Parents and young adults alike might wonder what investments are smart for the college set.
Must-haves items like a car or computer might seem like great place to put your money but neither wheels nor gadgets make a financial advisor's list of good investments because they lose value. However, there are many things in this world we buy to use, not to resell to make a profit, and cars and computers are two of the more common ones. The key is to remember that though they are costly, they can’t be considered ‘investments.’
That being said, what are some good investments for parents of college students, once you have the necessities out of the way?
1. Real estate. Buying, owning and managing property isn't cheap or easy, but a so-called ‘kiddie condo’ for a college student can be a smart investment. An entry-level home gives your student a place to live, perhaps with rent-paying roommates, and the possibility of building equity over time. Real estate should be considered a long-term play due to the high transaction costs to buy and sell.
2. Paying off credit-card debt. Paying off debt isn't necessarily an investment, strictly speaking. But every dollar paid off is a dollar less on which interest will be owed in the future. Students who have credit-card debt can start paying it down with the goal of being credit-card debt free when they graduate.
3. Mutual funds. These baskets of stocks, bonds and other assets can gain or lose value, but over the long term, a well-diversified mutual fund should perform well and generate a positive return on investment. Look for funds that have no- or low-upfront and annual fees. Students aren't too young to start investing for their future, including, one day, retirement.
4. Career training. While additional schooling isn't technically a financial investment, a certificate or job-specific training program can be a smart complement to a college degree, giving your student additional knowledge and credentials as well as a path into a career and jumpstart on jobs in that field. Research the outlook for employment as well as training costs.
5. Savings account. A savings account with a low interest rate also isn’t much of an investment. But regularly saving even small sums while your student is still in college can be the start of a great financial habit for a lifetime. Saving is important to make large purchases and be prepared for emergencies.
A true investment puts your student in a better financial position for his or her future. Considering a real estate investment close to your child’s college? Explore your loan options.Call today for more information.
Published August 14, 2015