How Can Students Invest?

How Can Students Invest?
One thing I like about having a personal finance blog is that I get to think about different perspectives and situations I normally would not have considered.

One such case is when a student asked me about investing.

On one hand, it's great to start early. On the other hand, there are practical concerns.

For most students, their allowance is the only real source of income and unless they're already rich there's probably not a lot of extra money to save. They also don't have a Tax Identification Number (TIN), putting the usual investments out of reach.

And while we could say that they won't need an emergency fund, it practice they may need to save up some money to be able to keep going to school or even pay part of the tuition in case a financial emergency hits their family. And if their allowance didn't have a lot of "extra" to begin with, building up a fund would be pretty difficult.

But of course, budding investors can't really let themselves be discouraged by inconveniences. So if you're a student who wants to start investing (or you know one who does), here's what you can do.

Save

As I've said before, this is the real-world test. Even if you have a small allowance, you have to try to save even a small portion of that. Or else find another way to earn some money.

It doesn't have to be a big amount or even 10% of your allowance. As long as you can find a way to regularly save, that's a great first step.

And also, open a savings account. It will pave the way for future investments. You can open an account with just a Student ID. 

Get a TIN

Sure, you could probably find alternative investments. But the "easy", legitimate investment people usually make need a TIN. Unit Investment Trust Funds, Mutual Funds, and direct stock investments all require a TIN.

So if you really want to start early, you could get a TIN even though you are a student. You can even start the application for one online, via BIR.gov.ph.

Lear More

Chances are you already know a little about investing, which is why you want to get started. But there's really a lot to learn.

It could be tough to do, since you also need to learn (and pass!) all your subjects in schools. But the good thing is that there's no deadline. Just keep learning when you have free time. You could read blogs, forums, ebooks or even facbook groups. You could buy physical books, attend seminars and webinars.

The important thing is to keep learning so that you are more prepared.

Set Goals

This is the most important but usually forgotten factor. Sometimes people even put "retirement money" as the goal but then quickly forget it and start micro-managing their money for large short-term gains.

It's important to set goals so you know when to cash out, determine exactly how that money you earn will make your life better, and not fall into the trap of greed.

So what investments are appropriate for students?

Without a TIN you are generally stuck with savings accounts and time deposits. But that's not so bad; personally, I think a time deposit is a good "starter investment" for students.

If you do get a TIN, I'd recommend starting with money market funds first. Essentially they are more "liquid" time deposits. You can deposit and withdraw more easily, but still earn the same as a time deposit.

It's tempting to invest in stocks. And that's not a bad idea. But I'd suggest doing this only after learning some on the topic. And it's probably best to start with low-cost balanced or equity funds - the kind that lets you start with 10k or even 5k. And again, try other stuff before this. In investing, discipline is also important; it's not just about starting early or seeing big gains.



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photo credit: Tasty Treat via photopin (license)

1 comment:

  1. I remember learning about personal finance and financial freedom during college and it became my goal after graduating. I couldn't do much until I graduated and started working though, but the TIN thing is a nice tip. Never knew you needed that to open an investment account.

    ReplyDelete