Investing Your Money

 Once you’ve managed your debt, you may find yourself with some extra cash. What should you do with it? Invest! As a young computer science student, you have fantastic options at your fingertips.

Example Salary statistics. Becoming a Software Engineer can be very rewarding.

Savings Accounts

 First up, consider a savings account. These accounts typically offer competitive interest rates and compound monthly. The interest is usually tied to the federal reserve rate, meaning it can fluctuate. Be mindful that some savings accounts limit the number of withdrawals you can make. To open an account, you’ll need to be at least 18, or you can do so with a parent’s help. Here are a couple of examples of accounts with high APYs:

  • SoFi
  • EverBank

    • For a list of savings accounts with the best rates, check out this link: NerdWallet Savings Accounts.

    Important: Always research the institutions backing these accounts. Most savings accounts are from FDIC-insured banks, meaning your deposits are protected up to $250,000. As a student, you likely won’t reach that threshold, so your money is safe.

    Stock Market

       Investing in the stock market can offer great returns, but it’s essential to do it wisely. Here are some key points to consider:

  • Invest Only What You Can Afford to Set Aside: Make sure to only invest money you won’t need for at least six months. As a student, having a safety net in a savings account is crucial for unexpected expenses, like traveling for a job or internship.

  • Start with Index Funds or ETFs: The safest way to invest is through funds or ETFs that track the S&P 500 or large-cap companies. Historically, the S&P 500 has returned an average of about 10.26% since 1957. If you invest $10,000 now, you could see that grow to around $800,000 by retirement (assuming you've kept it for 45 years). If you invest $10,000 every year, your total could reach approximately $8 million!

  • Be Patient: Don’t invest in the S&P 500 and then withdraw your money shortly after. The market can fluctuate in the short term, and taking money out too soon can incur high short-term capital gains taxes. Focus on long-term growth instead.

  • Avoid High-Risk Investments: As a beginner, it’s best to steer clear of options and risky investments like calls, puts, or futures. These can be very volatile. If you do decide to buy stocks, stick to well-established companies rather than small, high-risk firms.

    • Conclusion

    Investing can be a powerful tool for building your financial future. Start with a solid savings strategy, then gradually explore the stock market when you’re ready. Remember, patience and research are your best friends in this journey!