A common dilemma for a graduating college student is to graduate with no savings, a crushing amount of college debt and even worse high inflation credit card debt. This is a bad position to be in when starting a new life as a professional. It is like starting a race with 10 pound weights tied to your feet rather than with top notch running shoes. It makes it nearly impossible to hit the ground running and the graduating student may spend years paying off debt and recovering. The following are investment tips for college students; that should help to make integration into a working life smoother and get the student started, “on the right foot.”
Many college students will say that they have no money. Certainly no money to spare for savings. If you are able to go out more than one time a month with friends and spend money, than there is enough money to save a little. If not perhaps a part time job is in order. One way or another there should be a way to get a little bit of cash for spending purposes.
♦ Credit Cards
Credit cards are the ANTI investment. It is good to have these cards as an emergency measure. But doing more than the occasion purchase and immediate repayment is foolish. Interest rates and fees on credit cards are FAR greater than the amount that could be received for any form of savings or investment. If a college student ONLY goal is to leave college with NO credit card debt, then at least something positive has been achieved.
♦ No fee checking
A college student there is a good chance you will not have tons of money in your checking account at any given time. Therefore it is a good idea to make sure that your get a “no fee” checking account where you are not charged a monthly or annual fee for your checking account. There will be no interest accrued on these no fee checking accounts, but if the balances are never high then the interest would almost always be far lower than the fees anyway.
♦ Separate savings account
Savings accounts can be opened with very small amounts invested. Open a small savings account as a college student and send as regular small amount to this savings. Even if it is only $20 month, after 4 years of college and a little interst this can add up to something to start with once you get out. Once again, it is important to both have something being saved AND keep your credit card debt as close to zero as possible.
♦ Long term investment
Until you get $500-1000 in savings and Credit card down close to zero, putting money in a special banking account is as much about keeping it out of your hands as it is serious investing. The APY interest rates at banks is fairly low these days. 1% is likely to be a good return. Once you get between 500-1000 dollars thinking about opening a short term CD, money market or a reliable mutual fund would be the way to go. Remember that this money is long term. You should never put money into any of these vehicles and then NEED it 6 months later. This money is for the long haul and it is an investment for your future.
College is about putting yourself in a good position for the future. You get an education to give yourself an advantage over the people who do not take the effort. Why only consider education in your planning. The earlier you being to make a serious savings the better it will be in the long run. That is the miracle of compound interest. Simply avoiding massive credit card debt and creating a system where you put money away every single month for the whole time you are in college will give you the step up you need for the future success. Investment is not something for the future. Investment is now.