7 Investment Ideas for College Students and Parents

College is expensive but you shouldn’t neglect building your future nest egg and having a solid financial foundation under you.  Financial freedom begins early but it’s never too late for students or their parents.  Here are 7 investment ideas for college students and parents to consider.

Pay Yourself First – Start Investing

Open a brokerage account and start investing.  Your goal should be to set aside ten percent of your net take home pay from your jobs or side businesses.  Whether you’re mowing lawns or painting houses during your summer breaks or working at the mall, you can do this.   By regularly investing a set amount you can build long term positions in stocks or stock funds that may appreciate over the long term.

For those who don’t want to fuss over investments, then you can buy a balanced low-cost mutual fund that’s split between stocks and bonds.  Something like Vanguard’s Balanced Index Fund (VBINX) is a good start.

Clear View Wealth Advisors through its partnership with online brokerage custodian Betterment Institutional ( offers access to low balance accounts that can buy fractional shares of stocks and Exchange Traded Funds without any account minimums.  Here accounts are invested based on a model tied to your age, goals and time period.

Alternately, you could be more active with your investments and do some day-trading.  This takes more time but just like in school you’ll be rewarded for your diligence and homework if you hit it big.

Open an Online Money Market Account

Sock your money away in a money market account.  Sure, current interest rates aren’t going to make you rich. But building a safe cash reserve will help you as you deal with college tuition, books and fees.   And you’ll have money kicking around when a brilliant investment idea comes your way. While you can open an account at almost any bank, you may find the online options from companies like Discover offer a higher interest rate.

Buy Bonds as Low-Maintenance Investments

While stocks allow you to own a piece of a company, bonds are more like you being a lender to a company.  Bonds pay a steady rate of interest from the borrower who ‘rented’ your money.  Bonds are not risk-free (unless you’re buying something like a US Government bond like a zero-coupon savings bond)).  You’ll have to consider the risk of not getting paid.  This is why US Savings Bonds may be a good fit. Plus the cost of acquiring them is pretty low – starting at $25 at your local bank. You can also use your income tax refund to buy them directly from the US Treasury. You buy them at half the face value listed on the bond. Over time, the bond’s value increases to the face value at the date of maturity.

Inflation is the big enemy of bond holders.  So you can also hedge this risk and potentially earn more by investing in ‘convertible’ bonds.  These are hybrid investments that allow the holder to receive a steady interest rate and the opportunity to convert or trade in the bond for stock in the issuing company. This is described in greater detail in a downloadable white paper available from Steve Stanganelli of Clear View Wealth Advisors.

Buy Investment Property Near College

If you’re planning on living away at college, you may be better off being the landlord instead of having to pay one.  You could pool your resources with your family and extended family.  If you get roommates, you’ll be able to cover the mortgage and other expenses.  You or your parents will get valuable tax deductions, too.  Being a landlord isn’t for everyone but in the right circumstances it can work.  And when you’re tired of dealing with toilets, tenants and trash, you can sell the property, defer any taxes by using a 1031 Exchange and reinvesting in another income-producing investment.

Consider Buying Life Insurance

Sure, you’re young and carefree.  But anything can happen.  And this is especially important if you have a spouse or dependents.  It’s also important if you have or are planning on taking out student loans.  If your parents co-sign for any of these loans, they’ll still be responsible if something happens to you.  And conversely, you’ll still be on the hook on loans that they co-signed but you won’t have their income to help pay the loan if they’re gone.  Consider getting a low-cost term insurance policy for the total of the loans you may be getting.  Since student loans are typically written for a repayment period of ten or twenty years, you should consider an insurance policy with a term to match.

Fund a Roth IRA

Roth IRAs are a great savings vehicle.  They allow you to invest now for a long term goal – your retirement – and take money out without paying income taxes at that time.  They also can be tapped for paying college or buying a home without paying a penalty for withdrawing prior to retirement.  There are income limits which may mean a Roth IRA doesn’t work for high-income parents but for low-earning students they are great.  Roth IRAs are a great way to shelter student earnings or to shift income from higher-earning parents to students who are in much lower income tax brackets.  So investing through a Roth IRA may benefit you when you’re completing financial aid forms like FAFSA or Profile since retirement accounts are not assessed in the aid formulas. I’ve written more about this strategy in a previous blog post that can be found here.

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