Money Savings and Investment For College Students

Taking into consideration young students around the world who are still in college, I would like to emphasize the importance of saving and investment. Don’t wait till the time you get a higher salaried job to start saving. Start from where you are, even if you are a student who is getting pocket money, start saving a bit from it. For example, if you just start collecting coins, in 3 to 6 months, you will get enough to fill a piggy bank which means around 400 to 500 bucks. Always remember that a higher salary doesn’t necessarily mean higher savings, it usually means higher standard and cost of living. In other words, as your salary increases, your expenditure will increase faster (more than proportionately) and you'll never be able to save. It’s not the amount you save that counts but the early start and consistency that counts, so start saving from today.

Start saving when you are in college - that's perfect time for you.
Start saving when you are in college - that's perfect time for you. | Source

Once you have decided to save and you have some extra money in your hands, you can invest that money in many different ways. Now, I will present a guide for college students discussing some charts and numbers so that they know what the profit is in saving early and start investing when they are still in college:

Let’s take an adult at age 35. If he were to invest 100 bucks at age 35, let’s find out what he gets at age 65 when he retires and needs the money for the rest of his life.

Here, I am going to use a return on investment of 5%, 10%, 15% and 20% as examples. The banks generally provide you a return of 9% to 10% if you put them in fixed deposits for a long period of time. However, putting the same money into stock market can give you up to 20% or 25% based on what your risk profile is. Let’s skip the risk profile and stick to common bank fixed deposits first as they are safe and secure. I would assume Wells Fargo Bank would be a safe bet:

Table for Saving and Investing 100 Bucks into Fixed Deposits

Growing At
5%
10%
15%
20%
Age
 
 
 
 
35
100
100
100
100
40
128
161
201
249
45
163
259
405
619
50
208
418
814
1,541
60
339
1,083
3,292
9,540
65
454
1,919
7,614
28,485

As you can see above, with 10% returns, you get 10 times the money in 25 years. Well, you got to learn that the returns are dependent on the number of years invested and not on the age. So if you are 20 years old and you invest 100 bucks, you get your money multiplied to 10 times in 25 years. That will just make you 45 years old and you have not put your money into a lot of risk. As you grow older, your risk profile becomes low. You cannot risk your money a lot. However, you would risk a lot when you are young. Why? Because you know you have TIME with you to make up the money again in case you lose it. That’s not the case with a person who is 40 years old and trying to start investing.

Did this make sense? I hope it did.

Now what would the same money (100 bucks) be worth 25 years from now? Most likely 1/10th of the current value. So you probably have just got your money's value just by keeping it in fixed deposit in a bank. Hmmm. Not a pretty interesting thing, isn’t it? Coz you just didn’t get any extra baggage out of the same money. You could have rather blown it up on some fancy dress 25 years ago when you were still young and could fit into those cute slim dresses?

Yes. That’s a thought. Now lets look at it a different way. Assume that were your savings and you were trying to just save it up for future. Wouldn’t it be a great thing to have an extra 100 bucks for free because you saved it up long back?

In other words, if your parents put 100 bucks in the bank and created a fixed deposit with 10% returns when you were just born, wouldn’t it be great to have that extra 100 bucks to blow up now? Yes. That’s a thought too. In the same way, if you save now, you get to blow up the same money 25 years later to buy yourself a fancy car, may be a Mercedez or BMW. Well, I am not just talking about 100 bucks here. We got to talk about a lot more money for buying a Mercedez or BMW. This is just for an example of what savings can do for you and the point that money put into savings now when you are young would yield returns for later. If you are young and you have time in your hands, you can be risk savvy which means you know how to mitigate the risk if you were to lose out a few bucks. When I say mitigate, you know means by which you can earn back that money.

Now let’s put that to a better perspective.

Assume we put the same 100 bucks into stock market. It would earn you better returns. Depending on your risk, you can get returns at 15% to 20% to 25% or even more (no guarantees). However, I will stick to 20% because that would make a point of what I am trying to say here.

Let’s look at this example.

Table for Saving and Investing 100 Bucks into Stock Market

Growing At
5%
10%
15%
20%
Age
 
 
 
 
15
100
100
100
100
20
128
161
201
249
25
163
259
405
619
30
208
418
814
1,541
40
339
1,083
3,292
9,540
50
552
2,810
13,318
59,067
60
899
7,289
53,877
365,726
65
1,147
11,739
108,366
910,044

So according to the above chart, now your money has grown 9000 times. Isn’t it? You also got to remember that we are talking about 50 years here. We put the money into an investment scheme and kept it multiplying for 50 years. So when you were young at 15, you saved up 100 bucks and now at 65 years, you have 910,044 at your disposal. For now, it looks like a lot of money. However, you got to take the inflation, time value of money, and a lot more factors to enjoy that money.

How do you get a good answer to that? Let’s see. If you go back and ask your parents how much one sack of 25 kg rice cost about 50 years back. They would say 1 buck. How much does it cost today? 60 bucks per KG x 25 Kgs = 1500. So we are looking at money having appreciated 1500 times just to buy one sack of rice in 50 years.

So even if money has appreciated 1500 times, our money has grown 9100 times. That makes us rich to buy a lot more kgs of rice. Isn’t it? It just means I am richer today than I was 25 years ago. I hope this is making sense to you.

Well, you wouldn’t put 100 bucks into a stock market and keep quiet just to buy more rice. You will invest regularly. As you grow older you start to invest into lesser risk giving you lesser returns. Overall, you would be looking at a lot more profit coz you saved today for tomorrow.

Now if you wanted money at age 40 to buy yourself a house, you can just pull out the money from your investment you did at age 15 and use that to buy the house. Would that make you short of cash? NO. In fact, you can buy a much bigger and high priced house because you have a lot more with you now. In addition, you are still young at age 40 and probably earning a good salary. You have made sure long back that you want to live a better life at age 40. Here, we are just looking at 950 times the money value and not 9000 times because we pull out the money at age 40 instead of keeping it for another 25 years.

The other point you got to notice is that if you pull out the money at the first 25th year, you get 950 times the money value. However, if you pull it out at 50th year, you get 9100 times the value. That’s a lot more.

The alternate scenario is that you did not save and invest at age 15 and you want to start your investment at age 40. Now you would have to take a housing loan and the current rate of interest is 11%. So you have to shell out a lot more money to buy a house because you don't have enough saved up money to buy it. What does this equate to? A lower lifestyle because you now got to save for paying up your house loan while you have to eat, pay your bills (cellphone, electricity, water, etc), petrol for car (wont that cost a lot?), salary for driver (oh, if you want to maintain your lifestyle), education for kids (hmmm, you didn’t think about that did you?), hospital expenses for partner, kids, parents (oh yea. you may have to take care of your parents if you are a good child), and many more. You will have things hitting you like fireball. Believe me, you will be surprised.

So does this give you enough encouragement to save for the future? I bet it does. If it doesn’t, oh well, I tried. Now I have discussed above how important is saving and investment for young people especially college students. I suggest them to go invest, multiply money, and gain profit when they come to an older age.

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Comments 6 comments

ocbill profile image

ocbill 5 years ago from hopefully somewhere peaceful and nice

wish I invested at age 17. Instead I bought a necessary car, a VW rabbit. And you are so right about higher income. It means higher expenses and higher taxes. I like to supplement it with off the books odd job income.


soni2006 profile image

soni2006 5 years ago from New Delhi, India Author

Hi ocbill, you are not alone as there are several individuals including me who did not start early. This is the reason why I have written this hub to guide our young friends to start investing at an early age and live a secured life full of luxury afterwards. The same thing I explained to my younger cousin a few days back to tell him to not repeat the mistake I made when I was at his age.


Simone Smith profile image

Simone Smith 5 years ago from San Francisco

Great Hub - your advice is most helpful, and the charts really bring your message home.


soni2006 profile image

soni2006 5 years ago from New Delhi, India Author

Thank you so much Simone for the feedback and your visit.


lola 5 years ago

gee this helped alot.......(sarcastic)but i did learn quite a bit


petros 5 years ago

okay this is making sense but is it fine if i can personaly email u and ask u some questions?

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