Ways to Begin Investing in your Future: A Guide to 5 Kinds of Accounts
Investing in one’s future is important, and college is the perfect time to start small. At the Financial Wellness Center, counselors and resources are available to help students on their journey toward their ideal finances. In this reading, we will discuss five ways you can begin investing in your financial future through various accounts, such as high-yield savings accounts, Roth IRAs, investment accounts, CDs (certificates of deposit), and DBAs (doing business as). These are just a few of the many types of brokerage and investment accounts available, butunderstanding these basics will give you the background to dive into more niche accounts.
1. High Yeild Savings Accounts
A high-yield savings account (HYSA) is a type of bank account that pays a significantly higher interest rate than a traditional savings account. These accounts keep your money safe and accessible and should be backed by the federal government against bank failure, allowing your money to grow with competitive interest rates without risking the safety of your principal or initial deposit. People use HYSAs for many reasons, including but not limited to storing emergency funds and saving for short- term goals.
One of the biggest advantages of a HYSA is liquidity, meaning you can access your money when needed. This makes it an excellent option for emergency savings, unexpected expenses, travel funds, or saving for a future purchase. While the returns are generally lower than those of long-term investments, the low risk and easy accessibility make HYSAs a strong foundation for any financial plan.
For college students, opening a HYSA can be an easy first step toward financial independence. Even small, consistent deposits can add up over time thanks to compound interest. By establishing a habit of saving early, students can build financial security while learning valuable money management skills.
2. Roth IRA - Individual Retirement Accounts
A Roth Individual Retirement Account (Roth IRA) is a retirement savings account that
allows individuals to contribute after-tax income. In exchange, qualified withdrawals
during retirement, including investment earnings, are generally tax-free. This makes
Roth IRAs especially attractive to young adults who may currently be in a lower tax
bracket than they expect to be in later in life. Students who have earned income from
a job, internship, or self-employment may be eligible to contribute to a Roth IRA.
While retirement may seem far away, investing early allows time to become one of your
greatest financial assets. The sooner you start, the more opportunity your money has
to grow.
3. Brokerage Accounts
A brokerage account is a financial account that allows individuals to buy and sell investments such as stocks, bonds, mutual funds, and ETFs. Unlike retirement accounts, brokerage accounts generally do not have contribution limits or age restrictions for withdrawals, making them a flexible option for building wealth over time. Many people use brokerage accounts to pursue long-term financial goals, such as purchasing a home, funding future education, or building generational wealth. Because investments can fluctuate in value, brokerage accounts carry more risk than savings accounts. However, they also offer the potential for greater returns over extended periods. Before investing, it is important to understand your risk tolerance, investment goals, and time horizon. New investors often begin with diversified investments, such as index funds or ETFs, which spread risk across many companies. Learning about investing and starting with small amounts can help build confidence while developing healthy financial habits.
4. CD - Certificate of Deposit
A Certificate of Deposit (CD) is a savings product offered by banks and credit unions that allows individuals to earn a fixed interest rate in exchange for leaving their money untouched for a predetermined period. Terms can range from a few months to several years, depending on the financial institution and the type of CD selected. CDs can be a useful option for students or young professionals who have specific savings goals and want a guaranteed rate of return. They may be particularly beneficial for individuals who prefer stability and want to avoid the fluctuations associated with stock market investing. As part of a diversified financial plan, CDs can provide both security and steady growth.
5. DBA - Doing Business As
A DBA, or "Doing Business As, "is a legal registration that allows an individual or organization to conduct business under a name different from its legal name. While it is not a traditional investment account, establishing a DBA can be an investment in your future if you plan to start a business, freelance, or develop a personal brand. For example, a student who sells baked goods, provides tutoring services, creates content online, or offers graphic design services may choose to operate under a business name rather than their personal name. Registering a DBA can help create a more professional image and establish brand recognition with customers and clients. Entrepreneurship can create opportunities for additional income and skill development. Managing a small business can teach valuable lessons about budgeting, marketing, customer service, and financial planning. While starting a business involves risk, it can also be a pathway to financial growth and independence.
Investing in your future starts with understanding the tools available to help you reach your financial goals. Whether you're saving, investing, or exploring entrepreneurship, taking small steps today can have a lasting impact on your financial well-being. The University of Utah Financial Wellness Center is here to support you with free financial counseling, educational resources, and workshops designed to help you make informed financial decisions. As part of Student Affairs, the Financial Wellness Center is committed to helping students build financial confidence during college and beyond.