Saving and Investing for Students

What are the best investments for me?
The answer depends on when you will need the money, 
your goals, and if you will be able to sleep at night if you pur-
chase a risky investment where you could lose your principal. 
For instance, if you are saving for a long-term goal, such as 
a college fund for a child, you may want to consider riskier 
investment products, knowing that if you stick to only the “sav-
ings” products or to less risky investment products, your money 
will grow too slowly—or, given inflation and taxes, you may 
lose the purchasing power of your money. A frequent mistake 
people make is putting money they will not need for a very 
long time in investments that pay a low amount of interest. 
On the other hand, if you are saving for a short-term goal, five 
years or less, such as a car, you don’t want to choose risky invest-
ments, because when it’s time to sell, you may have to take a loss. 
Since investments often move up and down in value rapidly, you 
want to make sure that you can wait and sell at the best possible time.

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SAVING AND INVESTING
What are investments all about?
When you make an investment, you are giving your money 
to a company or enterprise, hoping that it will be successful 
and pay you back with even more money.
Stocks and Bonds
Many companies offer investors the opportunity to buy either 
stocks or bonds. The example below shows you how stocks and 
bonds differ. 
Let’s say you believe that a company that makes computers 
may be a good investment. Everyone you know is buying one 
of their computers, and your friends report that the company’s 
laptops rarely break down and run well for years. You either 
have an investment professional investigate the company and 
read as much as possible about it, or you do it yourself.
After your research, you’re convinced it’s a solid company 
that will sell many more computers in the years ahead. 
The computer company offers both stocks and bonds. With the 
bonds, the company agrees to pay you back your initial investment 
in ten years, plus pay you interest twice a year at the rate of 4% a year.
If you buy the stock, you take on the risk of potentially los-
ing a portion or all of your initial investment if the company 
does poorly or the stock market drops in value. But you also 
may see the stock increase in value beyond what you could 
earn from the bonds. If you buy the stock, you become an 
“owner” of the company.
You wrestle with the decision. If you buy the bonds, you 
will get your money back plus the 4% interest a year. And you 
think the company will be able to honor its promise to you on 
the bonds because it has been in business for many years and 
doesn’t look like it could go bankrupt. The company has a long 
history of making computers and you know that its stock has 
gone up in price by an average of 6% a year, plus it has typically 
paid stockholders a dividend of 3% from its profits each year.

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