How to Invest as a Student: Simple Ways to Grow Your Money

Investing may seem like something you only start doing once you’ve graduated and have a full-time job, but as a student, you have a significant advantage that can work in your favor—time. When it comes to investing, starting early can make all the difference due to the power of compound interest. Even if you don’t have much money to invest right now, starting small and making informed decisions will help you grow your money over time.

In this guide, we’ll cover beginner-friendly investment options for students, explain the benefits of compound interest, and provide practical tips on balancing investment risks with long-term goals.

Expected Learning Outcome

By the end of this article, you should:

1. Understand the benefits of starting to invest as a student and the concept of compound interest.
2. Be able to identify low-risk investment options such as high-interest savings accounts, mutual funds, and ETFs.
3. Learn how to use beginner-friendly apps and robo-advisors to start investing with minimal initial capital.
4. Develop strategies for long-term investing while managing risk.

Why Should Students Invest?

Investing while you’re still in school might seem like a daunting task. However, starting to invest early offers long-term benefits that can set you up for financial security in the future. Even small amounts invested can grow over time due to compound interest.

The Power of Compound Interest

Compound interest is when the interest you earn on your initial investment starts earning interest as well. The longer your money is invested, the more it grows, making it a powerful tool for building wealth. Starting early, even with small contributions, allows you to take advantage of compound interest for years or even decades.

Simple Investment Options for Students

Here are some easy, low-risk ways for students to start investing their money:

1. High-Interest Savings Accounts

A high-interest savings account is one of the simplest ways to grow your money without much risk. Many banks offer savings accounts with interest rates higher than a regular savings account. It’s a safe place to store money you may need soon, while still earning some interest. Some Neo-banks specialize in these, they include PiggyVest for Nigerians.

Benefits:

• Low risk
• Easily accessible
• Suitable for short-term goals or emergency funds

Where to Start:

• Look for online banks that offer high-interest savings accounts. Compare interest rates and fees to find the best option for you.

2. Mutual Funds

Mutual funds pool money from multiple investors to invest in a diverse portfolio of stocks, bonds, and other assets. They are managed by professionals, making them a good option for students who are new to investing and want to minimize risk.

Benefits:

• Professionally managed
• Provides diversification, reducing risk
• Requires less knowledge of individual stocks or markets

Where to Start:

• Many financial institutions and investment apps offer beginner-friendly mutual funds with low minimum investments.

3. Exchange-Traded Funds (ETFs)

Like mutual funds, ETFs are a collection of stocks, bonds, or other investments. However, ETFs trade on the stock exchange like individual stocks. They tend to have lower fees than mutual funds, making them a cost-effective option for students.

Benefits:

• Lower fees than mutual funds
• Can be bought and sold like stocks
• Suitable for long-term growth

Where to Start:

• Online brokers like Robinhood, E*TRADE, or Fidelity allow you to purchase ETFs with little to no fees.

4. Stock Trading Apps

There are several stock trading apps specifically designed for beginners, such as Robinhood or Acorns. These apps make it easy for students to invest in individual stocks or ETFs with as little as $5. They also offer educational resources to help you learn about the market.

Benefits:

• User-friendly platforms for beginners
• No need for large sums to get started
• Easy access to educational tools

Where to Start:

• Download beginner-friendly apps like Robinhood, Acorns, or Stash. These apps offer a simplified way to buy and sell stocks and ETFs with little to no fees.

5. Robo-Advisors

Robo-advisors are automated platforms that create and manage an investment portfolio for you based on your risk tolerance and financial goals. For students who don’t have the time or expertise to manage their investments, robo-advisors can offer a hands-off solution.

Benefits:

• Automated and easy to use
• Typically low fees
• Requires minimal knowledge of investing

Where to Start:

• Explore robo-advisor platforms like Betterment or Wealthfront. These platforms often require minimal initial investment and offer personalized investment advice based on your financial situation.

Tips for Student Investors

1. Start Small

You don’t need a lot of money to begin investing. Many apps and platforms allow you to start with as little as $5 or $10 or its equivalent in Naira. The key is consistency—invest regularly, even if it’s a small amount.

2. Prioritize Long-Term Goals

As a student, you have time on your side. Focus on long-term investments that will grow over the years. Avoid risky, get-rich-quick schemes or high-volatility stocks. Instead, think of your investments as part of your long-term financial strategy.

3. Balance Risk and Reward

Investing always comes with some level of risk, but as a beginner, you’ll want to balance your desire for growth with a level of risk you’re comfortable with. Consider starting with low-risk options like mutual funds or ETFs before diving into individual stocks.

4. Keep Learning

Investing is a lifelong learning process. There are plenty of free resources available online to help you improve your understanding of different investment strategies. Apps like Acorns and Stash also provide helpful tips to beginners.

You can see how insightful lessons on the Naira & Sense Series HERE