Investing when the time is right

Alicia Warden

Planning for your financial future can be a daunting task. It may not even cross your mind at this stage of the game, but, as Doug Borkowski points out, when you’re a young college student, time is on your side.

Borkowski, financial counselor at the ISU Financial Counseling Clinic and lecturer in human development and family studies, said saving now can mean a higher return later in life.

“The time value of money is the big thing,” Borkowski said.

There are many ways students can take advantage of the time ahead of them, and knowing where and how to start saving money is the first step.

Traditional savings accounts are good for emergency funds, Borkowski said. The money you have in a savings account can often be easily accessed.

Small expenses, such as parking tickets or books, “can creep up on you when you least expect it,” said Amanda Martin, senior in environmental science.

Other students see the importance of starting to save early in life.

“There’s always costs that come up unexpectedly,” said Stacy Beyer, junior in animal ecology.

Beyer said it is important that students learn about how to correctly save money.

There are other ways, besides savings accounts, to wisely invest your money. One thing to consider is a money market mutual fund, Borkowski said. These funds and other types of investments do involve more risk than savings accounts, but they also earn more compound interest.

“Compound interest is the rate of return or interest rate that accumulates over time exponentially,” said Maurice MacDonald, professor and chairman of human development and family studies.

It may be easy to save for the newest video game console or the latest must-have fashion item. But saving for the future instead of an immediate purchase can be a smarter financial move that will help you further down the line. Saving for future goals must become a routine to make those goals a reality.

“Saving is a habit,” MacDonald said.

MacDonald recommends students use the concept of “paying yourself first.” This concept involves putting some of your income into a savings account first before you spend any of it.

“It [money] won’t get frittered away,” MacDonald said.

Instead of spending your money on a short-term investment – a latte from Starbucks, for example – you are putting away that money for a future goal, such as a house, car or retirement fund.

Although these life events may seem far away, it can be beneficial to start thinking about them now.

The world of money and investing can be daunting to understand. But there are many resources available to students. The ISU Financial Counseling Clinic Web site is a place to get started. The site offers information on savings and investments. You can also make an appointment to visit with a financial counselor or planner.

Educating yourself on how to save is another step in planning for your financial future.

“Develop that habit, get some knowledge and then start saving,” MacDonald said.

Students may feel they don’t have much money now to save because they are trying to cover daily expenses. But knowing how the system of investing and saving works will help you know what you want to do when you have the available funds.

MacDonald said even if you can’t save money now, consider your education at Iowa State as an investment in your future. The return of this investment in the form of job and career opportunities after graduation. The salary equated with these opportunities may give you a greater cash flow that will allow for more investing and saving.

“The key is watching for opportunities,” MacDonald said.