If all you know about investing comes from “The Wolf of Wall Street” or your eighth-grade home economics class, then this is for you.
Investing doesn’t have to be picking stocks and putting huge amounts of money into risky investments — and for most people who invest, it doesn’t look like that at all. In fact, you can forget about stock, 401(k)s and Roth IRAs for now — although that will be coming later — because this will all be about short-term investments that can fit into a student’s lifestyle.
College students frequently have limited time to work and large demands on their funds, from tuition to car payments. We all know money can be tough already, so these options should be a bit more beginner-friendly and help keep your money more accessible.
If you need to have emergency funds on hand at all times, then it’s time to check out some high-yield savings accounts. The average interest rate for savings accounts is only 0.46%, but high-yield savings accounts can sit between 4% and 5.15%. If you have $500 in your savings, that’s a difference between $502.30 and $507.28 at a 4.5% rate.
That might not sound like a huge difference, but with a larger amount of money in the account over a long period of time, that 4% will make a huge difference. The main drawback of high-yield accounts to be aware of is the withdrawal limits, so be sure you have a healthy emergency fund in a standard savings or checking account as well.
If you can afford to part with a reasonable amount of money for a while but would like to have it back within a year or two, fixed-term CDs could be the way to go. A CD, or certificate of deposit, is essentially a kind of savings account. Different banks will offer various terms and interest rates, so if you need the return in six months rather than two years, there are options out there for you.
Unlike a savings account, however, your money is basically behind bars for the length of the term. That’s not necessarily a negative, but you don’t want to get overzealous and put your life savings into different CDs all at once. This is a very secure option since they normally offer fixed interest rates, so there shouldn’t be any unwelcome surprises.
One of the more accessible options that might feel a bit more familiar is micro-investing through apps. In every mobile game and YouTube ad there’s another promotion for a new app, so it’s important to be careful when it comes to these. The big ones like Acorns, Robinhood and Fundrise, which are very transparent and well-known, can be a fantastic option, but the fringe ones that pop-up over the screen while playing a new puzzle game could very well be a scam.
Some of these apps are more traditional and are based on regular deposits, while others might have more unconventional options, like investing all your spare change from a month’s purchases.
There’s a lot of options for easy investing out there, but the most important thing is to always do your research — both to ensure you’re making a safe investment and finding the right one for you. Be smart, and make some money.
Virginia Doherty is a columnist. Contact her at [email protected].
