Investing while in college may seem like a challenge since students are often considered broke due to high college expenses and potential loan debt. However, if you earn an income as a student, investing a small sum of money each month can help you gather enough to pay off some of your debt or put the money toward other big expenses like getting a house or a car.

In this comprehensive guide, you’ll learn how to start investing as a student by exploring the best investment options for college students and useful investing tips.

Investment Options for College Students

Investing as a college student gives you plenty of time to collect a substantial amount of money and perhaps earn high interest, depending on your investment choice. To decide what you want to invest in, you should first assess your risk tolerance. High-risk investment options provide a higher return on your investments, but they’re also unstable and can lead to money losses. Meanwhile, low-risk investments are safer and include a lower but guaranteed return. 

Once you determine your risk tolerance level, you can explore the following investment options for students:

1. Stocks
2. Savings accounts
3. Mutual funds
4. Exchange-traded funds (ETFs)
5. Money market funds

Stocks

While most investment options for students on this list are low-risk, stocks are high-risk investments. Stock investing involves buying a share in a company and earning money based on the company’s value. If the company performs well, you can get high returns, but if its value decreases, you can lose some or all of your funds. While stocks are volatile investments, they generate a high return rate and can be a great financial instrument if you’re saving for long-term goals.

Here’s how to start investing in stocks as a college student in three simple steps: 

1. Decide how to invest—Your money can be managed by an investment manager or a robo-adviser, which automatically creates an investment portfolio on your behalf. Both of these are suitable for students with limited investing knowledge, but robo-advisors cost less. If you’re well-versed in investing, you can also manage your investments yourself
2. Open an investment account—You can either opt for an online brokerage account that lets you invest in stocks, bonds, ETFs, and similar assets or open a robo-advisor account like Fidelity or Schwab
3. Determine the amount you can invest and make a purchase—Decide on the amount you can contribute to the account based on your budget. There are no limits on how much you must contribute to start trading, so you can start small and increase your contributions later

Savings Accounts

If you want to store money safely and earn interest on the saved amount, savings accounts can be a good choice. They’re the most basic financial investment, and they’re extremely low-risk since they’re typically federally insured up to $250,000, meaning that you won’t lose money if the bank your account is at fails.

You usually open savings accounts in banks, and you can choose the same bank you have a checking account with or a different one if it offers better rates. The rate of return on your investment on some accounts can reach up to 0.50% per year.

Mutual Funds

Mutual funds are investment funds that let you pool your money with other investors and buy diverse investments, such as stocks, bonds, and other securities. 

These funds are great for diversifying your investments, and they’re a good choice for beginners since you don’t have to manage them yourself. Instead, a mutual fund is managed by a money manager who makes decisions on investment opportunities to maximize your profit. However, to have an expert manage your investments, you may have to pay a fee.

Exchange-Traded Funds (ETFs)

Exchange-traded funds (ETFs) are similar to mutual funds since they’re also pooled investments, but they track a particular index, sector, commodity, or another asset. However, they differ in two important aspects:

1. Mutual funds are traded once a day after the markets close, while ETFs are bought and sold like stocks during normal exchange hours
2. ETFs aren’t actively managed by a money manager, so they include lower fees than mutual funds

Besides paying lower fees, investing in low-cost, well-diversified ETFs as a student is also a good option because it allows you to access hundreds of stocks without personally researching each one.

You can also explore index funds, which are similar to ETFs but directly tied to the performance of a specific index like the S&P 500. They’re also lower in cost than mutual funds since they don’t require an expert to choose your investments.

Money Market Funds

A money market fund is a type of mutual fund, but it’s extremely low-risk, so it has a low rate of return. These funds are sponsored by investment fund companies, and you can use them to invest in highly liquid, short-term debt securities like cash. Many financial advisors recommend keeping a sum of money in money market accounts for security since this allows you to move your funds into other investment options later.

How To Invest as a College Student—A Step-by-Step Guide

After carefully considering where you want to invest your funds by taking your risk tolerance into account, you’re ready to put your money to work. Here’s how to start investing as a student in a few simple steps:

1. Open an investment account
2. Make your first investment
3. Review your profile periodically

Open an Investment Account

The kind of investment account you decide to open depends on your goals and the type of investments you want to make. For example, if you want to save money for long-term goals like retirement, you should choose a retirement account, but if you have a short-term goal like buying a car, you may consider certificates of deposit (CDs).

Some of the best investment accounts for college students include:

• Brokerage accounts—These accounts let you deposit money and use it to invest in stocks, bonds, EFTs, and other assets. The interest you earn on your investments and any gains you receive by selling them is subject to tax, so you should leave a portion of your gains aside to cover the taxes
• Individual Retirement Accounts (IRAs)—Investing in IRAs allows your funds to grow tax-free, but you can only withdraw them without fees once you turn 59½. Most students typically open Roth IRAs because these accounts let you withdraw money early as long as you use it for college-related expenses
• Certificates of deposit (CDs)—These are similar to traditional savings accounts, but they require you to leave the money in the account for an agreed-upon time, or you’ll face penalties. Leaving your money untouched for a few years results in a higher fixed interest rate, so you can earn more money than you would with a traditional savings account

Make Your First Investment

Once you choose what to invest in and pick the investment account that fits your needs, you can make your first investment. You can start small and increase your contributions over time, or you can invest all the money you’ve saved.

The key to investing is to be patient—your contributions may seem small at first, but they’ll grow as time goes by. If you decide to invest in stocks, keep in mind that the shares can be unpredictable in the short term but can help you earn a lot over time due to high return rates.

Review Your Profile Periodically

You should let your investments grow for as long as possible, but that doesn’t mean you shouldn’t review them. Still, while investing apps and investment opportunities are highly accessible nowadays, don’t overwhelm yourself by checking your investments every day. Accumulating a substantial amount of money takes time, so try to review your investment quarterly.

Best Tips on Investing for College Students

Before you rush into investing, you should educate yourself on how to invest properly. There are many sources you can turn to for help, including financial literacy books, articles, or YouTube videos. Before you begin learning on your own, here are a few important tips to get you started on investing for students:

1. Determine your investment budget
2. Diversify your investments
3. Invest a little every month

Determine Your Investment Budget

Don’t invest any money until you figure out the amount you can afford to invest. To determine your budget effectively, calculate your earnings after taxes and the amount of money left after covering necessities like food, rent, and bills. You should also decide how much you plan on spending on clothes, entertainment, and outings with friends and create an emergency fund that can cover three to six months’ worth of living expenses. Then, you can invest whatever money is left in the end.

Diversify Your Investments

Instead of investing in a single stock, you should invest in multiple stocks, ETFs, and other assets to decrease your chances of losing money. If one stock loses value and results in money losses, you’ll still have other investments that you can gain money on. The best practice is to invest across various risk levels and industries, such as:

• Retail
• Technology
• Healthcare

Invest a Little Every Month

Having a small budget shouldn’t discourage you from investing. Any money you invest, even if it’s $20 or $30, will accumulate over time and help you earn a decent amount in the long run. Some brokers even allow you to buy fractions of a share, making stock investing for students much more accessible.

Additional Ways To Invest Money for College Students

While stocks, funds, and savings accounts may be a common investment for students, there are a few other ways you can invest money and still earn substantial profit. You can:

1. Buy and sell items
2. Invest in bonds
3. Subscribe to credit building services

Buy and Sell Items

Buying and selling valuable items can be a fun way to invest and make money. For example, you may invest in some childhood toys that have now increased in value and can be sold for thousands of dollars. A popular example is Pokémon cards that, depending on the cards you own, can sometimes be sold for millions.

If you don’t have items you want to sell, you can start searching for them in car boot sales and sell them on eBay, where the demand is high. However, you must understand the true value of the items you’re buying and selling to prevent knowledgeable buyers from using your lack of knowledge to their advantage.

Invest in Bonds

When you buy bonds, you make a loan to a borrower—typically a company or the government. In return, they promise to pay you a fixed interest rate during the life of the bond and repay you the loan once a certain period ends. These are low-risk, low-return investments, but they’re a safe investment option if you’re unwilling to take risks.

Subscribe to a Credit Building Service

Signing up for credit building services is the best way to establish a firm financial footing so you can grow your investment portfolio more easily. They’re not used to help you make a quick buck—rather, credit building services assist you in establishing a good credit history so that you can easily obtain loans for large expenses like:

• College tuition and fees
• Rental housing
• A vehicle

Since a strong credit score helps you get better interest rates and terms when obtaining loans, an early start at credit building can help you potentially save over $200,000 over your lifetime.

A great way to start building credit as a student is to subscribe to services like those FreeKick offers. This provider helps minors and young adults establish a good credit history with their parents’ help, starting at the age of 13.

FreeKick—Premium Credit Building and ID Protection

FreeKick is an FDIC-insured deposit account provided by Austin Capital Bank that allows young adults and minors aged 13 to 25 to build credit with their parents’ assistance. The platform also provides comprehensive identity monitoring and protection services for the whole family of up to two adult parents and six children.

Start Building Credit Early With FreeKick

If you’re a freshman who wants to obtain a credit card and start living independently, you won’t be able to do so alone because the CARD Act of 2009 prohibits anyone under 21 from obtaining a credit card. This makes it challenging for students to start building a credit profile, resulting in difficulties when they want to secure loans.

FreeKick circumvents this limitation by letting you establish a good credit history as early as the age of 13 through its parent-sponsored credit building service. Here’s how to get started:

1. Create an Account—With your parents’ help, visit FreeKick.bank and choose a plan that best fits your family’s needs and budget
2. Set It and Forget It—Once the account is activated, FreeKick will automatically start building your credit over the next 12-month period
3. Keep Growing—When the first 12 months pass, you can either renew the account and keep building credit or close it and get a refund of your initial deposit

Keep Your Identity Protected With FreeKick

Shocking data shows that a child’s identity is stolen every 30 seconds, and college students are one of the groups most frequently targeted by identity criminals. This is why you must protect your identity as a student to ensure your investment account remains safe from ID theft.

FreeKick offers a simple solution for ID protection with its identity monitoring and protection features designed for both adults and minors. Here’s what the service includes:

Services for Adult Children and Parents	Services for Minor Children
Credit profile monitoring SSN monitoring Dark web monitoring for personal information Up to $1 million identity theft insurance Full-service white-glove concierge credit restoration Lost wallet protection Court records monitoring Change of address monitoring Non-credit (Payday) loan monitoring Free FICO® Score monthly FICO® Score factors Experian credit report monthly	Credit profile monitoring SSN monitoring Dark web monitoring for children’s personal information Up to $1 million identity theft insurance Full-service white-glove concierge credit restoration Sex offender monitoring—based on sponsor parent’s address

FreeKick Pricing

FreeKick has a plan that fits any family’s needs and budget, and both available plans are FDIC-insured up to $250,000. Find more details in the table below:

FDIC-Insured Deposit Amount	Plan Fee
$3,000	$0 (Free)
No deposit	$149/year

Establish a strong credit profile early and protect yourself and your family from identity theft—sign up for FreeKick today.