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Investment Tips for College Students

Updated on February 21, 2008

Easy Ways to Invest while in College

The majority of college graduates start their first months in the job market with low amounts of cash, no savings, and credit card debt (and this doesn’t even include school loans). This is a growing, widespread problem for freshly graduated college students. It is especially difficult during economic slowdowns when recent graduates finding a job is difficult.

One way to change the habit of overspending is to start saving and investing your money while you are still in college. Students like flexibility, so one option to help you save money is to allow more flexibility in the investments you make. Banks and financial institutions have recognized the great market need for investment products that offer flexible options. Currently, there are at least a dozen investment options that offer great flexibility while still giving a decent return on the investment.

Four Investment Ideas for College Students

1. Free Checking Account 0% APY

- Let’s start with the checking account. Checking accounts are the most flexible type of account available. You can deposit and withdraw funds whenever you want. Almost every student has a checking account, and those who don’t should open one. Most people pay a small monthly fee for their checking accounts while receiving no interest on their money. If you are trying to save money, it makes sense to have a free checking account. There are many banks, like WaMu, that offer free checking accounts with free checks. However, there is zero interest on your balance. But with no monthly fees, at least your balance is not shrinking like it does with banks that charge. If you are interested in a free checking account, but you don’t know which banks offer them, check out the closest bank branch to your campus. Usually big banks, like Wells Fargo or Bank of America, offer special deals to students. Free checking may not be a great investment, but at least you are not throwing your money away by paying account fees and stuff like that. In fact, you can take the money you save on fees and put it into savings.

2. Savings account 0.1% — 0.3% APY

- Another great option for students looking for flexibility in their investments is opening a savings account. Basic savings accounts don’t require a large initial investment. In fact, they work similar to checking accounts, but there are some limitations on how many times you can withdraw your money per month. Savings accounts usually don’t come with checks or debit cards, but you can link it with your checking account to make money deposits much easier. Many banks let you set up an automatic monthly transfer between accounts, which can make adding to your savings easier. For example, if you automatically have $25 or $50 automatically transferred from your checking into your savings every month, you will be find the savings begin to add up. It will be easier to save with an automatic transfer because it doesn’t leave room for excuses, like “I can’t put money into savings this month, maybe next month…” Traditional savings accounts don’t offer a great rate of return, with a low APY (Annual Percentage Yield) rate with your initial investment. Larger banks, like Bank of America, Wells Fargo, and WaMu, offer 0.1 – 0.3% APY.

3. Short-term CD – up to 3% APY

- Savings accounts are good when you are talking about a couple hundred dollars, but if you have larger amounts, like a $1000 or more, for savings, you probably want to put it somewhere safe where you won’t be able to spend it. You should consider a short term Certificate of Deposit account. With a CD, you can lock your investment for as long as you want. The time of the investment can vary from 1-120 months. Interest rates also differ on CD accounts. Traditional banks usually offer rates up to 3% APY, depending on the length of your deposit. The important thing to remember before opening a CD account is the inability to withdraw the money for a specific period of time. If you do withdraw the money before the maturity date, you will have to pay penalty fees.

4. Money Market Accounts 1% - 6% APY

- A Money Market Account, in my opinion, is the least popular form of investment for college students. This type of account works just like savings, but it requires a larger initial investment, which may be difficult or impossible for most college students to manage. But, hey, if your parents kicked in some extra cash this quarter or you started living on campus and sold your car, the Money Market may be an option for you. The requirement for a large initial investment gives you a return ranging from 1-6% APY versus the 0.1 – 0.3% APY on the savings account. The higher return rate definitely sounds appealing. It is important to note that a Money Market, while giving a high APY rate, doesn’t require us to “lock” our money for a period of time like a CD does.

You might find that none of these options suit you. That’s okay. If you really want to start saving, begin small. Even if your method of savings is a jar that you put coins into, it is a start. For more tips on saving, check out Tips for Saving Money & Paying Off Debt.

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    • Ralph Deeds profile image

      Ralph Deeds 9 years ago from Birmingham, Michigan

      Good advice, Stacie.

      The topic reminds me of a story proudly told by Joe Godfrey, a very tightwad vice president of General Motors. His father apparently was also a very successful tightwad. Anyway, he sent our hero off to college with a monthly allowance which he estimated would be sufficient for his expenses. Near the end of the school year his father paid him a visit in his dorm room and discovered a cache of several hundred dollars that the student had saved up out of his allowance. Without a word, his father picked up the wad of bills and stuck them in his pocket. As the old saw, goes, the acorns don't fall far from the tree.

      Another GM story. One of the company's original investors/founders was C.S. Mott (whose son Stewart Mott died recently) who left a billion or so to the Mott Foundation. Anyway, as the story goes, C.S. went on a business trip with Tom Christensen, a young manager from the GM Design Staff. When Christensen bought a couple of newspapers as they entered the airport, Mott instructed him return them and get his money back. Christensen did so and as they entered the waiting area Mott scouted around and found a couple of the same newspapers, slightly used, and advised Christensen never to buy a newspaper at an airport or train station. Sound advice from a billionaire which I've followed ever since hearing the story.

    • profile image

      Debt Expert 8 years ago

      Great suggestions! My CD has been a godsend to me ever since I got out of college - I don't know where I'd be without it.

    • profile image

      getanswers 8 years ago

      I have never heard of checking accounts before...

      thanks for the information..

    • AndyBaker profile image

      AndyBaker 8 years ago from UK

      Well, you wrote this hub about 5 years too late for me :)

    • ricky develo profile image

      ricky develo 8 years ago from Orange County, CA

      Excellent advice for college students. The % APY is definitely important. Thanks!

    • profile image

      Twin XL 8 years ago

      Great advice... wish I'd known this years ago!

    • profile image

      Tobi 7 years ago

      This is great! I have a free checking account with PNC. I'd like to also suggest TD Bank in that category.

      && I shall now put money in my savings every month or so.

    • profile image

      About CD Accounts 7 years ago

      If you have the spare cash, CD's are a steady safe hands off investment. I'd tell college students to invest in 1 year CD's.

    • ezzy1512 profile image

      ezzy1512 7 years ago

      Great hub.

    • Neil Ashworth profile image

      George Poe 7 years ago from United Kingdom

      Nice hub. Some good information here. Thanks for the info..

    • profile image

      Hank 7 years ago

      Very nice hub. CD's are a great way to go.

    • Mellow n Melody profile image

      Mellow n Melody 6 years ago from India

      Good advice...Thumbs up

    • profile image

      terest Rates 6 years ago

      If i put $5,000 in my account i am not allowed to take out any money in 8 months the in terest rate is 2.75?

      How much will i make in 8 months?

    • profile image

      6 years ago

      .66(5000*1.0275) is the amount you will receive after the 8 months

    • profile image

      helene.bliss 6 years ago

      Nice hub and indeed it's full of information. Thanks for sharing this topic to us.

    • iamageniuster profile image

      iamageniuster 6 years ago

      Thanks for sharing. I've applied these and came out of college debt free with a little savings.

    • DaleCap123 profile image

      DaleCap123 6 years ago from Mauritius

      Great advice..Many say here that they wish they heard this years ago; it is never too late to make wise decisions.

      Investing is so so needed in our dispensation!

      Just make sure you don't need the money in the NEAR future..

    • profile image

      COzayed 6 years ago

      These quite hubs rather than one hub,

      thanks for these info :-)

      Yaa, everyone should tell those friends who like to spend money

      rather than save it to their future!

    • bugslady8949 profile image

      bugslady8949 6 years ago from The Bahamas

      you did a great job on this hub, I hope when I have money I would do some of this things you suggested.

    • profile image

      wow 4 years ago

      horrible investments other than money markets

    • profile image

      Janno 3 years ago

      hello,I just wished to write to say how much I've enjyoed reading your site. I am part cherokee on my mother's side and my sister is half blackfoot on her father's side. we are half sisters actually as you can see. but anyways I love anything and everything to do with the Native American culture. I also have a friend who is always looking for new info on this as well and I am having a problem with finding information about her birth totem. Her birthday is September 13 If you could help me I'd be grateful as I say she loves Native American stuff as I do. Also I noticed you do crafts. I do too and am looking for a crochet pattern for a native american girl dress to do for a project I'm working on. If you may have any ideas or could help in any way I'd be grateful. Sorry if I've rambled I take medication due to a serious ailment which has left me bedbound. Thanks again for any and all help!!!!

    • profile image

      Margo 3 years ago

      Hello Monia,Thank you for letting me know that you have enjoeyd reading my blog. I am so glad it has helped you. Your friend was born under the Harvest Moon and her birth totem is the Brown Bear. Of course it doesn't stop there because we all have 9 power totems that walk with us on our journey here on Mother Earth. And then there are the Messengers who come and go to teach us important lessons. I don't know of any specific patterns for Native dresses. Will you be knittin, crocheting, or sewing the dress? You know you can always use yarns that are colored in the typical colors we see in Native American designs with any pattern. Perhaps something made from turquoise, red, and yellow? Or use the colors of the Medicine Wheel which are Red, Yellow, White, and Black. Let me know if I can help you further.

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