The best time to plant a tree was 20 years ago. The second-best time is right now. This metaphor is accurate when it comes to investing and growing your wealth over time. Most people start investing too late in life, which reduces the overall potential of their investments.
If you’re a college student, then it’s the ideal time to start saving and investing your money.
There are three big reasons why college is the best time to start saving and investing:
- Compound interest – Thanks to the magic of compound interest, investments can grow exponentially over time. Compound interest allows you to earn through the principal amount you’re investing and the interest gained previously.
- Building sound financial habits – If you start investing as early as possible, you have a longer overall investing period. This means that you can learn from your mistakes early on and become a much better investor in a few years.
- Lower capital required – Since you’re starting early, you can afford to start small. You don’t have to start investing in lakhs. You can start investing a few thousand saved from your monthly allowance.
How to start investing as a college student?
- A penny saved is a penny earned. It’s advisable to start with a strict budget so that you can begin saving some money each month.
- Next, make a realistic financial goal – How much do you want to have in your bank account when you leave college and start your first full-time job? This financial goal will help you decide where to invest your money.
- Third, begin planning. Start thinking about the different ways to invest money. It’s best to choose an investment avenue that has a reasonable chance of helping you meet your financial goal without too much risk.
Best investing ideas for college students in India - 2023
Here are some of the most popular investment avenues which can be used to make an investing plan for students:
#1. Open a high-yield savings account
Not every savings account pays the same amount of interest. You can choose a savings account that offers a higher interest rate.
“Can students open a savings account in India?
Yes, a student can open a savings bank account in India as long as they are 18 years old. Further, special savings bank accounts are also available for minors who are at least 10 years of age.“
| Bank | Savings Account Interest Rate |
|---|---|
|
DCB Bank Savings Account |
6.5% p.a. |
|
IndusInd Bank Savings Account |
5.0% p.a. |
|
RBL Bank Savings Account |
6.0% p.a. |
|
ICICI Bank Savings Account |
3.5% p.a. |
#2. Check out mutual funds
Mutual funds allow you to invest in equity or debt markets without having to choose individual stocks on your own. The returns from a mutual fund investment are linked to the performance of the financial markets. You can invest a fixed monthly amount in a mutual fund through a system called SIP.
#3. Learn about bonds
The two primary types of bonds are those issued by the government and those issued by corporations. A government bond is generally considered to be safer than a corporate bond. Bonds usually provide a fixed rate of return to investors.
#4. Get excited about cryptocurrencies
Cryptocurrencies are a relatively very new way of investing money. You can purchase cryptocurrencies through established brokers or a cryptocurrency exchange which accepts investors from India. You can store the cryptocurrencies you own in a private and virtual “wallet”.
#5. Invest in deposit schemes
Deposit schemes are some of the safest ways to invest money. A student can opt to open a fixed deposit account or a recurring deposit account with their bank. These schemes offer a fixed rate of return with a fixed lock-in period.
#6. Experiment with the stock market
Through the stock market, you can directly invest in publicly-listed companies. You can earn returns by selling stocks at a higher price or through stock dividends issued by the company. The returns are linked to the stock price of the company and there is no lock-in period.
#7. Start discussing ULIPs
A ULIP or a Unit-Linked Insurance Plan works both as an insurance scheme and a long-term investment scheme. A ULIP can be used to invest in balanced funds, debt funds, equity funds, and so on. The returns of a ULIP are linked to market performance.
#8. Contribute to IRAs
An IRA (or Individual Retirement Account) allows Indians to save and invest for their retirement. You cannot withdraw funds from an IRA account before the age of 60 years. Investing in an IRA can have tax benefits.
#9. Don’t forget Target-date funds
Target-date funds are a type of mutual fund that is relatively new in India. Such funds allow you to invest for a specific period of time (for example, three years) and you receive returns based on the market performance of your investment. A target-date fund can be beneficial when investing with a specific future goal in mind.
How to start learning about the stock market as a student?
Investing in the stock market can seem daunting; however, you can start learning right away and build up your confidence and your ability.
TradingLeagues offers the best stock market games for students such as Classic Leagues, Battle Leagues, Target Leagues, and Selection Leagues. These games are designed to teach you about various aspects of investing in the stock market.
This fantasy stock trading app is a lot of fun because you’re competing with other real people and there is no risk involved. You can learn about the stock market at your own pace and without any stress.
Wrapping up
In today’s world, investing is not an option, it is becoming a necessity. The sooner you start, the better you position yourself for the future. Investing allows you to not only protect your wealth against inflation but also grow your wealth over time. College is the ideal time for students to learn about finances and start investing.
