As a college student, investing might seem scary, but getting started early can help you do well with your money in the long run. College students have time on their side, which is the most important thing when it comes to investing, even if they don’t have a lot of money. Here are seven smart ways for students with tight budgets and busy schedules to invest their money.
1. Open a savings account with a high interest rate
Before you start investing in stocks, make sure you have a good base by opening a high-yield savings account. These accounts have much higher interest rates than regular savings accounts, which means your emergency fund can grow while still being easy to get to.
This isn’t the most exciting investment, but it’s very important. Put 3 to 6 months’ worth of expenses here to cover unexpected costs like car repairs or medical bills. It’s worth it for the peace of mind, and you’ll make money while still being able to reach your short-term goals.
2. Put money into ETFs and index funds
Index funds and exchange-traded funds (ETFs) are great for people who are just starting out because they let you diversify your investments right away without having to pick stocks. These funds follow market indexes like the S&P 500, which means your money is spread out over hundreds of companies.
Start with broad market index funds that don’t cost much to manage. You can put in small amounts of money on a regular basis. Even $25 or $50 a month adds up over time. Instead of trying to time the market, the key is to be consistent. A lot of brokerages now offer fractional shares, which makes it easier to invest what you can afford.
3. Start a Roth IRA
One of the best things young investors can do is open a Roth IRA. You put in money after taxes, but your investments grow tax-free, and you can take out money tax-free when you retire. Starting in college means that your money will grow for decades.
You can put in up to $7,000 a year (or your earned income, whichever is less) for 2025. Even putting away $50 to $100 a month while in college can add up to a lot by the time you retire. The sooner you start, the more time your money has to grow, turning small amounts into big amounts of money.
4. Invest in your skills and education to improve yourself.
A college student should often invest in themselves the most. Take classes that will help you make more money, learn useful skills like coding or data analysis, go to workshops, or get certifications in your field.
Your biggest asset in your twenties is your human capital, or your ability to make money. Putting money into skills that will help you make more money in the future can give you returns that are much higher than those from the stock market. You might want to learn skills that are in high demand through sites like Coursera, LinkedIn Learning, or certifications that are specific to your field.
5. Use apps for micro-investing
Micro-investing apps make it very easy to start putting your extra money to work. Apps either round up your purchases to the nearest dollar and invest the extra money, or they let you set up automatic small investments. These platforms are made for people who are just starting out. They have easy-to-use interfaces and educational materials. Micro-investing is a great way to get into the habit of investing regularly without breaking the bank, but you shouldn’t rely on it alone.
6. Look into Dividend Reinvestment Plans (DRIPs)
Stocks that pay dividends can give you passive income, and dividend reinvestment plans automatically use that money to buy more shares. This makes a compounding effect because your dividends buy more stock, which makes more dividends.
Find well-known companies that have a long history of paying dividends. Dividend stocks may not grow as quickly as growth stocks, but they give you steady returns and teach you important lessons about investing for the long term. The automatic reinvestment takes away the urge to spend dividends on other things.
7. Look into investments in peer-to-peer lending or crowdfunding.
Peer-to-peer lending platforms and real estate crowdfunding can be interesting options for students who are willing to take smart risks. These other types of investments let you spread your money around more than just stocks and bonds.
But be careful with these. They are usually less liquid and riskier than other types of investments. Put only a small part of your portfolio into alternatives, and do a lot of research on any platform before you invest. These are better as learning tools than as core holdings.
Important Rules for Student Investors
Start small and keep going; you don’t need a lot of money to start. It’s better to invest $25 to $50 every month than to make big contributions every now and then.
Think about the long term: you won’t retire for decades. You shouldn’t worry about short-term market fluctuations if you’re investing for 40 years or more.
Pay off your high-interest credit card debt before you start investing. Getting rid of 20% interest debt is a sure way to get a better “return” than any investment.
Keep learning by reading books, keeping up with financial news, and knowing what you’re putting your money into. Learning about money is an investment that pays off for the rest of your life.
Live Below Your Means: You can only invest the money you save. Making small changes to your life, like cooking instead of eating out or looking for student discounts, can free up money for investing.
Things You Shouldn’t Do
Don’t try to get rich quickly by day trading or making risky investments. Cryptocurrency and meme stocks can be very appealing, but treating investing like gambling almost never works out. Stick to the basics and don’t put money into things you can’t afford to lose.
Don’t forget about employer matching when you have an internship or part-time job. If your employer matches your 401(k) contributions, make sure you put in enough to get the full match. It’s free money.
Don’t let fear stop you from starting. Yesterday was the best time to start investing; today is the second best time.
The Bottom Line
As a college student, you don’t need a lot of money to invest. You just need to build good habits and give your investments time to grow. Start with what you can afford, stick with it, and think about your long-term goals instead of your short-term gains.
The way you handle money now will affect your future finances. You’re giving yourself the gift of time, which is the most valuable thing in investing, by starting early. The most important thing is to start, no matter how much money you have. Today, you are showing discipline and foresight that will help you in the future.
