Invest Thursday’s bar money to see returns beyond hangovers

Students see investments as complex and expensive, but two local investors said students can invest with the money they have.

James Torch, freshman communication studies major, said he never thought about making an investment or that he had enough money to invest.

“I’m putting it towards school,” Torch said. “I don’t have that much, though.”

Nathan Miller, freshman business management major, said he doesn’t know much about investing or if he has the money to do it, either.

“I had a job over the summer, but I put it toward college,” Miller said. “Half of it was spending money and the other half went to college.”

Don Barrett, owner of Barrett Financial Group, said that while investing in stocks can be expensive, there are investments students can make with even $20 a month.

“It’s good to put money away when you’re young,” Barrett said, in reference to the effect of interest and time on money. “It was Albert Einstein that said, ‘The most powerful force in the universe is compound interest.’”

Michael Thomas Jr., financial investor for Stifel Nicolaus, said time is the main component to student investing. He said only two or three students invest at his firm.

“The key is what’s it worth over time,” Thomas said. “I think what the biggest struggle I see (is) someone who says, ‘Well, I don’t have any money to invest.’ I mean that’s a challenge you hear a lot of times from students. Yeah, but those small amounts today can add up to a lot over time.”

Drinking an investment away?

American college students spend close to $5.5 billion on alcohol — mostly beer — in a given year, according to a 1999 report by the Federal Trade Commission. That’s more than all the money college students spend on books, soda, coffee, juice and milk combined.

With the U.S Census estimating close to 18.4 million students enrolled in colleges and universities in the U.S., if every student drank equal amounts, each student in a one-year period would consume nearly $298 worth of alcohol.

Torch said he spends hundreds every school year.

“I would say between $25 to $30 per week,” Torch said. “I go out Thursday, Friday and Saturday.”

Thomas said applying small amounts of extra cash, like beer money, to investments in mutual funds or an IRA account could make a difference in a student’s future.

“So you look at $30 this month, $30 that next and so forth, and then you add in some compound interest in to there. Then you do begin to build some worth or some wealth and some assets,” he said. “I think it’s worth a lot. It just takes time to become worth a lot.”

Miller said he doesn’t think investing the money he has would get him far, but he has enough to spend on beer.

“I probably spend $10 a weekend,” Miller said.

What can students afford?

Barrett and Thomas said the most common and logical student investments would be either an Individual Retirement Account or mutual funds.

IRA

WHAT IT IS: For students, it’s an account that a person contributes money toward, and the contributions earn interest over time. Thomas said the two typical types are traditional and Roth IRAs.

HOW: Thomas said students can get this started by going to a bank, investment firm or even a mutual fund itself.

WHEN: Anyone can sign up for an IRA as long as they are younger than 70-and-a-half years old.

WHAT YOU NEED: To be eligible to sign up for any form of an IRA, a person must have taxable income during the year when contributions are made. In other words, students must have a job or a source of taxable income during the year they put money into their IRA.

Note: Additional information on an IRA can be found on the IRS Web site or from any financial adviser.

MUTUAL FUNDS

WHAT IT IS: It’s a form of investment where money is pulled together from multiple investors and invested as a whole. Thomas said this is a good form of investment for people without a lot of money.

HOW: Thomas said for those who want to do it themselves, researching online is OK, but he said it is best to trust someone who knows exactly what he or she doing.

WHEN: At any time, anyone can invest his or her money into a mutual fund.

WHAT YOU NEED: Barrett said students don’t need to have a bunch of money. The more they put in, though, the more they could get back.

Note: Additional information on mutual funds can be found online or through financial advisers.

Problem students face when investing

“Why don’t I think students invest?” he said. “It’s because they don’t have any financial literacy currently.”

He said the lack of financial literacy is a problem he runs into with other clients as well.

“I have had clients who’ve had an IRA for 30 years who don’t know what an IRA is,” Thomas said.

Contact student finance reporter Anthony Holloway at [email protected].