How to build wealth as a College Student (2024)

As a college student, It can be very difficult to balance your school work and social life. What may even be harder than some think is the ability to save and invest your money. It is even more difficult for us to cultivate wealth building habits as students are not taught the importance of financial literacy in their school curriculums, despite its upmost relevance for students to understand once they prepare to live life on their own

To maintain financial security through your years as a student, It is essential to have a bit of information and skills that would help towards conserving your funds and helping bolster and even profit from your money as well. In this article, I would go over a few of the essential tips I have learnt along the way that can help any young student/adult to cultivate wealth building habits and maintain financial buoyancy.

Budgeting

A very essential step towards ensuring proper usage of your funds would be to start by calculating your typical expenditure and costs pattern over a certain time period (Days, months, years). This helps give you an idea of how much money should be used for basic necessities such as food and groceries, rent for accommodation, cost of school tuition and books, etc. You can also budget for various events and scenarios as your budget can range from the most basic costs and necessities to more complex and impromptu costs as well. This essential skill can help you decide how much you can spend over a time period and gives you an idea of how much finances you have and how to designate it efficiently. According to Senator Elizabeth Warren's book, "All Your Worth: The Ultimate Lifetime Money Plan." she explains in detail the popular 50-30-20 rule which entails spending "50% on needs, 30% on wants, and saving 20% of your after-tax income." This would help in designating money efficiently and practicing your saving skills.

Saving

Once you have a general idea of your costs and necessities after budgeting, the next step would be to decide on an appropriate method to use to save money. Most young people want to be wealthy or "get rich ASAP" but a very essential part of building wealth is adapting the discipline that is necessary to save your money instead of spending it unnecessarily. From my experience, I feel this is the most difficult aspect for most as it is very easy to get frivolous once someone has a lot of money with no proper discipline on how to allocate or save it.

For those students that work, as we've seen from the 50-30-20 rule, a good method for saving would be to save at least 20% of your paycheck to allow for funds to accumulate gradually over time as you work. Also, according to Chime.com, saving 20% from each paycheck is important to financial well-being and alleviating stress. According to the 2020 Employee Financial Wellness Survey, 54% of America's workforce is financially stressed; this shows how difficult and complex it is for many people in the workforce to maintain financial stability.

According to Forbes, It would also be recommended to open an individual retirement account, that allows you to gain special tax benefits while building your saving habits

Investing

An often overlooked avenue of building wealth that is often overlooked by the younger generation is investing and trading in stocks and mutual, investing in index funds or mutual funds, or buying fractional shares of companies you support. Nowadays with the increased accessibility to trading through easy-to-use online trading platforms and apps, it is easier than ever for college students to be able to take an active role in building their wealth and investment portfolio.

According to Forbes' 'Tips for Investing for College Students', it is suggested that investing over the long run would be more profitable through investing in "low-cost and well-diversified index funds and exchange-traded funds (ETFs)."

Other profitable investment strategies that one can indulge in with more experience include:

If these methods are applied successfuly and patiently over a period of time, your finances would have grown exponentially through constant saving and low risk profitable investments over time. Remember, it is not feasible to get rich quick, slow and steady wins the race.

Works Cited

Johnson, Holly. “Looking to Build Wealth? Here Are Some of the Best Ways to Invest Your Money | CNN Underscored.” CNN, Cable News Network, 28 Jan. 2022, https://www.cnn.com/cnn-underscored/money/best-ways-to-invest-money.

“7 Tips for Investing as a College Student.” Forbes, Forbes Magazine, 14 Apr. 2022, https://www.forbes.com/sites/qai/2022/03/23/7-tips-for-investing-as-a-college-student/?sh=4a6adeed74af.

https://www.investopedia.com/ask/answers/022916/what-502030-budget-rule.asp#:~:text=The%20rule%20states%20that%20you,else%20that%20you%20might%20want.