College is a time of learning, exploration, and growth. For many students, this time provides much-needed experience in real life and is also a time when most of your financial life is still on training wheels.
For those students utilizing campus living premises and are on a meal plan, two of their biggest financial line items are settled – housing and food. This means they are operating under a budget that will significantly change once they graduate. Such students should take advantage of their financial situation to secure a stable future investment. Given that students have the rest of their working lives to earn and invest, this is a prime opportunity to diversify their investments across more volatile assets such as cryptocurrency and more stable ones like stocks and bonds.
Here are five investments a college student can make to secure a stable financial future.
1. Stocks
Buying a stock essentially means that you have bought a piece of a company. Despite the risks involved, if you invest wisely in profitable companies and aim for long-term benefits, your stock price will grow with the company. This will prove to be a valuable investment for college students who wish to have their financial life in order before getting into the workforce.
2. Bonds
Bonds are considered much safer investment ideas than stocks, especially if you invest in government bodies. The individual who buys a bond pays the lender for it, after which it accrues dividends and interest until they decide to cash in the bond. Since bonds are mostly more expensive than stocks, college students who can afford to buy them should because they are a great way of investing for the long term.
3. Mutual Funds
When you invest in mutual funds, your money goes to a pool of investment money managed by a professional money manager. This money is then used to invest in profitable ventures, including real estate, bonds, and shares. College students can choose mutual funds, but they need to know that the risks depend on the type of account they invest in to ensure their future is more secure.
4. Certificates of Deposit (CDs)
A Certificate of Deposit is an agreement between a customer and a credit union or bank. The customer agrees to save a certain amount of money in the bank without withdrawing it for a specific amount of time. This money compounds interest over time until the contract period ends. The best part about CDs is that they are a low-risk investment and are a safe option for college students with little knowledge in the investment arena.
5. Exchange-Traded Funds (ETFs)
ETFs are similar to stocks. In fact, Exchange-Traded Funds are a bundle of different bonds and stocks managed by financial experts, similar to mutual funds. ETFs also have similar risks and benefits to mutual funds and are a safe option for rookie investors.
Bottom line
Thanks to the rise of investing apps like Acorns and Stash, college students can start saving and investing with pocket change. The earlier you start investing, the better off you are at securing a stable financial future.