Saving money when you don’t have very much is a troublesome issue that most college students have today. However, even if you aren’t bringing in big money, you can definitely save some money over the course of college to get on your feet when you graduate. With a little planning and discipline, you can leave your peers in the dust, and have a small nest egg for relocation, an apartment, or even retirement.
1. Open Up a Savings Account
Image via Flickr by 401(K) 2013
While savings accounts are a weak investment as far as earned interest, they are an important rung on the savings ladder. If you can manage to start a savings account early in college, you can see your money grow. Most banks offer student checking and savings accounts which forgive overdrafts, and might even provide a decent interest rate. To get this fund started, try adding an automatic debit on payday from your checking account to your savings account. Even if it’s only $10, you won’t miss the cash, and you can start piling away some money.
2. Start Your Roth IRA Early
IRAs, or individual retirement accounts, are an ingenious device for college students to save. A Roth IRA is a retirement account that you can place earned income into at any time. You can place up to $5,500 in a Roth IRA, and since the money has already had taxes taken out, it is virtually a tax-free investment. It also keeps you from withdrawing the money, as a withdrawal before age 59 1/2 is penalized. It’s a great way to save up and keep your money invested.
3. Traditional IRAs Help Save for Retirement
Traditional IRAs are another way to save early for retirement. They are similar to Roth IRAs, but are not tax free. Essentially, you place money in a traditional IRA to lower the amount owed on your taxes, or to get money back on your taxes. You can put up to $5,000 into a traditional IRA each year. If you withdraw money, you must be 59 1/2 or you incur a penalty. When you take money out after that, it is taxed as normal income. However, if you must have a tax break for a certain year, it is definitely worth a look.
4. CDs Keep Money Safe and Invested
CDs, or certificates of deposit, are a relatively safe way to save money and keep it invested. The certificate of deposit, which is offered by any bank, is a financial device that gives you a fixed term you must keep the money in the investment. It also has a fixed interest rate most of the time. What the certificate allows you to do is gain a higher interest rate and not be tempted to take the money out, as a withdrawal before maturity will incur a penalty. But if you want to keep money invested for at least 3 months or more, it is a perfect investment.
5. Penny Stocks Offer Great Return with Risk
If you fancy yourself to be a bit more of an investment guru, you may be willing to take on a little more risk. One such investment is penny stocks. These stocks, which are small publicly traded companies, are cheap and usually priced at under $5. While they are risky, the low price of the stocks makes it an attractive investment. If you currently are unsure of which sector of the market is most profitable, you can read some books by Fisher Investments to truly understand what the best emerging market is right now.
6. Treasury Bills Present Risk-Free Investment
If you have $1,000 saved, a US Treasury Bill is a low-interest, risk-free investment worth considering. While the interest rates are low, you don’t have to worry about losing any money on the investment, as it is backed by the full faith of the United States government. The terms of the bills are short, so if you need money quickly, it won’t tie it up for a long period of time.
7. Diversify Your Funds for Higher Chances of Return
Above all, remember now, and throughout your life that your investment portfolio should be varied as much as possible. Essentially, you don’t want to have all your eggs in one basket if you need money quickly or if you need some for a down payment. Make some of your investments long-term and some relatively liquid, even if you don’t have that much to invest.
It’s important to sit down and determine your needs and goals before investing in anything. By outlining what you hope to achieve with your investments, you can create a plan that will help you reach those goals. Investing is hard when you don’t have much income, but if you start today, the sky is the limit.
About the Author
This post was written by Shaun Chatman, who is a well published author on many authority sites. He lives in Dunedin, FL, and spends his free time playing with his kids or advising friends on everything from tech and gadgets to finance and travel.