Saturday, December 6, 2008

Invest Money While In College Using Saving Bonds

Invest Money While In College

College education these days are necessary but oh, so expensive. I have a most memorable time juggling my studies and part time work to foot my own expenses for food, transportation, lodging and entertainment.

Most college students are deep in debt as they took up loans to pay for their education. If your kid is smart, he/she can apply for grants and scholarships to lessen the burden, but most students do not have such a luxury.

Is it possible to invest money while in college? The answer is yes. With a successful college investment program, students can pay off their loans faster. There are actually several ways to do so but some offer more earnings (like stocks and commodities) at higher risks.

I recommend two ways to invest money while in college that are less risky - bank accounts and savings bonds.

1. Banks

Banks offer savings account which earns minimal interest but being FDIC insured, they are virtually risk free. The minimum balance is usually $300 so if the balance falls short, the account will incur additional fees.

Banks also provide money market accounts. Money markets require a higher balance than savings accounts, but they offer a higher interest rate. The minimum balance for these accounts can be anywhere from $1,500 to $5,000. If the balance drops below the minimum balance, a $20 fee may be incurred.

For those with substantial money to invest while in college but are risk averse, money market accounts are the way to go.

2. Savings bonds

Savings bonds are best bought when a student is at a young age. You buy the bonds at half the face value and over a period of 10 to 20 years, the bond eventually reaches its face value.

If the bond is not cashed in when it reaches face value, it will still continue to gain interest. Bonds do not drop in value. However, the interest rates on them do vary from time to time. They are considered a safe investment but are also slow to increase.

Investing money while in college can be done, despite the fact that students have limited earnings power and are most likely laden with student loan and credit card loans.

Embarking on an investing program (risk free and running on auto-pilot) gives you a head start compared to your peers who are spending money freely and wallowing in debt when they begin their careers.