It’s Never Too Early to Start Investing for Your Future (Even on a Student Budget)
You’re never too young to start investing, or start saving. That’s a phrase you’ve probably before. Well, we’re not going to buck that trend. As cliché as it sounds, it really never is too early to start saving for your future. Of course, we know that saving as a student isn’t easy, especially when you factor in the average cost of living. For example, if you look here https://www.savethestudent.org/money/student-budgeting, you’ll see that average student rent payments are £421 per month.
There Are Ways to Start Saving Now
You can get a job and earn some extra cash. However, the chances are that you’re not going to get much more than minimum wage and, moreover, you’ll probably be working part-time hours. So, while there’s nothing wrong with working your way through university, it’s probably not going to give you stacks of cash. Therefore, if you’re going to save and, importantly, save for the future, you need to be smart about it. We’ve got plenty of money-saving tips. From student discounts to advice on how to generate extra income, you can get a much better handle on your finances with our feature articles.
You can also defer to external resources. By visiting https://www.ucas.com/finance/managing-money, you’ll learn the basics of creating a budget. From identifying potential sources of income and taking off unavoidable expenses, to avoiding financial pitfalls, UCAS has plenty of great money-saving information. However, as useful as those tips are, they’re only helpful for the here and now. Learning how to budget for a term or two isn’t going to set you up for retirement. Retirement! Surely, I don’t need to worry about that? You’re right, you don’t. However, as we said at the start of this article, it’s never too early to start.
The Benefits of Saving Early
By starting now, you can start small. You can also enjoy the benefits of compound interest. If you’re not sure what that is, have a look at https://www.mathsisfun.com/money/compound-interest. Basically, compound interest is where the interest from one period is added to the next so that your total investment increases in value. This, in turn, increases the amount of interest you earn and so the process continues. Your initial investment grows exponentially, and, over time, you can turn a little into a lot. Of course, no investment is ever guaranteed. However, if you can achieve a positive return, compound interest will increase the value of your holding.
The other benefit of thinking about your future early is that you can take advantage of modern investment mechanisms. Tax isn’t a huge concern if you’re a student but, unfortunately, it will be once you graduate. Therefore, if you’re going to invest, you need to do it in an affordable and tax-efficient way. A stocks and shares ISA is the best way to achieve both of these things. Visiting a source such as https://freetrade.io/stocks-and-shares-isa, will demonstrate that these products shelter any profits you make from capital gains tax. In contrast, if you make an investment outside of an ISA and make a profit, you could be liable for capital gains tax of up to 20%.
You Can save in an Affordable Way
This eats into the money you make, which is why a stocks and shares ISA is a sensible thing to use. What’s also important to note is that the right stocks and shares ISAs allow you to invest at an affordable level. Thanks to something known as fractional shares, you can take a position in companies you might not be able to if you have to buy a single share. For example, a single share in Microsoft on December 2, 2021, cost £247. You might not have enough spare cash to buy a share, but you believe Microsoft is a profitable investment.
This is where fractional shares come in. You buy a small fraction of a share at a level that suits you. This is how students can start investing. Modern apps make it possible to take positions in major companies for a small price. So, the next time you think it’s too early to start investing in your future, just remember that fractional shares make it possible. This, combined with tax-efficient products and compound interest, means it’s not only possible to invest as a student but prove that it’s never too early to start.