The Student Life section of Utah State Today highlights work written by a talented student journalist at Utah State University. Each week, the editor selects a story that has been published in The Utah Statesman or the Hard News Cafe' for inclusion in Utah State Today.
Investing Your Money 101: Why and How Students Should Do It
Investing. We all hear about it. We see it on the news, we hear people talk about it, we hear about it in our history, business, and finance classes. But what is it really? Why do we hear about it so much but very few of us have any?
Sure, we understand that it deals with money and making more money. But we are college students, right? Why should we worry about investments at our age? We don't have money to invest, and investing is for people who are older and have families.
The truth is, investing is for everyone. Most Americans that invest become financially stable when it comes time for them to retire. Not to mention that those people have a little money set aside if they ever have a financial scare. But the secret is that investing can be done at any age. The sooner you invest, the more money will be earned in the long run. Although adults between the ages of 20 and 25 are usually in college, or just starting a career, it is the best time to start. Although money is tight, it can be done.
What are the benefits from investing? Besides being prepared for retirement, it also allows people to become financially stable before retirement, and allows people the ability to provide for a family. In addition to being financially stable, those who invest wisely can become quite wealthy over a lifetime.
Tyler Mickelsen, a business major at Utah State and an investor says, "I don't want to work until I'm 65. I want to be retired or just working part time when I am at age 40. If people invest now they can travel and see the world and make their dreams come true."
One of the biggest benefits of investing can be compound interest. Basically, compound interest allows investors to earn money on the money they have already invested. For example, if you invest $500, earning 5 percent a year, you will earn $25 for that year. The next year you will have $525 in the bank earning 5 percent a year. You will earn $26.25 for that year. Investors continue to make money off of what they originally earned.
John Frampton, a student at Weber State University says, "Investing gives you the opportunity to make money off of the money you have already made."
People need to learn to make money work for them, not them work for their money. Most everyone has their own personal goals and dreams they would like to see fulfilled. This is one way they can see those dreams come true.
But how does one go about investing wisely? Where does one start? Personally, I have always wanted to invest but I had no idea how to go about doing it. Fortunately, there are many resources that can be used in order to learn how to invest. However, some ways may be more effective than others.
Devin Simper, a real estate investor, gives advice on how to invest.
"Ask anyone that's wealthy how to invest. Chances are, they have invested. Learn as much as you can about it. I talk to builders, small business owners, anyone. Always try to learn from others and learn how money works."
Talking to people that have already invested is probably the best bet since they can explain it simply and they know the best avenues to take. Also, the Internet is a great resource to learn and understand many of the different types of investments. However, ensure that the internet source is credible by checking the legitimacy of the organization or individual.
Communities occasionally give financial seminars and workshops to assist community members in making smart financial decisions. These workshops often will give advice about investments. That advice will be specific to the investor because area economics, geography, and social influences will be taken into consideration.
Some classes offered at Utah State may also be an effective tool in learning how to invest. For example, personal financial planning classes through the personal financial planning major. Or family finance classes through the family, consumer, human development major. Also, there are books in the library that will fit one's needs on any type of investment.
Talking to a financial planner may be one of the best resources. The planner can guide the investor in a direction that would best fit their personal needs.
There are many ways to learn how to invest. The question is, what to invest in? Many types of investments are available. Most people have heard of stocks, bonds, and real estate. But those are only a few of the many types of investments one can choose from.
There are high risk or low risk investments. A high risk investment means that there is a high risk of losing money, but the possibility of receiving a high return rate. A low risk investment means there is a low chance of losing money, but not a particularly high return rate.
Investing can also be long term or short term. Long term investing could be between ten and 40 years. Whereas a short term investment could be for one month. There are many options to choose from. Therefore, it is extremely important to learn as much about an investing as possible before making any final decisions.
Although interviewed separately, Frampton, Mickelsen and Simper all suggested investing in real estate. Their reasoning behind it was similar as well. Land will eventually raise in price. Someone is eventually going to want to buy it, and the investor will be able to make a profit. However, one should look at the best place to invest in real estate and conduct research before investing a lot of money. Also, look at every form of investment to determine if real estate would be the best place for an investor's money.
Learning how to invest, why to invest, and what to invest in are all stepping stone to reaching ones financial goals. The biggest part is actually investing.
"The best time to invest is now," said Mickelsen. "If you don't, you will spend money on unwise things like cars and toys and your money will deteriorate."
Although college students between the ages of 20 and 25 have limited financial resources, even a small investment will be beneficial in the end. Small amounts of money students spend needlessly could be put towards an investment. For example, instead of eating out twice a week, students could put that 20 dollars a week into a Roth IRA investment and eat less expensively at home. Instead of going to movies and buying CDs, borrow a movie from a neighbor and put the saved money into some form of an investment.
Understanding how to save money and knowing what to do with that money once it has been saved is also an important step in investing. Students should look into their own monthly budget to see where they can cut back and save money.