By ALON GALBOA
College is full of decisions. Some of them, like what to major in or who to date, are obvious. Others can be less clear. Yet, there’s one decision that you could start right now that puts you in a better financial position than almost all other college students. It’s not winning the lottery, or inheriting large amounts of money, it’s saving money and investing.
It’s a subject most young people avoid thinking about. Most would probably argue: How can I possibly invest if I have little or no money to begin with? Or another variant, “I’ll just invest when I’m older and have more money.” But as you’ll see waiting to start investing can hurt you when you’re older.
That’s because young people have the best weapon of all when it comes to investing: time. If you start early, say now in college, you have 40+ years to let your money grow. But if you wait another 10-15 years, that’s a significant amount of time you lose. And as they say, time is money.
That’s because of compounding interest, which means that the money you save every year has interest added to it. Then every year following, interest is added onto the previous year’s sum. Thanks to compounding interest, if you start investing $500 a year, your money will theoretically grow at a faster and faster rate every year.
So you understand that starting to save and invest at a young age means more money in your pocket later in life. But how do you go about investing with barely any money left over after paying rent, school supplies and the occasional bar tab?
If you know what you’re doing, you could start trading stocks. But there’s a simpler way, one where you don’t have to worry about whether the stock market is up or down or picking the right stock.
It’s a type of investing called DRIP, which stands for Dividend Reinvestment Plans. All you need to do is put in a certain amount of money each month, lets say $50 dollars, and you get $50 worth of shares. That usually ends up not being a nice round number, but it doesn’t matter. You buy the same amount every month and over time and it should average out to a good rate.
Saving and investing in college can be one of the most important decisions you make. It can prepare you for some of the inevitable bumps in the road and give you the financial freedom to do what you want at a later point in your life. So scrounge up some money from the couch cushions, buy one less cappuccino or beer every so often, and instead, invest it for your future.
Alon Galboa is a senior journalism student at the University of Missouri.
Society of American Business Editors and Writers
Walter Cronkite School of Journalism and Mass Communication,
Arizona State University
Suite 416, 555 North Central Ave, Phoenix, AZ 85004-1248
Phone: (602)-496-7862 Fax: (602) 496-7041
©2001 - 2013 Society of American Business Editors and Writers, Inc.