Investing Strategies for Teens and Young Adults: College

Today, paying for a college education is no longer a walk in the park as it may have been in the late 1900s. In fact, according to Forbes, between 1980 and 2020, the average cost of tuition, fees, room, and board for an undergraduate degree increased by 169-180%. Such a price increase has led to $1.75 Trillion in student loan debt. Many students are now graduating college under incredible financial pressure, but how can we prepare for the cost of college to prevent this financial pressure?

1. Invest

Saving for college is brilliant– you set aside money every month, and by the time it comes to paying for college. However, investing in college is even more brilliant. Rather than sitting the cash on the sidelines, you can let your money work for you by investing. FAI’s rules for investing remain the same in this situation: maximize the time frame and determine an investing strategy based on the time frame. Ideally, we should start preparing for college early to maximize the time frame. This allows us to take more risk on our investment, thus giving us the potential to incur greater returns. Depending on the allotted time frame, your investments and concentration range from stocks, mutual funds, bonds, and CDs. This way, you can diversify your portfolio and attack your return targets.

2. Plans/Accounts

Although many tend to invest alone, looking into specific plans and accounts specifically designed for education savings could be beneficial. For example, 529 Plans are tax-advantaged investment accounts specifically designed for education savings, allowing users tax-free growth. Other options include custodial accounts, which are accounts granted under state law that allow parents/guardians to hold gifts or transfers for minors that can be used to pay for college. Whether or not these plans and accounts are for you, it’s important to explore your options so you don’t miss out on opportunities.

Conclusion

Student loan debt is a massive problem in the United States, leading many to question the value of the intellectual and emotional enlightenment that occurs during college education. Investing and utilizing specific plans and accounts can reduce student loan debt and make your post-college life more stress-free!