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Reasons College Students Should Start Investing in Stocks

by Olufisayo
Start Investing in Stocks

College is a great time of life for most people. However, between football games and classes, it can be hard to think of much else. If they are about anything, the college years should be about planning for the future.

When it comes to planning for the future, personal finances should be near the top of every college student’s list of priorities. That’s why it’s a good idea for many college students to start investing in stocks.

College Students Are Young

While there’s been a big uptick in the number of nontraditional students in the past few years, many college students tend to be between the ages of 18 and 25.

Even if you add in the number of students who are just a few years older, the average age of college students around the country skews toward the young side of the ledger.

It’s always a good idea to invest for the future, but investing while you’re young and in college is a big key to long-term financial success. By investing in college, you’ll be setting the stage for building real wealth.

Young People Have Decades To Build Wealth

Compounding is the main reason you’ll be more likely to build wealth if you start investing while you’re young. Stocks pay out dividends and they tend to experience capital gains over time. By reinvesting the dividends you receive in your 20s, you’ll have more time to have to build your stream of dividend income.

Over a period of four or more decades, you should see your current stock investments compound many times over. As long as you continue to invest additional capital throughout your working life, even small investments today can grow into a sizable sum by the time you hit your 50s or 60s. It might be tempting to only buy tech stocks, but you should start to diversify as soon as possible.

College Students Can Make Mistakes

If you’re a college student, you can afford to make a few mistakes. This is tied to the length of time you have until the traditional retirement age. If you make a bad investment as a college student, you won’t be happy.

If you make a series of bad investments in the decade before retirement, you’ll likely be broke. There’s a big difference in these two outcomes. Mistakes can be some of the greatest teachers, and it’s better to learn from your mistakes early in life.

College Students Have Lower Expenses

If you’re paying for Harvard or another expensive private school out of your own pocket, this point might not apply to you. However, if you’re going to a community college or an in-state school, it’s likely your out-of-pocket expenses for school will be relatively low.

If you can stay with your parents during school, it can pay off handsomely over the long haul. Your goal as a college student should be to get through school with minimal expenses. If you can, working a part-time job could provide you with the excess capital you need to start buying stocks or mutual funds.

Once you decide to get married, have kids and buy a house, your expenses will go up rapidly. You may never have as much available capital as you have right now. Therefore, it’s a great idea to take advantage of the compounding that stock investments will provide while you’re a college student.

Investing In College Can Start Good Habits

If you decide to invest a percentage of your income in college, it should be easier to continue when you get a better job and make more money. The earlier you start good financial habits, the more likely you will be to continue them throughout life. Investing in stocks is one of the best habits you can start.

College is a great time to start investing. By starting early and continuing throughout your life, you should be able to build a nice nest egg by the time you hit retirement.

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