Financial Tips for Students
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5 Financial Tips for College Students
By Lynn O'Shaughnessy
I recently got an email from a college senior, who was looking for financial tips for college graduates.
She’s lucky. She’s lined up a job and wanted to know how she should start investing. Here are the financial tips that I passed along to her:
Financial Tip No. 1: Start Now
Young college graduates don’t have much, if any money, in the bank when they graduate, but they enjoy a huge financial advantage over their parents and grandparents. They can maximize their savings with the power of compound interest.
Young college graduates, who start saving now, can save far less money and be much wealthier than Americans who realize in their 40s and 50s that they have to get busy stashing money away. Think of compounding as a snowball that has enough time to roll down an entire mountain instead of just one slope. That’s going to be one big snowball.
She’s lucky. She’s lined up a job and wanted to know how she should start investing. Here are the financial tips that I passed along to her:
Financial Tip No. 1: Start Now
Young college graduates don’t have much, if any money, in the bank when they graduate, but they enjoy a huge financial advantage over their parents and grandparents. They can maximize their savings with the power of compound interest.
Young college graduates, who start saving now, can save far less money and be much wealthier than Americans who realize in their 40s and 50s that they have to get busy stashing money away. Think of compounding as a snowball that has enough time to roll down an entire mountain instead of just one slope. That’s going to be one big snowball.
Financial Tip No. 2: Start a Roth IRA.
Opening a Roth IRA is a must. I’d put the Roth IRA into the same category as other indispensable things such as seat belts, Golden Retrievers, birthday candles and second chances.
Here’s an explanation of why a Roth IRA is superior:
Why You Want a Tax-Free Roth
Financial Tip No. 3: Invest in Index Funds
Stick with low-cost index funds. All my money, my kids’ money and my husbands’ money is sunk into index funds. I prefer Vanguard index funds, which are cheap and cover nearly all asset classes.
Here’s why index funds are superior:
Best Index Funds: 8 Picks
Financial Tip No. 4: Choose the Best Starter Funds
Initially, you won’t have enough money to spread among different investment categories so you might want to start with Vanguard Total Stock Market Index Fund VTSMX.
Another suggestion: Vanguard Small-Cap Value Index Fund VISVX. If you look at the performance of the major investment categories over many decades, small-cap value is king. This is the fund that my teenage son selected for his Roth.
Once you’ve accumulated more money, make sure you end up with a large-cap and a small-cap index fund, as well as an international stock index fund in your portfolio. I see no reason to bother with bond funds when you’re in your 20s unless you’re an inveterate nervous Nelly.
Financial Tip No. 5: Feed Your Roth Automatically
If you don’t pay yourself first, chances are you will never contribute to your Roth. While auto-investing works great with 401(k) plans, most investors don’t think to use automatic investing with their IRA.
Opening a Roth IRA is a must. I’d put the Roth IRA into the same category as other indispensable things such as seat belts, Golden Retrievers, birthday candles and second chances.
Here’s an explanation of why a Roth IRA is superior:
Why You Want a Tax-Free Roth
Financial Tip No. 3: Invest in Index Funds
Stick with low-cost index funds. All my money, my kids’ money and my husbands’ money is sunk into index funds. I prefer Vanguard index funds, which are cheap and cover nearly all asset classes.
Here’s why index funds are superior:
Best Index Funds: 8 Picks
Financial Tip No. 4: Choose the Best Starter Funds
Initially, you won’t have enough money to spread among different investment categories so you might want to start with Vanguard Total Stock Market Index Fund VTSMX.
Another suggestion: Vanguard Small-Cap Value Index Fund VISVX. If you look at the performance of the major investment categories over many decades, small-cap value is king. This is the fund that my teenage son selected for his Roth.
Once you’ve accumulated more money, make sure you end up with a large-cap and a small-cap index fund, as well as an international stock index fund in your portfolio. I see no reason to bother with bond funds when you’re in your 20s unless you’re an inveterate nervous Nelly.
Financial Tip No. 5: Feed Your Roth Automatically
If you don’t pay yourself first, chances are you will never contribute to your Roth. While auto-investing works great with 401(k) plans, most investors don’t think to use automatic investing with their IRA.
See the full article here: http://moneywatch.bnet.com/saving-money/blog/college-solution/5-financial-tips-for-college-graduates/2064/
Great Reading,
Great Services
Technocash Limited is pleased to provide access to a collection of useful articles on financial tips for students, business, finance and money transfers.
Technocash provides a range of accounts to facilitate international payment processing without using credit cards. Our accounts online hold all major currencies such as USD, EUR, GBP, YEN, CAD, NZD, AUD, PHP, BRL etc in the one account. You can easily and immediately do a currency exchange from one currency to another.
In Australia and New Zealand most financial transactions are made via online bank account transfers. Technocash assists our clients with this process by providing access to these types of transfers.
Read more about our business accounts here.
If you would like to recommend or submit an article please contact Technocash Limited at info@technocash.com. Please enjoy these articles.
"We saved money by cultivating a garden, and it never occurred to us that most folks bought their vegetables at the supermarket."
— Ted Lange
— Ted Lange
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