Do I Need to Start Investing as a Student?

Let's talk stonks.

When you start to hear stories about people taking punts on stocks and making money hand over fist, it's natural to want to start investing yourself.

But what if you're a student? Should you be investing the money you earn from your casual job? And what if you're still in high school? Are you even allowed to invest at all?

If you've got all these questions, don't worry—we've got the answers. We spoke with the founder of Money School Lacey Filipich about investing while a student.

Do I need to start investing as a student?

Working out when to start investing is not always easy, especially if you're a student with a casual job. For Lacey, it all comes down to excess cash.

“If you have a buffer fund of cash saved for emergencies, and you can save because you don't need every single dollar you earn to cover your living costs, investing while you're young is a great idea,” Lacey tells us.

“The power of time is on your side, and compounding will have more years to work its magic if you invest. However, if you are on a tight budget, you're probably not ready to start investing just yet.”

What if I'm in high school?

Starting young, nice. Unfortunately, Lacey has some bad news for you.

“You have to be 18-years-old to buy shares [in Australia]. So, if you want to do it earlier, you'll need a parent or guardian to help.”

You can get your parents to start a trustee account for you, but that means your parents are liable for tax, GST or income on these shares until they're transferred into your name after you turn 18.

Why do people invest?

In a nutshell, to make more money!

“We invest to get our money making more money on our behalf,” Lacey says.

“Investing aims to grow your savings beyond what you could earn as interest if it was cash in the bank.”

Ultimately, it leads to financial independence and work becomes a choice rather than a must.

Is investing risky?

Absolutely. Lacey suggests caution when diving in.

“The greatest risk is ignorance—investing when you don't know what you're doing,” warns Lacey.

“Most investments have some kind of risk. Share prices drop, companies can go bankrupt (hello Blockbuster!). If you are going to invest, you need to understand those risks first.”

Should I invest all my money?

“No,” Lacey emphatically says.

“Have some cash in a buffer fund for emergencies and make sure you keep enough cash to cover your living costs. Getting money out of investments can be costly, so you don't want money you plan to spend in the short term locked up in an investment.”

 

Header Image: Joshua Mayo via Unsplash