soared they’d learn to sell at a profit.
Of course the account would be set up as a DRIP and they’d learn when prices dip below what they paid the dividend every three months would buy more of the stock. When prices are high the dividend would buy less. Instead of being hunched over a computer game all the time they’d be out earning money and discussing their stock “empire” at least part of the time. This way the child would learn that the more he/she works, the more money they earn, and that it is possible to take part of the earnings to invest and make money grow without having to work for it physically. By the time the child turned 10 or twelve he/she would have a pretty firm grip on how to manage money, plus the beginning of a nice little nest egg.
The 2/3 of their money that they did not have to put in the ROTH they could spend as they see fit. The beauty of successful stock trading in a ROTH of course is that you do not have to pay any pesky income taxes so it behooves a person to stash as much as legally possible in a ROTH as opposed to a regular savings or brokerage account.
I have no children so any major flaws in this plan have not been exposed by contact with reality!