pexels-photo-159888 You might think being a student is the first and only way to begin investing in your future but this is short-sighted. You’ve got to look bigger and think broader. The chances are you can already begin planning where your money will begin going before you even start earning it. Most students are focusing their life on studying, but some are earning, too. Of course, most of that money is going toward trying to eat, rent and so on. The money just can’t go to anything else, let alone savings or investment, because it’s needed right now. Yet, planning for your future doesn’t mean you need to begin acting now. You can start gathering details about how the stock market works without putting aside huge amounts of money. You can figure out what retirement means and why you should care, even if you’ve never worked a day in your life. Planning begins now, not later.

What are stocks?

The most famous rich people in the world are almost always involved in some way with the stock market. When you see the stock market depicted in films, you usually see people in shirts shouting with large screens and numbers rolling everywhere. But that’s not what you should worry about. Stocks are actually much simpler than most would have you believe. Investopedia offers an easy definition. “Plain and simple, stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same thing.” Owning a business’ stock indicates ownership on your part. This makes you a shareholder, entitling you to everything a company owns. Being an owner, you’re entitled to a share – hence the title – of the company’s earnings. You also get voting rights that’s attached to the stock. You might wonder: why would a company even have stocks? Why not simply focus on getting profits by doing good work people want? Most of you might think a business makes itself into a success by simply its job well. If you want to be a success as, say, an advertising company, you simply produce really good marketing campaigns, win plenty of clients and so on. In reality, that’s not how it always works. The reason a company has stocks it shares with the public is simple: it needs the money. Basically, companies only have two ways to get money that can cover start-up costs and expand: Debt financing (borrowing) or equity financing (selling stock). How Stuff Works points out why companies go for public shares: “The disadvantage of borrowing money is that the company has to pay back the loan with interest. By selling stock, however, the company gets money with fewer strings attached. There is no interest to pay and no requirement to even pay the money back at all. Even better, equity financing distributes the risk of doing business among a large pool of investors (stockholders). If the company fails, the founders don't lose all of their money; they lose several thousand smaller chunks of other people's money.” Companies can keep stocks private or even focus on a few owners. But stocks are one option. Stocks also are more easily obtainable, though you should find out from professional brokers which are right for you. Some are riskier than others. The ideal is to find a company that will one day become a major world player – for example, imagine being an early shareholder in Facebook? As the company grows, the stock prices themselves increase in value, meaning you make a return on your initial investment. As Zacks summarises: “The primary factor that causes stock prices to increase or decrease is the company’s earnings. Earnings are considered the money a company makes after it pays its liabilities.” Naturally, the more a company earns with less liability, the more earnings it obtains thus increasing a stock’s value. Students are advised to begin learning about what this means by speaking to a broker and other financial advisers. They could ask you, if you have the right funds and details, to fill out a Satrix investment plan application form or something similar. You should also consider unit trust investments or government retail bonds which are premised on being safe investments.

How to benefit your future

Of course there are other ways to benefit your future. A savings account is one popular form of financial management and is simple: you simply need to keep money aside and not touch it. Savings accounts benefit from compound interest, which is “interest on interest”. This is where interest helps increase your deposit, then, in the next cycle, you have an interest on this increased amount. In other words, the interest keeps piling on, hence the term “compound”. Savings accounts only work if you start them early, with a sizeable amount. Time is the biggest factor when it comes to establishing a financially secure future. Naturally, as a student, you do have time on your side given your age – but you might not have finances. You therefore have nothing to save just yet. But even a small amount can go a long way, as long as you know you won’t need it for some years. There’s no harm in at least attempting to save a small amount and seeing what compound interest can do for you.   If investing might be too much, consider a savings account. These are just two of many options to consider when it comes to carving out your financial future. Image: Pexels

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