How to Invest as a College Student — What to Do and NOT to Do

You might’ve grown up hearing one of the most detrimental financial myths: Investing is like gambling. Although both involve a certain level of risk, investing (when done right) is a long-term strategy that can provide financial freedom and help build generational wealth.

Smart investing isn’t about timing the market or picking the best stock. Instead, it’s all about time in the market. The sooner you start investing, the more time your money has to grow. So learning how to invest as a college student is the best time to get started.

How to invest as a college student

Most college students have a limited income with competing priorities for paying tuition, rent and other living expenses. Therefore, they don’t typically have a lot of cash to make a significant upfront investment or afford large ongoing contributions. Additionally, graduate and professional students are generally stressed for time with busy school and work schedules.

All of these factors can be barriers to investing on top of already feeling like you don't know what the heck you’re doing in the investment world.

So, if you’re wondering, “Where should I invest my money as a student?”… we’ve got you covered with a list of best investments for college students woven in with some investing strategies to get you started.

1. Make finances (and investing) a priority

Your financial decisions as a student will set the foundation for your future financial security. Unfortunately, this is a prime time where students take on massive amounts of student debt and often live outside of their means by swiping their credit cards left and right.

Make your financial well-being a priority by sticking to a realistic budget and working toward financial goals, like creating an emergency fund and investing when you can.

Even if it’s just $25 to $100 a month, dedicate small amounts of money each month to investing in the stock market. This helps you be more familiar (and less intimidated) with this investment option. You’ll start to see the power of compounding interest and build a healthy financial habit that’ll serve you well going forward.

2. Use a digital financial advisor

If you aren’t confident in your investing ability or simply don’t have the time to learn right now, you can outsource your investment decisions. One affordable way to do this is by using a robo-advisor, which is a digital financial advisor.

A robo-advisor will automatically create an investment portfolio for you based on a series of factors, including your investing goals and your overall risk tolerance. Robo-advisors generally have a very low barrier to entry, meaning you don’t need a large chunk of money to get started investing.

For example, you can begin investing with Betterment with as little as $1. There isn’t a minimum balance requirement for its basic digital plan that only charges a 0.25% annual fee, which is significantly less than the usual fees charged by other financial advisors. It also has an investment app that makes on-the-go account management easy.

3. Choose your own investments using a free or low-cost broker

If you want to take a DIY approach as a new investor, there are many well-established brokers that offer commission-free online trading. I personally use Vanguard for my investment accounts, as does Student Loan Planner Founder Travis Hornsby. But there are other trusted places for investing, like Fidelity and Charles Schwab.

We suggest sticking with buying index funds to keep your investment strategy simple. Unlike investing in an individual stock, an index fund is comprised of a large pool of stocks or bonds that mimic the performance of a financial market index (e.g. S&P 500).

Index funds are one of the easiest ways to get started with investing. It’s also one of the best ways to ensure a broadly diversified portfolio of investments and produce long-term gains.

4. Sign up for an online investment course

Gone are the days where investors had to solely rely on financial advisors that charged hefty fees. Fortunately, the investing veil has been lifted and the average American can now learn how to make smart investments on their own via an online investment course.

There are plenty to choose from, but the Student Loan Planner investment course, Six-Figure Debt to Six-Figure Net Worth, is specifically designed to teach student loan borrowers with $20,000 to $1 million of student debt how to invest.

You’ll learn the ins and outs of investing and be provided with simple investment strategies that you can implement completely on your own. You’ll also score lifetime access to future course updates and bonus content, like investing for your kids’ education and real estate investing.

5. Start building your retirement savings

Even if you aren’t dreaming about retirement right now, there’s a good chance that your priorities will shift over time. At which time, you’ll already be several steps ahead on the road to early retirement and true financial freedom by starting your retirement savings now.

Retirement accounts are treated favorably in terms of how the IRS taxes (or doesn’t tax) your contributions, withdrawals, and investment profits and dividends.

If you’re currently employed (e.g. part-time job or full-time employment), you can open an Individual Retirement Account (IRA) and contribute up to $6,000 per year. You’ll receive either a front-end or back-end tax break, depending on whether you go with a Roth IRA or Traditional IRA.

Additionally, your employer might offer a 401(k) plan, or a 457(b) if you work for a government entity. At a minimum, you should maximize your employer match while you’re still in school. You can then adjust your contributions once your salary increases after graduation.

Keep in mind there are strict rules for contributing to and withdrawing funds from your retirement savings, such as an early withdrawal penalty.

6. Open a brokerage account

A taxable brokerage account is a non-retirement account that doesn’t have any limitations on how much you can contribute or when you can withdraw your money. However, any earned interest or dividends and capital gains made on investments you sell will be subject to taxes.

This type of investment account is best for any money that you’ll want to touch before retirement age (e.g. to buy a house) and for investing beyond your retirement contribution limits.

Be aware that different investment brokerage accounts will have varying minimum balance requirements (e.g. $1,000 to $3,000) to open and buy investments. But once you’ve met this minimum, you can invest however much you prefer.

If you’re otherwise financially secure, aim to invest $100 per month in a taxable brokerage account.

Don’t gamble your money away: Investment options to avoid

Now that we’ve covered how to invest as a college student strategically, let’s focus on what not to do.

There’s a lot of financial information out there, most of which comes with strings attached (aka someone is ultimately profiting from it). This only adds to the confusion of how to invest as a college student.

For anyone looking to grow long-term wealth, we don’t recommend putting your money toward:

• Cryptocurrency
• Trading individual stocks
• Options
• Anything exotic

It can be tempting to fall for these investment options’ allure, but they aren’t the most reliable routes to financial freedom. That being said, if you have extra income and can responsibly limit how much you’re investing, then it’s best to view these as your “fun investments”. Just don’t invest any money that you can’t afford to lose.

Bottom line: These types of investments aren’t necessary.

The gains that might come with these types of investment options are unlikely to repeat themselves. A short-term win doesn’t translate to long-term wealth. There are many more simple paths to making money with investing.

Stick to a simple investment strategy

Regardless of the amount of money you can afford to invest right now, it’s best to have a simple investment plan that focuses on long-term wealth building.

Investing early will give your money time to grow and establish a habit of investing. You can then plan to boost your investments as your salary increases after graduation and as you move through your career.

Keep reading: Should You Pay Off Student Loans or Invest?