Investing in the future
It has long been said, “a penny saved is a penny earned.” While this is still true, in the ever-changing world of the 21st century, that phrase can now read “a penny saved is a few pennies earned.”
This saying is most appropriate when speaking to college students. The image of a broke, hungry college student has been floating around for decades, but in a world of dwindling financial aid and skyrocketing tuitions, it has never been more realistic.
However, becoming a broke college student can be avoided if a student follows a few simple financial processes.
Save. Save. Save
When new students enter college, there seems to be a whirlwind of expenditures. For the most part, this is linked to their newfound feeling of independence.
A simple plan to save a set percentage of all income will set students on the right track to build a savings and have a strong source of relief in case of a financial emergency.
Hint: Buying the new iPhone is NOT a financial emergency. When spending, it is better to use money to create experiences and memories rather than simply purchase an item that will eventually lose its value.
Savings is great; however, turning a small amount of money into a larger amount of money is even better. A majority of college students have never invested their earnings, and most would not even know where to go to do so.
Below are some trusted sources for college students to break into the world of finance with a couple low risk, consistent reward investments.
Dividend Reinvestment Program (DRIP) funds are a great way for college students to enter into the world of finance and investing. DRIP funds are a type of stock that allows the shareholder to have the quarterly dividends of their shares automatically reinvested in the company.
The advantage of an investment such as this, is that it allows the investor to increase their holdings in the company without having to go through a broker or save up to buy a full share of stock. In short, these stocks allow investors to reinvest and increase ownership without extra fees, which allows for increased possible income.
Another affordable option for college students is to invest in mutual funds. A mutual fund is a form of group stock ownership that is most times professionally managed.
These funds are created by groups of investors pooling together their investments and purchasing stock in their choice of companies. Oftentimes, these companies will be in the same field of production.
A great way for college students to break into mutual fund investing is through the website www.sharebuilder.com. This website allows investors to invest as little as $4 a month into a mutual fund and pick their own companies to invest in.
When picking companies it is best to pick blue chip companies. These are low risk, established companies. While this may mean earning a smaller portion of a share with this company, it is assured that the investor will have a consistent, reliable source of income from this stock.
Investing and saving are not difficult to do and the rewards stemming from them can be immense. Follow these practices and be a broke college student no longer.