World Investor Week: 3 Investing Concepts to Help Students Get Started

October 1, 2018

By guest blogger the SEC’s Office of Investor Education and Advocacy

For a student, filling out the FAFSA and figuring out how to pay for college are just the first steps in a lifetime of financial decisions. In recognition of 2018 World Investor Week (Oct. 1-7), here are three basic investing concepts to help students start to build a strong financial future.

Understanding the Power of Compound Interest

With compound interest, you earn interest on both the money you save and on the interest that money earns. Thanks to compound interest, even a small amount saved can add up to big money over time. That means the earlier you start investing, the more time you give your money to work for you.

In the chart below, we see how someone who started investing at age 18 and invested for 10 years ended up with more money for retirement than someone who started at age 30 and invested for 35 years. That’s the power of compound interest!

The Benefits of Starting Early

Investing from Age 18-28

Investing from Age 30-65

Years Contributing

10

35

Annual Amount Contributed

$600

($50 per month)

$600

($50 per month)

Total Contributed

$6,000 total

$21,000 total

Avg. Annual Rate of Return

7%

7%

Value at Age 65

$101,332.21

$82,942.13


Use the Compound Interest Calculator at Investor.gov to find out how the money you save can grow over time.

Planning for Future Needs and Goals

What are the things you want to save and invest for? A car? Educational opportunities? A start-up business? Make your own list, then use the Savings Goal Calculator at Investor.gov to calculate how much money you need to save each month in order to meet your goals.

A good way to get started is by opening a savings or investment account now. Get in the habit of paying yourself first by contributing a portion of any money you earn – no matter how small.

Avoiding "Get-Rich-Quick" and "Can't Lose" Schemes

It’s easy to be tempted by promises of get rich quick schemes that promise little or no risk. Fraudsters try to convince investors that extremely high returns are “guaranteed” or “can’t miss.” But if it sounds too good to be true, it probably is! Avoid these scams and learn more red flags of fraud and common persuasion tactics at Investor.gov.

Some investments may even be endorsed by celebrities. But it’s never a good idea to make an investment decision just because someone famous says a product or service is a good investment. Find out more in our alert about celebrity endorsements.

The Takeaway

The most important step you can take now to secure your financial future is learning the basics. These Investor.gov resources that can help:

About World Investor Week: World Investor Week is a global campaign promoted by the International Organization of Securities Commissions (IOSCO) to raise awareness about the importance of investor education and protection. During Oct. 1-7, 2018, individual investors, investment professionals, teachers, parents, researchers, and other interested individuals – as well as firms, regulators, and organizations – are encouraged to make a special effort to promote investor education. Learn more at www.worldinvestorweek.org or visit the World Investor Week page at Investor.gov.

The SEC’s Office of Investor Education and Advocacy is providing this information as a service to investors. This is not a statement of official SEC policy or a legal interpretation. If you have questions about the meaning or application of a particular law or rule, please consult with a lawyer who specializes in securities law.

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