As a college student, your mind is pretty much on getting good grades and navigating the social landscape of college life. Anytime you think about your finance, it’s either because you’re checking to see if you have enough for a special hangout with friends for the weekend or you’re suddenly struck by the amount of student debt you’re racking up.
If there’s anything many college students share in common, it’s being broke from time to time. So why on earth should we bring up investment? As counterintuitive as it may sound, now is the perfect time to start investing. This post explores why you should become a student investor.
- The Power of Compound Interest
You’ve probably heard, learned, or read about it thousands of times. One of the major factors that affect compound interest is time. Let’s assume you’re able to save $20 every week and decide to invest it in a low-risk market index like S&P 500 with an average annual interest of 10%. That works out to be about $1,000 yearly. If you start college by age 17 and retire by age 67, you will make $1,161,600. All the money you have contributed towards retirement is $50,000. That’s over $1.1 million in profits.
Now, let’s assume you wait till you’re 22 before you start investing, all other factors being equal, you’ll make $790,0231. All the money you have contributed will be 45,000 and your profit will be about $750,000. Pretty impressive, right?
But look at the numbers carefully, just because you failed to invest $5,000 while in college, it accrued to over $370,000 in losses. You see why you have to take investing seriously now.
To secure your financial future, you have to become a student investor.
- You Have Lower Financial Responsibility
The majority of college students are typically unmarried. Heck, you might even be receiving financial support from your parents. Couple that with the fact that about 70% to 80% of college students work while attending school. So, it’s easy for you to squeeze out money for investing.
Moreover investing for beginners can be a risky endeavor, especially if you’re looking into obtaining higher rewards. By investing in riskier stocks, you can make buttloads of money, but you can also lose money.
When you have kids or mortgages to worry about some years down the line, taking those risks would not be wise. Now that you have more disposable income, use it to explore the world of investing.
- Paying For College Debts
College loans are one of the biggest problems that haunt down college graduates for years. While it’s prudent to pay off your college loans as soon as possible, it shouldn’t be done at the expense of investing. Why? Because the interest rates for federal student loans are way lower than that for many low-risk investments. This means that your debt accrues at a far lower rate when compared to the gains you can get from investing.
So, the best strategy is to do both. Profits from your investments can be used to cover part of your student debt in the future.
To secure your financial future, you have to become a student investor. As you’ve seen, your decision to postpone investing will impact you negatively in the long run. Now is the right time to learn about investing for beginners. Sharpen your investment knowledge and skill as you navigate the complex world in investing. Remember, your financial future rests in your hands.
