How to Invest as a Student

Investing as a student is a wonderful time of life in which to get started in building your financial portfolio. Investing even just a little bit of money in your late teens and early twenties can grow to thousands of dollars in your middle age. When you begin investing as a student, you have time on your side. Here is how to invest as a student.

Things You'll Need

• Investment money

Instructions

1. Determine how much money you have as an initial investment. Many investment vehicles have a minimum investment requirement, so the amount of money that you have available to invest might narrow down the options of what you can consider at this time.

2. Open a savings account. The first step in investing as a student is opening up a savings account with a local bank. Most savings accounts do not offer much in interest income, but you need to start somewhere. Make a decision that any money you place into your savings account will remain in savings. Some banks have a lower minimum initial investment requirement for students.

3. Explore certificate of deposit (CD) options through your bank. Most banks offer CDs in which you can invest your money. The interest rate is generally higher than what you will receive in a savings account. However, that money is not liquid, which means that you will have to pay a penalty if you try to withdraw your money from the CD before a certain date. When you set up the CD, you can decide how long you want to keep your money tied up in a CD.

4. Invest in a mutual fund. Once you have accumulated around $3,000 for investments, you are ready to make the leap to more serious investing. Many investment companies are available to walk you through the process of investing in a mutual fund. Links to three of the largest investment companies are provided in the Resources section.

5. Consider opening a retirement account. Most students do not have retirement on their minds, but opening a retirement account can enable a student to invest in a mutual fund with a smaller initial investment (sometimes as low as $1,000 to $2,000). If you invest in a Roth Individual Retirement Account (Roth IRA), you will pay taxes at your low student tax rate and then be able to withdraw that money tax-free in retirement.

6. Continue saving money. While leaving your initial investment alone to grow and accrue interest is a good start, adding to your nest egg on a regular basis is an even better plan. After you invest your initial investment, most investment companies will allow you to add to your investments in much smaller increments, such as $100 at a time.

Tips & Warnings

• Talk with representatives from your bank or investment company as you have questions. Most investment companies offer a toll-free number so you can talk with a representative. Most investment company representatives are very knowledgeable about the investment process and the accounts that are available for investment, so they can walk you through the entire investment process.

Resources

• The Vanguard Group
• Fidelity Investments
• American Century Investments