How To Invest While In College: A Beginner’s Guide (Updated)

a house plant sitting on a shelf in front of a window. The words grow is written on the pot. It represents how money will grow when you invest while in college

Knowing how to invest while in college isn’t as hard as it sounds. As a college student, you can and should start investing. A big misconception is that you need a lot of money to start investing. That just isn’t true. The sooner you begin investing, the more time your money has to grow. Even with a small amount you can watch your wealth gradually grow, giving you a solid financial foundation for years to come.

Time Is On Your Side

We all have heard that slow and steady wins the race. It’s true. Therefore, that is how I want you to invest, slow and steady. When you invest your money a little at a time over a long period you will create wealth that lasts because your money starts making you more money. Slowly and steadily is the key to how to start investing wisely.

Compound Interest

Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it”.

I want you to understand compound interest because when you do it’s going to become your new best friend. Compound interest is when the interest you earn on the balance in your account is reinvested, earning you even more interest. The great thing about compound interest is your interest earns interest. This is the key to how to invest while in college.

How To Start Investing

So, how do you start investing? It’s not as complicated as you might think, and anyone can invest while they are in college. You don’t need to find a broker or a financial advisor, you can do it yourself. I’ll guide you through the process. Here are five simple steps to help you get started. Be sure to read, Budgeting Tips For College Students.

1. Generate An Income

To invest, you need an income. You might already have a primary source of income from a job, scholarship, student loan, or a family member. However, I want you to maximize your income. The best way to do this is through multiple sources of income.

If you don’t have a job, get one. If you have a job, I want you to start a side hustle. Side hustles are flexible and can fit into any student’s schedule. They are a great way to avoid debt, increase your wealth, and become financially independent.

How To Invest While In College Starts With Side Hustles

A side hustle can be anything, babysitting, house sitting, or pet sitting (check out Rover). Uber or Lyft driving. Delivering food, groceries, or office supplies with DoorDash, Uber Eats, Postmates, Grubhub, or Instacart. When I was in college, a fellow student bought a scooter and delivered food from the hours of 10 pm to 2 am and he made more money from deliveries than from his full-time job. He said the tips were great during those hours.

If you are talented get on Fiverr, Upwork, or Etsy. If you can fluently speak another language, you can find translator jobs through sites such as Translators Café, Gengo, and Upwork. And if you have a great voice and reading skills, become an audiobook narrator at Audible, Voices, Upwork, or Fiverr. Resell items on eBay, Amazon, or Poshmark. Mow lawns in the summer or shovel snow in the winter. Clean houses or haul off junk. You get the idea. Side hustles for college students are plentiful. There’s a side hustle for everyone.

2. Make Room in Your Budget for Investing

Even if you are working it still may be hard to free up some money to begin investing. I know how difficult this can be as money is typically tight. However, I have a few suggestions that can help you squeeze out some extra dollars so you can start investing and building your financial foundation.

  • If you can live at home. Living at home is your biggest savings when you are in college.
  • Never eat out. Always pack a lunch and some snacks. If you go to class or work in the evening, pack a light dinner.
  • Take a good look at your subscriptions. Subscription services are super convenient and have become a way of life. Whether it’s movies, make-up, food, clothes, or grocery delivery take a good look at what it costs you a month.
  • Skip buying the coffee. I know you may need your morning dose of caffeine but get it at home. You can easily save $50 or more a month.
  • Use available campus amenities. Your college tuition covers the cost of a lot of on-campus amenities. Most college campuses have a fitness center where students can work out for free. If you are not feeling well or need a check-up visit your health center for free. Free counseling services are also available if you need to talk to someone. If you need a tutor or a little extra help with a paper or project, check out the on-campus academic resources.
  • Take advantage of student discounts. You can get everything from Amazon to car insurance at a reduced rate. Student discounts can save you a lot of money.
  • Thrifting is a great way to save money. Shop at consignment and thrift stores for clothes and other items you may need.

Save A Little Here And There

The above are a few suggestions to get you going, but you get the idea. The goal is to save a little here and a little there. It will add up over the months and before you know it, you will be building your nest egg. That is how to invest while you are in college.

Close up of hands counting dollar bills. A student saves up to invest while in college

3. Open A High-Yield Online Savings Accounts

One of the first and most simple things you can do is open a saving account, but not just any savings account. High-yield online savings accounts are the perfect way to earn a little interest off the money you are saving. It’s not a lot, but remember slow and steady is the way to become wealthy. If you have a little extra money every month, I recommend putting it in a high-yield savings account as it is one of the best ways to invest while you are still in college.

You get almost no interest from your savings account at your local bank. If you have a savings account at the same bank as your checking account, close it immediately.

Online savings accounts are convenient. You can link them up to your checking and other accounts. If you have an extra $10 or $100 transfer it over to your high-yield savings account so it can start earning compound interest.

Presently, my two favorite high-yield online savings accounts are Ally and Barclays. Both of these banks have no minimum balance to open. At the time of writing this post, Ally has an APY rate of 4.25% and Barclays has an APY rate of 4.35%, which is very competitive. If I had to pick one I would go with Ally because they give you the ability to wire money and Barclays does not have that feature. Also if you want an extra .5% use our referral code to make even more money. Save more with Ally!

4. Open And Contribute To A Roth IRA

I recommend opening up a Roth IRA (Individual Retirement Account) because it is super easy to do and one of the best ways to save money. I know it sounds a little intimidating, but it’s not and you don’t need a lot of money to get one going.

A Roth IRA is a retirement savings account that allows you to pay taxes on the money you put into it upfront. Therefore, the money you invest grows tax-free. That means when you are ready to retire and have 1 million dollars in it, that 1 million is all yours. You don’t have to pay taxes on it when you withdraw it.

The younger you are when you open your IRA, the greater your saving potential because you get that tax-free compounding interest for a longer period. Let’s open a Roth IRA. Vanguard has a great Roth IRA account. They have what is called a “Target Retirement Fund”. This means all you do is pick the year you will retire (typically the year you turn 65) and that’s it, Vanguard does the rest. To start, you’ll need $1,000 to open a Vanguard Target Retirement Fund. Once it’s open you can fund it whenever you have the money.

5.  Start Investing in a 401(k)

If are working and your company offers a 401(k) with matching contributions, I would take full advantage of it as 401(k)s are one of the best investments. A 401(k) is an employer savings plan that allows workers to contribute a portion of their income into a retirement savings account. These plans can come in two different forms: the traditional 401(k) and the Roth 401(k).

The great thing about a 401(k) many employers match employee contributions. Whatever you put in, they will put in. That’s free money! To get the most out of your 401(k), contribute up to what your employer will match. Typically, this is a percentage of your income.

Now that you know how to invest while you are in college, go build your wealth!

Do you want to make money fast? Do you need some side hustle ideas to get you started? 11 Side Hustle Ideas To Make Money Fast!


Sensei Side Note

When I turned 18, my birthday gift from my parents was a Roth IRA. I know a little lackluster for the big ONE-EIGHT. Nothing says welcome to adulthood more than an account with money in it that I can’t touch until I’m older. They funded it with a thousand dollars and told me that if I kept adding to it, I would be a millionaire by the time I was 65. It was such a huge financial gift that had me saving for retirement as early as possible. At 19, I graduated with my BS in Business and started working at a Fortune 500 company. That job came with a 401k. Currently, I max out both, my 401k and my Roth IRA, and anything left over goes into a high-yield savings account. I’m building my wealth slowly and steadily.