Your Money, Your Future

Martha-Page Ransdell / Special Projects Editor

It’s no secret that college students have a reputation for being poor. Between juggling a demanding class schedule, homework, extracurricular activities and sometimes even a paying job, who has time to think of budgeting, saving and spending money more wisely? Well, think again. It’s a proven fact that those who begin to save and invest money at a young age will be able to receive more of the benefits in the later years of one’s life.

Why Should I Invest?

“Beginning to save and invest early enables one to receive more of the benefits from compounding,” said Robert Pavlik, associate professor of finance. For many students, investing and saving money is a practical choice to help prepare for the future.

“You need something to cushion you for the time between graduating and getting out on your own,” said sophomore Mackenzie Stoh, who suggests opening a savings account and depositing a certain amount of money each month, which over time, will accumulate interest.

How Do I Invest?

Investing your money is not as difficult as one may think. Many banks offer in-depth guidelines on the various options available when looking to invest money. Wachovia, Fidelity Bank and BB&T all have extensive information on their web sites about the different ways to invest. They include detailed descriptions of the various options, such as mutual funds, stocks, bonds and certificates of deposit (CD’s).

Mutual Funds

For students hoping to invest, Pavlik suggests looking into mutual funds, which allow for an investment company to use members’ capital to buy various stocks from other companies.

“A number of mutual funds require as little as $250 to open an account”, Pavlik said. “The same funds offer periodic investment plans that allow smaller dollar investments after the account is opened.”

The Stock Market

Another option for students who want to invest their money is the stock market, although it is important for college students to make sure they are putting enough money in the stock market to make a difference. “It has been shown that young adults, on average, under-invest their long-term investment capital in the stock market,” Pavlik said.

According to Pavlik, there is a useful formula for students to go by when determining how much money to invest in the stock market. The amount of money students are willing to invest can be estimated with the formula 100 minus one’s age. It would be appropriate for a 20 year old to have about 80 percent of his or her investable assets in stocks, or a 22 year old to have 78 percent of their money in stocks.

“Naturally, the actual percentage should be dictated by individual circumstances,” Pavlik said.

Students interested in investing money in stocks should keep in mind transaction costs and the time and expertise required. For these reasons, it may be impractical for some students to invest in stocks.

Don’t want to Invest?

If the information on mutual funds and the stock market is too much to comprehend, one smart choice for students to make regarding their money is to monitor their spending habits and save as much as they can.

“Be smart with your money,” said sophomore Alex Linville. “Any time you can save money, do it. You’ll be glad you did when you’re out of college, looking for jobs and living in a 400 square foot apartment.”

Duane Gilbert, financial center manager of Wachovia Bank in Burlington, thinks that the majority of college students don’t make good choices when it comes to spending money.

“The number one thing students do wrong is they don’t analyze their amount of cash flow and therefore have no idea where their money is going,” Gilbert said.

The Budget Worksheet

Pavlik suggests that students begin their goal to save money by using a standard budget worksheet. These can be found online (http://www.financialplan.about.com), or in software such as Quicken or Microsoft Money. Using the budget worksheet to track cash inflow and expenses for several months can provide thoughtful insight into how much money you really spend and the frivolous things your money is spent on.

“The idea is not to become miserly, but to develop more organized and disciplined spending habits,” Pavlik said. “The information from the budget process will contribute to creating a long term financial plan.”

Contact Martha-Page Ransdell at pendulum@elon.edu or 278-7247.

Martha-Page Ransdell / Photographer

Wachovia, Fidelity Bank and 1st State Bank are just a few of the banks in the Burlington area that offer investment services and assistance to those who want to invest their money.

Investing Terms To Know:

Compounding: Earning interest on interest

Stock: the capital or fund that a corporation raises through the sale of shares entitling the stockholder to dividends and to other rights of ownership, such as voting rights

Mutual Fund: a investment company that continually offers new shares and buys existing shares back at the request of the shareholder and uses its capital to invest in diversified securities of other companies; once you have opened a mutual fund, you can deposit any amount of money you want

Budget Worksheet: a chart that tracks cash inflow and expenses; allows people to see exactly how much money they are making and where they are spending it

Savings Account: a bank account that accumulates interest