As someone close to being an adult and going to college, I have earned a small amount of money ($3000) and am looking to start my lifetime savings and get a head start by investing my money rather that simply holding it in a savings account. Assuming that I can invest it any way I please, how can I best go about growing my money so I have a sizable amount by the time I graduate from college and need a house or car? I currently have it invested in sector mutual funds but with the rise and fall of the stock market, is this really the best way to prepare long-term?

  • This is not a duplicate, since this OP is starting college, and the linked question already graduated.
    – RonJohn
    Oct 13, 2017 at 21:50
  • Put that straight into a Roth IRA, and invest it for growth. If you don't know how to invest for growth, stop by your university's donor relations office and ask them how they invest their Endowment. Because an IRA is an endowment for you, and at age 20 your investment goals are exactly the same. Investing in an IRA at such a young age will have an explosive effect on its growth, $3k is likely to balloon to $100k by retirement just all by itself. Good retirement! Get an IRA at a discount brokerage (e.g. Fidelity) and slap it in index ETFs which have the lowest possible expense ratios. Oct 14, 2017 at 2:35

4 Answers 4


(Congrats on earning/saving $3K and not wanting to blow it all on immediate gratification!)

I currently have it invested in sector mutual funds but with the rise and fall of the stock market, is this really the best way to prepare long-term?

Long-term? Yes!

However... four years is not long term. It is, in fact, borderline short term. (When I was your age, that was incomprehensible too, but trust me: it's true.)

The problem is that there's an inverse relationship between reward and risk: the higher the possible reward, the greater the risk that you'll lose a big chunk of it.

I invest that middle-term money in a mix of junk high yield bond funds and "high" yield savings accounts at an online bank. My preferences are HYG purchased at Fidelity (EDIT: because it's commission-free and I buy a few hundred dollars worth every month), and Ally Bank.


I would like to add my accolades in saving $3000, it is an accomplishment that the majority of US households are unable to achieve. source

While it is something, in some ways it is hardly anything. Working part time at a entry level job will earn you almost three times this amount per year, and with the same job you can earn about as much in two weeks as this investment is likely to earn, in the market in one year.

All this leads to one thing: At your age you should be looking to increase your income. No matter if it is college or a high paying trade, whatever you can do to increase your life time earning potential would be the best investment for this money.

I would advocate a more patient approach. Stick the money in the bank until you complete your education enough for an "adult job". Use it, if needed, for training to get that adult job. Get a car, a place of your own, and a sufficient enough wardrobe. Save an emergency fund. Then invest with impunity.

Imagine two versions of yourself. One with basic education, a average to below average salary, that uses this money to invest in the stock market. Eventually that money will be needed and it will probably be pulled out of the market at an in opportune time. It might worth less than the original 3K!

Now imagine a second version of yourself that has an above average salary due to some good education or training. Perhaps that 3K was used to help provide that education. However, this second version will probably earn 25,000 to 75,000 per year then the first version. Which one do you want to be? Which one do you think will be wealthier?

Better educated people not only earn more, they are out of work less. You may want to look at this chart.

  • @Peter he specifically states in the first sentence that he's going to college, so half -- or more -- of your answer answers the wrong question.
    – RonJohn
    Oct 13, 2017 at 13:12
  • 2
    @RonJohn how is he paying for that college? Could those plans go awry? Best to keep in savings for now.
    – Pete B.
    Oct 13, 2017 at 13:57
  • "how is he paying for that college?" That's irrelevant to the question. "Best to keep in savings for now." That was my answer, too.
    – RonJohn
    Oct 13, 2017 at 14:07
  • @RonJohn How the OP is paying for college is not irrelevant. If the OP is keeping 3k in a savings account evening 0.1% interest while taking out student loans at 5%, then it's worth considering using the 3k for college expenses if the OP otherwise has enough of an emergency fund.
    – Eric
    Oct 13, 2017 at 20:49
  • @Eric (1) you should ask OP how he's paying for college, instead of assuming that he's going to incur lots of student loan debt. (2) 0.1% is insulting, and why my answer recommended Ally Bank.
    – RonJohn
    Oct 13, 2017 at 21:25

Congrats! That's a solid accomplishment for someone who is not even in college yet. I graduated college 3 years ago and I wish I was able to save more in college than I did. The rule of thumb with saving: the earlier the better.

My personal portfolio for retirement is comprised of four areas:

Roth IRA contributions, 401k contributions, HSA contributions, Stock Market

One of the greatest things about the college I attended was its co-op program. I had 3 internships - each were full time positions for 6 months. I strongly recommend, if its available, finding an internship for whatever major you are looking into. It will not only convince you that the career path you chose is what you want to do, but there are added benefits specifically in regards to retirement and savings. In all three of my co-ops I was able to apply 8% of my paycheck to my company's 401k plan. They also had matching available. As a result, my 401k had a pretty substantial savings amount by the time I graduated college.

To circle back to your question, I would recommend investing the money into a Roth IRA or the stock market. I personally have yet to invest a significant amount of money in the stock market. Instead, I have been maxing out my retirement for the last three years. That means I'm adding 18k to my 401k, 5.5k to my Roth, and adding ~3k to my HSA (there are limits to each of these and you can find them online). Compounded interest is amazing (I'm just going to leave this here... https://www.moneyunder30.com/power-of-compound-interest).

  • 1
    (1) Note that OP can only deposit as much of that $3K into a Roth IRA as he has earned through wages this year. He'll probably need to file a 1040. (2) Investing in the stock market is orthogonal to whether or not the money goes into a 401(k), Roth or HSA. (3) He wants to use the money in 4-5 years, not for retirement.
    – RonJohn
    Oct 13, 2017 at 13:09
  • IMO it's important to be precise. You can invest ROTH sheltered funds in the stock market, the choices are not mutually exclusive.
    – quid
    Oct 13, 2017 at 17:15

while not stated, if you have any debt at all, use the $3000 to pay it off. That's the best investment in the short term. No risk and guaranteed reward.

College can invite all sorts of unexpected expenses and opportunities, so stay liquid, protect working capital.

  • How much debt can a not-yet-adult get into?
    – RonJohn
    Oct 13, 2017 at 21:51

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