How to Save and Invest for Students

Saving and Investing for Students

I recently went to my very first Atlanta Braves baseball game, which is weird since I’ve lived in Atlanta for over six years now. I went to the game with two friends, fellow college students, and as we were leaving we started talking about how one of my friends only had $14 in his bank account. He felt as if he was incapable of saving and investing. He felt that he “didn’t make enough” or that “life was too expensive” Both of which are excuses I dislike very much, because no matter how much money you make you can always make it work – especially when you have virtually n0 expenses like my friend. Let’s take a moment and figure out how you can find financial success through learning how to save and invest for students.

Now, since I’ve come to University I’ve helped a number of my friends get on top of their finances, and most of them are actually starting to build up a nice little nest egg that is going towards their future. In response to my friend I’m going to go ahead and outline exactly what I do in order to stay on top of my money and put a significant percentage of my income away while still living comfortably.

Multiple Bank Accounts

The first step to handling your money is to actually force yourself to look at your money often. Too many times people, myself included, have decided that they are going to not look at their account because a bank account is a lot like Schrodinger’s cat. If there is money in there at one point and you spend money using your debit card, the money may or may not still be in there. The only way to verify its existence is to look. Therefore, if you don’t look you still have all of the money you deposited. Sadly, this isn’t how it actually works. So, we are going to force you to look at your account(s) on a fairly regular basis. We do this by setting up three different accounts.

1. Spending Account – Checking 
2. Reserves Account – Checking 
3. Savings Account – Savings 

Depending on how comfortable you are in your life financially or how aggressive you want to pursue savings we can decide how much goes into your spending account. This account is to be used on items that you really don’t remember spending your money on. Going out to dinner, ordering pizza, getting snacks at a gas station, going to a movie, etc. Personally, I put $50/week into my spending account to just “waste” on items. Some weeks I spend all of it, sometimes I spend very little. But every week I add $50 more dollars no matter what the current balance is.

The Reserves account is where you will actually deposit all of your checks from work. This is the account that you distribute from. Typically there are no fees or restrictions on transferring money from one checking account to another. This is where you keep your excess money that you are willing to spend, but you know you shouldn’t. In order to spend any of the money in this account you’ll have to physically log into your bank account and transfer that money from your reserves account to your spending account. This works because 1) you never activate the debit card for your reserves account so you are actually forced to do the transfer 2) When you log into your account you’ll see how much money you have and you’ll think if what you’re buying is really worth it. 3) It gives you more time to think about whether you actually need the item or whether or not it should be saved to be bought on a later date.

The Savings account is exactly what it sounds like. For my bank I can withdraw from my savings account three times per quarter (a three month period) without penalty. This is great, because if I actually need to access the money, I can. At a minimum you should match whatever you are putting into your spending account and place that into your savings account every week.

I’ve been using this structure for over a year now and it has worked wonders for me. It is honestly the best system I’ve used that really didn’t require any extra effort or even budgeting. The only thing it does is it forces you to think about every transaction and decide whether or not it is truly worth it.

Investing

No matter how much time you spend explaining to people that when you invest money into your future you still have that money. It’s still there if you need it. After trying to explain this simple fact to friends of mine I went on the search for finding the easiest way to invest money without much knowledge. After some experimentation with multiple platforms I settled on Acorns. Basically, Acorns is targeted at students and people who don’t know a lot about investing and offers them a completely hands off way to invest. One such feature that I’m completely in love with is the round-up method of investing. Whenever you make a purchase the platforms round the cents up to the next dollar and invests that into your portfolio. This is a completely painless way of investing. As a kid did you ever collect pocket change in a jar? It builds up quickly. Well, now they’ve made that process completely electronic and it truly does build up quick. There are other platforms out there that do this sort of thing; however, I personally feel that acorns works best for college students. Acorns also solves the problem that students face of feeling like they no longer have the money they invest by putting it in huge text on their app the moment you log into to your account. It seems silly but friends of mine that have used this app actually said the text size helped to put them at ease and remind them that they still have access to that money whenever they want. Also, did I mention the platform has absolutely 0 fees if you use a .edu email address?

Here are a couple of steps you can take to make it even easier to build up your portfolio as a student:

1. Attach your spending account to the round up feature so you are able to start saving off of the money you spend.
2. As an 18-22 year old you can take more risks than our older counterparts so pick one of the more aggressive funds. This isn’t a requirement, just my personal opinion.
3.  Set up an auto deposit of something small like $20-$50/month into your investment account from your Reserves checking account. This will ensure that no matter what, you have a set amount going into your account every year that you can feel good about. 
4. Once you save roughly three months of your pay into your savings account you should start to put the money you are saving into your investment account as it is most likely gaining more interest than your savings account. (The average interest on a savings account is 0.02% annually) 

Final Thoughts

In the end, money isn’t difficult. It just takes time and discipline. Money is the number one cause of stress among Americans. Personally, I feel like school is stressful enough and that we don’t need to add another stressor into the already complicated lives of college students. Though, I am a little biased since I am one of them.