Best Investments for College Students – How to Work Your Money

Are you a college student wondering how to make the most of your hard-earned money? Investing can be a great way to get a return on your money and build wealth over time. However, investing can be intimidating for first-timers, especially college students with limited funds. In this blog post, we’ll provide insight into some of the best investments for college students, giving you the tools you need to make your money work for you. We’ll cover everything from low-risk investments to long-term strategies that can help you reach your financial goals.

529 Plans

Many parents open 529 plans for their children as soon as possible, as the earlier contributions are made, the more time the money has to compound and grow over time. But don’t worry if you haven’t started saving early; any contribution to a 529 plan is beneficial. 

In fact, one of the great advantages of 529 plans is that they can accommodate large contributions and allow families to save significant amounts of money. An interesting fact is that the total amount that can be contributed to a 529 plan is higher than the other commonly known savings plan, the Coverdell Education Savings Account.

Roth IRA

A Roth IRA is a retirement savings account that is funded with after-tax dollars. This means you pay taxes on the money you put into the account, and then, when you take it out, it’s tax-free. 

This is an attractive option for college students who may have to pay taxes on income from part-time jobs, internships, or scholarships.

It’s important to note that you cannot deduct Roth IRA contributions from your taxes. But when the time comes to withdraw money from your account during retirement, there won’t be any income tax due on those withdrawals. 

That makes this type of retirement savings plan a great way to save money in college that can benefit you later in life.

The best part about Roth IRAs is that they provide tax benefits while you’re still young and likely in a lower income tax bracket. 

This could mean you pay taxes on a much lower amount of your income now instead of waiting until retirement when your tax rate could be much higher. So when it comes to retirement savings, a Roth IRA is an excellent option for college students looking to make their money work for them.

Mutual Funds

One of the benefits of investing in a mutual fund is diversification, meaning that your money is spread across multiple assets, reducing your exposure to risk. This means that if one asset does poorly, the others may still perform well, reducing the overall impact of any losses. 

Mutual funds are a good way to invest with a relatively small amount of money, as many mutual funds have low minimum investments. 

Apart from the potential for higher returns, mutual funds can also provide investors with access to professional advice on managing their investments. Many funds offer educational materials such as research reports and investor guides, helping investors to make informed decisions about their investments. 

A fact about mutual funds is that over $14 trillion is invested in them globally. This makes them one of the most popular investment vehicles in the world. 

Investing in mutual funds can be a great way for college students to diversify their portfolios and manage their risk. While there are risks associated with any investment, diversifying across multiple asset classes can help to reduce your exposure to potential losses. 

Investing in mutual funds can also be an easy way for college students to start building their financial future without putting a large amount of money into it. 

With low minimum investments and access to professional advice, mutual funds can be an ideal choice for those looking for an easy entry into the world of investing. 

While there are potential rewards associated with investing in mutual funds, it’s important to understand the risks involved as well. Investing in mutual funds is not a guaranteed return and all investments involve some degree of risk. 

Make sure to do your research before investing and consult with a financial advisor if necessary.

U.S. Savings Bonds

Unlike other investments, U.S. Savings Bonds are not affected by stock market fluctuations, making them ideal for college students who don’t want to take on too much risk with their investments. 

The bonds also provide a guaranteed return on your investment. Meaning, if you hold the bond until it matures, you receive the same amount of money back as you bought. Plus the interest. 

A unique feature of U.S. Savings Bonds is that they can be cashed in after as little as one year. This makes them ideal for college students who may need cash to cover tuition or other costs during their studies. 

Another great benefit is that you can purchase U.S. Savings Bonds with as little as $25. Meaning even those with tight budgets can still benefit from this type of investment. 

When purchasing a U.S. Savings Bond, there are some important things to keep in mind. For example, the bonds can only be redeemed after a certain amount of time has passed. Usually five years from the date of purchase. 

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Photo by Dan Dimmock

When cashing in a bond, you will incur a federal tax penalty if you do so before the five-year mark. Finally, it’s important to note that once a bond has been cashed in, it cannot be reissued or refunded. 

In summary, U.S. Savings Bonds are an excellent investment option for college students looking to save money while minimizing risk. 

With relatively low initial investments and guaranteed returns on your money, these bonds can provide college students with a secure and reliable way to save for their future educational expenses.

Certificate of Deposit

A certificate of deposit, also known as a CD, is a safe and secure investment. It can provide college students with an opportunity to earn some extra money while they pursue their degree. 

A CD is essentially a savings account in which the depositor agrees to leave the funds untouched for some time. In exchange for a guaranteed rate of return. CDs typically pay higher interest rates than regular savings accounts. And since the funds are tied up for a specified amount of time, there’s virtually no risk of loss. 

CDs are issued by banks and financial institutions. They’re therefore available in terms ranging from a few months to five years or more. The longer the term of the CD, the higher the rate of return on the investment. 

Generally speaking, the rates are fixed for the length of the term. You won’t be affected by changes in the market. When the term ends, you can either choose to withdraw your funds or reinvest them in another CD. 

One thing to keep in mind when considering investing in a CD is that you may incur early withdrawal penalties if you need to access your money before the term ends. 

For this reason, it’s important to make sure you’re not putting money into a CD you might need soon. It’s also wise to keep track of when each CD matures. So that you can decide whether or not you want to reinvest in a new one. 

The great thing about CDs is that they’re FDIC-insured. Meaning that if something happens to the financial institution issuing the CD, your investment is still protected up to $250,000. This makes CDs a relatively safe option for college students who want to save money without taking too much risk. 

When shopping around for CDs, be sure to compare the rates being offered by different financial institutions. Keep an eye out for promotional offers as well, as these can often result in higher returns. 

Finally, pay attention to any fees or restrictions associated with the CD. So that you can make sure you’re getting the best deal possible. 

Overall, CDs are an excellent option for college students looking for a safe and secure way to invest their money. They may not offer the same potential for growth as some other investments. CDs come with a guaranteed rate of return and are insured against loss. Making them an attractive option for those who want to avoid taking on too much risk.

Make Up Your Mind Right Away!

Choosing the right investments for college students can be a difficult decision to make. With so many different options available, it’s important to take the time to research each one and make an informed decision. 

Depending on your goals and financial situation, 529 plans, Roth IRA’s, mutual funds, U.S. savings bonds and certificates of deposit could all be excellent choices for college students.

Certificates of deposit are financial products offered by banks and credit unions. They guarantee a fixed rate of return over a specified period of time. They are a great option for college students looking for a low-risk investment opportunity with guaranteed returns. 

Certificates of deposit typically require a minimum deposit. And may have restrictions on when the money can be withdrawn without penalty.

Making the right investments while in college can be key to ensuring financial stability later in life. 529 plans, Roth IRA’s, mutual funds, U.S. savings bonds and certificates of deposit. All offer college students the opportunity to save and invest in their future. 

It’s important to take the time to do research on each option before deciding which is best for you. Be sure to consider your long-term goals and financial situation carefully before making any final decisions.

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