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Investing As a Student at University
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Investing As a Student at University

Written by Sam | June 24, 2020

This is a topic that many students don’t think about first, however, if you can save money at university and you want to make use of your savings it is a good idea to start researching into investing!

To make it clear, I am not a financial advisor. This is the information I have gathered and taken from our own personal experiences. Please seek advice before investing from an advisor of finance professional.

I personally think it is wise to build up a pot of money before investing so that you have something to fall back on before putting money into investments. Read more on managing your student loan.

What Is Investing?

Investing is where you buy a share of a company, often called a stock or share. The prices go up and down with the market. There are different markets around the words, the one in the UK is called the FTSE.

The price is dictated by many factors, profit, cashflow, forecasts, economy, debt and so much more than what we can even list!

When most look at investing they will choose a company to invest in and the hot topic at the minute is Tesla mixed with a bit of bitcoin, however, this is likely to change!

Why Invest Do People Invest?

People choose to invest because the cost of living goes up and if you keep money in the bank, you actually lose money!

HOW?! Well, it’s called inflation, to keep the topic relevant, look at university tuition fees and accommodation costs!

8 years ago, tuition fees went from £3,000 to £9,000 plus. There were many reasons for this I am sure, but one of the biggest factors was because the cost of living goes up, which means salaries need to increase in order to make sure employees can afford to live and the university stays competitive for lecturers.

Secondly, look at accommodation & food shopping costs. £100 of food today gets you much less than what it would 10+ years ago.

If you keep this money in the bank, inflation eats away at your money at an average of 3% per year. It doesn’t sound a lot but when you leave it in there for 10 years, you have lost 30% of your money!

What Can You Invest in as a Student?

Well you have the same investment options as anyone else, the big difference is what platform you use. Some platforms you can use are:

  • Trading 212
  • Hargreaves Lansdown
  • AJ Bell
  • Vanguard
  • Nutmeg – Managed For You

From here you can set up an account, please make sure you understand the differences on each account and the CHARGES. 3% may not be a lot at the start but it will soon add up. Generally charges for an account are around 1% roughly.

If you are a UK citizen, you can put your investments in to a stocks and shares ISA which means that everything in there and what you earn is TAX FREE.

Personally, I would look at investing in a market, such as the S&P500 (Americas 500 biggest companies) or the FTSE100 (UK100 biggest companies). This is because, most fail to beat the market and you aren’t putting all your eggs in one basket. Yes it might be in one market, but a brand like Netflix is in a lot of countries.

I do this and would suggest the same for other students and that is putting something away each month. Many will try and time the market, but a small amount each month can really add up, plus you buy when it is low and high so it averages out!

Compounding

What is compounding? This is where you make money on the interest you have earned.

For example, you have £100 in your account, you don’t add anything to it, you make 10% (£10). The following year you still add nothing and you make another 10%, the number goes up £11.

These numbers are small so it’s easy but imagine having much larger numbers. A picture of this would be:

The reason why you should consider starting younger is the fact that you can put smaller amounts away and still achieve the same amount as those who are only just starting later in life and having to put a big sum away each month!

If you start at 20, your sum will be much larger than when starting at 30 and putting the same amount away each month:

Please be aware this also depends what you invest in and how much your fees are. This is why I have invested in the S&P & FTSE because they are diverse and are cheap to hold!

This website has a lot of articles on it and breaks down processes and different investments well.

Summary

If you want to invest as a student, I personally think it is a great sign and a good place to start!

I recommend that you do your research first and speak to someone in the finance field first plus your parent and or guardian. You can then start to see what you want to achieve and what you can afford to do!

I am not a financial advisor, it is based on personal experience and information gathered from several sources.

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