How to Invest as a College Student

As a college student, it’s not too early to start investing your money. In fact, the sooner you start, the more time your money may have to grow. That could help you meet your financial goals such as going to graduate school, buying a house, or saving for retirement.

There are different types of accounts college students can use to invest, including brokerage accounts and retirement accounts like individual retirement accounts (IRAs) and 401(k)s. But there are some important steps college students should take before they start investing. Here’s what to know about investing as a college student.

Why You Should Start Investing Early

One key reason to start investing early is the potential return on your investment. The average annual return offered by the S&P 500 — a stock market index of the 500 largest companies in the U.S. — is around 7% when adjusted for inflation.

While investing does involve risk, it may help you outpace inflation and give you an extra boost toward your long term goals.

Investing as a college student can be a good time to get started.


💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

3 Ways to Invest While in College

There are several ways for college students to invest their money, including using tax-advantaged retirement accounts and brokerage accounts.

IRA

An IRA, whether it’s a traditional or Roth IRA, is a type of retirement account that almost anyone with an earned income can open up and start contributing to. There are rules regarding how much you can contribute to an IRA every year — up to $7,000 for those under age 50 in 2025 — and when you can take withdrawals (depending on the type of IRA you open). However, these accounts can be relatively easy ways to kick-start a college students’ investment portfolio.

Two of the most common types of IRAs are traditional IRAs and Roth IRAs. With a Roth IRA, you contribute after-tax dollars and you can withdraw the money tax-free in retirement. With a traditional IRA, you contribute pre-tax dollars (those contributions may be tax deductible), and you pay taxes on the money when you withdraw it in retirement.

IRAs do have withdrawal rules and penalties. Early withdrawals may incur taxes and penalties, with some exceptions. The rules for making withdrawals from a Roth IRA are different from those for a traditional IRA, so it’s wise to understand what they each involve.

Brokerage Account

A brokerage account allows investors to make investments by depositing funds in the account. Your financial institution may have brokerage options, or you may consider using an outside financial brokerage firm or an online brokerage. You can shop around and research different brokerage accounts to compare their minimum deposit required (if they have one), the fees they charge, the investments they offer, and the responsiveness of their customer service department.

With a brokerage account, a college student can buy and sell stocks, bonds, mutual funds, index funds, and other assets. Once an investor opens an account they can transfer money into it from a checking or savings account to fund their investments. Unlike IRAs, brokerage accounts have no contribution limits.

However, selling assets in a brokerage account can trigger capital gains taxes. Short-term capital gains (from assets you’ve held for less than a year) are charged at a higher rate than long-term capital gains (assets you’ve held a year or more).

401(k)

A 401(k) is a type of retirement account offered through an employer (though there are different types of 401(k)s, such as solo 401(k)s, that you can open yourself if you are self-employed). Like IRAs, 401(k)s have annual contribution limits — up to $23,500 for those under age 50 in 2025.

The money you put in a 401(k) account is pre-tax dollars and it reduces your taxable income. The money grows tax-deferred while it’s invested. Your contributions are typically deducted automatically from your paycheck and you have a choice of investments to pick from, depending on your employer’s plan. Your employer may offer a 401(k) match — essentially matching your contribution up to a certain amount and/or percentage.

Aside from certain specific exceptions, you can’t withdraw money from the account until you reach age 59 ½, or you’ll be subject to a 10% early withdrawal penalty.

Steps to Start Investing as a College Student

If you’re a college student who is new to investing, there are several actions that could help you get started.

Set Clear Financial Goals

Before you make your first investment as a college student, it’s important to give some serious thought and consideration to your financial goals. Do you want to try to hit a total net worth or dollar amount by a certain age, for instance? Or do you want to save up enough to buy a home or start a family?

Having clear financial goals in mind before you start investing can help guide your decision-making about what types of investments you make.

Determine How Much Money You Can Set Aside

With your goals in mind, think about how much money you realistically can set aside to invest. Even if you have a part-time job, odds are, you won’t be able to invest your entire paycheck. But if you can free up some additional money in your budget for investing, that could help you get started. Even a small amount can help.

Choose the Right Investment Account

Next, knowing how much you have to invest and with some end-goals in mind, you’ll need to decide what type of investment account will best help you build your portfolio and reach your objectives. As discussed, this might be a retirement account like an IRA, a 401(k), or a brokerage account.

Understand Types of Investments

You’ll also want to review and understand the different investments available. That can include a variety of asset types such as stocks, bonds, cash, mutual funds, exchanged-traded funds (ETFs), and more. Study up on each one to help determine which makes the most sense for your situation and your goals.

Also, consider your risk tolerance. Remember, investing involves risk, and some assets are riskier than others, so you’ll want to make sure you are comfortable with your choices.

Fund Your Investments

The final step is to go ahead and fund your investment account and make your initial investments. You may want to start small and increase your contributions over time if your financial situation allows.

Tips for Investing as a College Student

Investing as a college student may feel intimidating at first, but these tips and guidelines can help.

Consider Diversification

A good rule of thumb for all investors is to invest in different types of assets and asset classes. The basic idea behind portfolio diversification is that by diversifying the assets you have, you may offset a certain amount of investment risk. Conversely, the fewer types of assets you have, the more risk you may take on should they perform poorly.

For example, imagine you invest in only one stock and that company folds — if that happens, you’ve lost your entire investment. However, if you’ve invested in a number of different stocks in different sectors, one company failing would affect you far less. However, it’s important to note that diversification does not eliminate risks.

One way to potentially stay diversified is by investing in mutual funds or exchange-traded funds, which bundle different groups of stocks together.

Avoid Emotional Investing

The market experiences natural ups and downs. As market fluctuations occur, it’s critical to try to avoid letting your emotions impact your investing.

When the market makes a big dip, you may feel the urge to quickly sell investments. However, by doing so, you may be locking in your losses. Letting reason prevail over emotions is generally wise — that way you don’t miss out on any future potential upturn that may take place.

Think of investing as a long-term proposition. The longer you allow your investments to stay in the market, the more opportunity they may have to ride out downturns — and the greater the potential you may have to take advantage of an upswing.

Timing the Market vs Time in the Market

When the market is doing well, you may find yourself tempted to get in on the action and end up buying investments that are too expensive or selling investments too soon. This type of buying and selling is known as timing the market. You may want to avoid checking the market frequently to help keep your emotions in check.

Rather than trying to time the market, think about investing over the long term.

Balancing Investing With Academic Responsibilities

As a college student working on earning your degree, your school work comes first. That means your academic responsibilities should take precedence over your investing activity. Remember, your education is an investment, too — one that is likely vital to your future.

That said, you may want to keep an eye on your portfolio and review your investments and allocations from time to time, whether that’s monthly or quarterly, and make any changes as necessary. But don’t get so caught up in investing that you neglect your classwork.

The Takeaway

Investing as a college student is possible, and there are many ways to get started. College students can explore various types of retirement accounts, like IRAs or 401(k)s, or brokerage accounts to get started. Investing when you’re young may help you build wealth over time. But investing involves risk, so make sure to choose investment accounts and asset types that you’re comfortable with.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

How should I invest as a college student?

How you invest as a college student depends on your financial situation and your goals. For example, if you’re saving for a long-term goal such as retirement, you may want to open a retirement account, such as an IRA or, if you’re eligible, a 401(k). However, if your goal is more of a short-term one such as going to grad school or buying a car, you may want to open a brokerage account that gives you more flexibility for making withdrawals.

Carefully consider your objectives, the amount of money you have to invest, your risk tolerance, and the types of investments you’d like to make, whether it’s mutual funds or a mix of stocks and bonds.

How much will $100 a month be worth in 30 years?

How much $100 a month will be worth in 30 years depends on an investment’s rate of return. For example, if the annual average return is 5%, you could have about $83,673 after 30 years. With a 10% rate of return on the investment, you could end up with approximately $228,003 in 30 years.

Which investment is best for students?

The type of investment that’s best for students depends on the student’s specific financial situation, investing timeframe, financial goals, and appetite for risk. Generally speaking, low-cost assets that offer some diversification such as exchange-traded funds, mutual funds, and index funds may be investment options for students to explore. Do your research on the different investment options to help determine which may be best for you.