Saving money while on a student budget isn’t exactly an easy task. With school fees, rental fees, and a variety of other costs to keep track of, it seems impossible to grow your wealth. And this seems to be a common problem among the youth. A 2018 report by BBC shared that about 53% of the people between 22 and 29 at the time had no savings. As for those who did have savings, some 40% had less than £1,000 in their account.
Fortunately, there are several things you can do as a student to improve your financial position. One of them is to invest some of your capital. Though a highly profitable option, investing can be tricky, so here are five tips that every student investor should remember:
1. Start early
The younger you start investing, the better. Timing is vital to any investment option, primarily due to the power of compounding. Investments tend to grow as more time passes, so the earlier you start, the more time your investments will have to accumulate wealth. Additionally, as a student, you’ll have more time to devote to investing and market research.
2. Invest a little every month
Wherever you choose to invest, you should commit to putting in even a small amount of capital every month. Around £15 to £30 will do, which is around the cost of entry to nightclub or ticket to a football match. Apart from seeing your money grow, you’ll be more motivated to research market movements and analyse your current options.
3. Spread your investments across different markets
Once you’ve got the hang of one market, the next course of action is to diversify your portfolio. This is a simple yet effective risk management strategy. If you invest your capital in multiple markets, there is less to lose should one of those markets decline. In short, a diverse set of assets can protect you from any market downturns.
And when it comes to choosing what markets to invest in, the trading heat map by FXCM is a particularly useful tool, as it compares the different asset classes that can generate healthy returns. It displays the biggest movers in stocks, forex, and other markets. It can also be adjusted to display results from the past day, week, and month, making it a vital tool for choosing what to invest in. After all, market knowledge is essential in minimising risk.
4. Keep an eye on your budget
With your investments well underway, it’s important to continually monitor your budget. Make sure you have enough capital to pay for monthly bills and necessities, while also keeping up with your investments. The budgeting tool by National Debtline is a great resource for this. It allows you to input the details of your income and expenses then gives you a neat summary of it all. Keeping on top of your monthly expenses makes it easier to maintain a financially healthy lifestyle.
5. Prioritise any existing debts
Investing can be a lucrative endeavour, but it shouldn’t be a priority if you’re in debt. So, before directing all of your funds to investments, prioritise repaying your debts first. A guide on Citizens Advice recommends writing to your creditors to request that they freeze interest or extra charges while you work out how to repay the debt. Communicating with your creditor can help you both come to an agreement, and keep debt like your student loans from rising any higher. Remember: As tedious and stressful as this task may be, it’s a necessary step to growing your wealth for the future.
Here’s a final piece of advice to go alongside the others: One of our older features on Student Pages highlights financial advice that still rings true today: Set realistic saving goals. Having achievable financial goals can really help you make a habit of saving and investing. So, don’t forget to set your expectations before getting into the nitty-gritty of your finances. Nothing’s more motivating than accomplishing financial goals and watching your wealth grow.