Money Management While At Purdue

At Purdue University in West Lafayette, tuition and rent set the stage, but the real wins come from dozens of smaller choices you repeat all year. In this guide, you will hopefully find plenty of tips that you can implement into your own everyday routines. The aim is to establish a money management system that can help you keep financial stress down and allow you to enjoy student life more.

Naturally, any financial plan must be tailored to the specific student, and there is no one-size-fits-all solution available. Some of the suggestions below might not be feasible for your particular situation, but might still serve as inspiration as you put together your own plan, one that is rooted in your particular circumstances.

Get it Down on Paper

Start by writing down all your fixed costs for the term.

Then add variable categories you can control.

Finally, add a minimum savings target you treat like a bill.

Fixed costs include things such as rent, tuition, utilities share, phone plan, insurance, base groceries, hygiene costs, regular medical costs, necessary clothing, necessary transport, and any mandatory fees.

Variable spend covers things such as eating out, cooking costs above the base groceries, discretionary transport, entertainment, gifts, discretionary clothes, and technology above the basic needs. Set a weekly spending ceiling that matches your income after fixed bills. For larger expenses, you may need to cut back for a few weeks to afford a splurge.

Automate a small transfer to savings right after payday or loan disbursement. A savings plan that is based on you saving “whatever is left” at the end of the month is less likely to work.

Housing And Utilities

When it comes to housing and utilities, there are many trade-offs that you need to consider.

Living closer to campus can cut transport costs, but rent near the core often climbs, so balance the equation by mapping your weekly schedule. Paying a bit more to walk everywhere may still win versus transport costs and time lost commuting.

Ask about what’s included before you sign any rental contract. In some cases, having utilities such as heat, air conditioning, water, and internet bundled into the rent payment will beat a lower nominal rent, and it can also make your costs more predictable.

For shared living arrangements, have a talk about how rent, electricity, and heating/air conditioning costs will be split. Will they be split in equal parts, or will they be split based on room size? Make sure you have a written contract outlining this, to prevent issues down the line.

Food

Purdue University offers several meal plans for students. Exactly what your particular situation will look like depends on several factors, including which campus (West Lafayette or Indianapolis), which year/level, and if you live on campus or not. Plans include a combination of meal swipes (a set number of meals per week or semester) and Dining Dollars (a debit account for food purchases). Meal plans are tied into the student’s ID card and can be used at dining courts, On the Go locations, Quick Bite locations, retail dining spots on campus (via Dining Dollars). There are multiple tiers: e.g., Unlimited plan, 14 Track, 10 Track, 7 Track, and block plans for certain apartments/commuters.

First-year students (freshmen) are required to live in university housing (unless exempt) and must then choose a residential meal plan that will be built into the housing contract. Commuter students of any year are not required to have a meal plan.

When you look at different meal-plans available to you, it is important to make a realistic choice, to avoid paying for things your wont actually use. If you know you skip breakfast and prefer to get most of your nutrition from lunch, try to find a meal-plan that reflects this.

From both a financial perspective and a health perspective, it is good to make choices that will cut down on vending machine runs, order-in food, and similar. Here, having access to some type of kitchen is important. A private kitchen with full stove/oven in your own room is not guaranteed for typical freshman dorm rooms at Purdue, as some dorms offer only small kitchenettes, or access to a communal kitchen space. For the in apartment style housing, which is more common for upperclassmen, full kitchens with stove/oven, refrigerator, microwave are standard. Still, when combined with a meal-plan, a kitchenette or access to a communal kitchen space can work well. The important thing is to come up with a plan based on your actual living circumstances at Purdue and not one that will only work in a fantasy situation where you have access to a fully equipped and completely private kitchen with all the bells and whistles.

Books etc

Textbooks can be expensive. Check the syllabus early for what’s required versus optional. Explore permitted alternatives, such as used copies, older editions with matching problem sets, and book rentals. For some situations, library books can also work, but you can not rely on the library having enough books to cover all student needs.

For niche titles that wont be in your everyday study plan, it can be possible to purchase one book together with classmates and share it. Make sure you decide on a rough schedule for this “time share” book, because there is a risk that everyone will want it during that last week when your are all cramming for the test.

Selling the used books when you have finished a class can help fund new books, provided the

book stays on the department list for the next term. Be smart about when and where you list the book for sale. Selling used books works best when demand is hot because students who are taking that class are in the process of obtaining books for it. Sell the books at first opportunity when that class is given again, because your edition will age, and might become too outdated to be appealing if you keep books in storage until it is time to leave Purdue.

Transport

If you live far away from campus, transport to school can add up quickly. If you are living on campus, transport costs can still be an issue if you have work, hobbies, social events, etcetera far away from campus.

The main campus for Purdue is located in West Lafayette and getting around by walking throughout the campus area and in the nearby neighborhoods is very feasible, and a vast majority of the students walk instead of relying on other forms of transportation. This includes walking off campus to reach shops, grocery stores, restaurants, and other facilities in the surrounding area. A portion of Third Street has been turned into an especially pedestrian-friendly corridor where vehicle traffic is blocked, and this has improved the walkability between north academic areas and student residences.

Purdue university provides a Safe Walk escort service 24/7 for student.

Some housing listings highlights being just a 5 minute walk from campus. Always confirm this, either in person or by checking a map before you make any housing decision.

As mentioned above, most students at Purdue walk, and public transport is also available to more far off parts of Lafayette. If your personal circumstances mean you need to bring a car, make sure you price the full cost for this, including any required parking permits.

Examples of other points to consider and plan for in your budget:

The pros and cons of owning a bike during your time at Purdue.
Setting a budget for taxis and other rideshares.
Leaving Purdue during breaks. In some cases, booking buses or flights as soon as you know the schedule for your semester can help keep prices down. If you carpool home, decide in advance how the costs will be split.

Student Jobs etc

Working during your time at Purdue is not only a way to earn some cash; it can also give you valuable skills and help you kick-start your future career. This is true even for jobs that are not within your specific field of study.

When picking a job, try to find one that aligns with your study rhythm and doesn´t cause a lot of friction with your schedule. You went to university to study, so don´t wreck it to please an employer. A lower paying job that aligns with your study rhythm is probably worth more than a slightly higher paying one that trashes your sleep pattern or forces you to skip certain classes.

If your major offers co-ops or internships during the year, plan cash flow before you accept. Higher short-term pay sometimes means a semester of awkward housing overlap or moving costs you didn’t budget.

Subscriptions

Audit subscriptions at the start of each term. Streaming, cloud storage, study apps, music, and gaming passes can all add up. Sometimes, sacrifices must be made to say within budget. In other situations, it is not even a sacrifice, because you are not really using the subscription a lot anymore.

Student pricing is common, make sure you take full advantage.

Gadgets

In some cases, you might be able to borrow specialty gear from campus libraries or departments rather than buying single-use gadgets. Check loan periods before deadline weeks so you’re not stuck with late fees.

Health Care and Health Insurance

Know where to go for routine care versus urgent care, and keep the phone numbers saved. If you’re on a parent insurance plan, confirm in-network clinics near campus, since out-of-network visits can be costly. If you’re on a student plan, make sure you know the terms and conditions, including co-pays, referral steps, and what telehealth covers. Learn this before you actually need to use the plan.

Keep a small emergency kit ready at home to avoid having to run out and make expensive late-night purchases, e.g. band aids and any basic over-the-counter medications you normally use against colds, flu, and pain.

Purdue University (West Lafayette) offers a dental insurance plan for students, administered via Delta Dental. The student dental plan is available as part of the student health insurance package (for eligible students) or as a voluntary option.

Exercise

At Purdue West Lafayette, exercise does not have to be costly.

Many students at Purdue West Lafayette use their feet as their main mode of transportation and get plenty of steps in each day simply from moving around on and off campus.
There are many bike racks and bike hoops where you can lock your bicycle on campus.
There are many hiking trails in and near Lafayette that are free to use.
For full time students at Purdue West Lafayette, access to the main recreational fitness facility is included in the student fees. The facility is named the France A. Córdova Recreational Sports Center, but commonly called just “CoRec”. Here, you will have access to weights, cardio, pool, climbing & bouldering, indoor courts, and turf rec spaces. Over 80 group fitness (“GroupX”) classes per week are included.
The MoveStrong FitGround is an outdoor fitness amenity for body-weight and functional work at Purdue. It is free for full-time students.
Purdue’s RecWell/Intramural (IM) program uses a pass system for intramural sports. At the time of writing, the cost is $30 for a semester pass and $55 for an annual pass. A pass gives you access to register for any intramural leagues/tournaments. So once you have the pass, you can join as many intramural sports as you’re eligible for. There are 35+ intramural sports (causal competitions) and 30+ club sports (more serious competitions) available.

Avoid Unnecessary Fees

Late payments can rack up late fees, and if it gets really bad, it can impact your credit score. Put due dates in your calendar (physical or digital) with alerts a few days before. When possible, automate recurring payments.
Library and equipment fines are also avoidable if you use reminders.

If you park, know the zones and the times, to avoid parking tickets.

Social Spending

Creating a budget where your social spending is zero is not advisable unless it is absolutely necessary. Being able to participate in the social life on and off campus, even if there are some costs associated with it, is important, and it not something you should refrain from just because you got overzealous with your budget. There will be things you can´t afford and need to turn down, but there will also be many opportunities that can fit even within a cautious student budget.

Set a monthly entertainment budget that fits your weekly ceiling and decide in advance what you’ll say yes to. You can for instance decide to pick two or three events you care about and go, guilt-free.

Get into the habit of hosting low-cost nights, such as potluck and board games, so hanging out isn’t tied to pricey venues. Also make full use of the amenities and services available for free for students at Purdue or included in plans you have already paid for. With a meal plan, dinner “carry out” is allowed under certain conditions, but you must use a swipe for that.

Having More Than One Bank Account

If your bank allows it, create several bank accounts and use them to separate your money. You can for instance have one account for bills and auto-transfers, one account used for your everyday spending, one savings account for emergencies, and one savings account where you save up for larger one-off costs.

Separate your money into your different accounts as soon at it lands in your main account. Waiting and hoping there will be something left to put into the savings accounts will usually not work well.

Investing As A Student at Purdue

For some students at Purdue, the struggle to make ends meet make it impossible to set aside money for investing, and anything left over in the budget should be allocated to a liquid emergency account rather than being locked away in investments. For others, investing is feasible, and it can be a highly rewarding experience to start investing while still at university, even if the numbers are kept low. The chief goal should be to learn, develop as an investor, and build healthy habits that compound quietly while you finish classes and line up work.

Getting Started

Step 1: Preparation

Before you start thinking about investing, save up an emergency cushion and keep it in a bank account. This is to protect you if there is an emergency expense. You do not want a busted laptop to force you to sell off investments prematurely or make a high-interest card swipe.

If you have any expensive debts, pay them off instead of devoting resources to investments. A balance at 20 percent interest is harder to outrun than any reasonably diversified beginner portfolio can handle.

Take a look at your budget, and make sure you can afford to save up a bit each month to use for investments. Take a look at your full year, not just the semesters, to get a more accurate picture or your strengths and weaknesses.

Step 2: Make decisions about goals, time horizon, and risk-willingness, and put together a basic investment plan

Goals, time horizon, and risk-willingness are important parameters for any investor. What is your goal with your investments? Do you want to get a cushion together that can help you when it is time to leave Purdue and find a full-time job? Do you have traveling plans? Dreams about an unpaid internship? Will this be the start of a down-payment on a home?

Your goal will determine your time horizon. If you are investing to go traveling in 3 years, that is your time horizon. If you are investing to buy a house in 10 years, that is your time horizon. The longer the time horizon, the more room you have for the market to go down and then up again. A 25 year old that have just got their first full-time job and started saving for retirement have a very long time-horizon and can afford to be quite risky, but risky is not the same as reckless.

A mix that leans heavily to medium-risky equities makes sense for goals five years and beyond, while you want lower risk investments that can fund costs like travel, deposits, or a relocation after graduation. You can for instance get started by investing in short bonds for goals that are a maximum of 3 years into the future, and broad equity funds for the rest.

It does not have to be complicated to get started and you do not have to get the mix 100% right. If you feel flustered, start with one short bond fund and one global equity fund. Using funds allow you to get diversification from day one, even if you only have a small amount of money to invest.

You can set up automatic transfers and purchases, to remove some of the emotions form the equation, and also remove the need to worry about getting the timing exactly right. This is investing, not trading, so you are not looking to time the market perfectly. Accept that prices wobble, and focus on making small, regular purchases.

If you want to be a little bit more hands-on, and perhaps a bit more risk-willing, with a part of your money, that is absolutely okay, but be aware that the risk of losing it all is higher. Still, you are young, you are not a 60+ year old gambling with their retirement account. Being more hands on can be a great way to learn more about the markets. If you want a small slice for learning, fence it to 20 percent or less and use it to test ideas slowly. Keep detailed records for that sandbox, because the point is to see whether your decisions help more than a simple index fund over time.

Step 3: Find the right broker and account type for your investment plan

Once you have a basic investment plan in place, pick a broker that is ideal for you and that investment plan. You do not want to get stuck with a broker that is charging you for a bunch of services you wont use anyway.

As a beginner, you are probably planning to keep it pretty simple, e.g. broad index mutual funds or index ETFs with tiny expense ratios, no gimmicks, and an allocation you won’t redesign every other week. You need a broker that is inexpensive to use and will give you access to funds with low fees. Every $1 you pay to your broker or to a fund manager is $1 you can not invest, so every little expense count. Fund fees compound against you, but the good news is that there are index funds available where the costs are very low. They might not feel super exiting, but they are a very good place to start.

Step 4: Make small but steady contributions

You don’t need dramatic returns to get real results, but you do need time and consistency.

Tax-advantaged Investment Accounts in the United States

Since you are studying in the U.S., make sure you learn about the various tax-advantaged accounts that are available and that you may be eligible for. Some of them will probably not match your current goal and investment horizon, while others might. Some of the retirement accounts have exceptions that make it possible to withdraw money before retirement without being punished. Generally speaking, most tax-advantaged retirement accounts impose an early withdrawal penalty on distributions taken before age 59½, but there are many specific exceptions where the 10% penalty is waived (you may still owe ordinary income tax on the withdrawal depending on the account).

If there’s an employer-sponsored plan at your job and it matches contributions, consider grabbing the match before you start thinking about other investment prospects. Free money beats clever stock picks, especially if the investments are kept in an account type where you can withdraw before age 59½ without penalties. If your job offers a plan with a match, contribute at least to the match and pick the low cost broad market options inside it.

Example of situations where some tax-advantaged retirement account types will waive the penalty, if certain conditions are fulfilled:

First time home purchase
Higher education expenses
Un-reimbursed medical expenses
Health insurance premiums while you are unemployed
Total and permanent disability
Qualified birth/adoption distributions
Qualified reservist distributions

As you can see, a retirement account in not just for retirement planning, it can actually be more of a “life account” that can help you out throughout life before retirement, provided you fulfill the conditions for early withdrawal without penalty, or the situation is dire enough for you to accept the penalty fees. With some plans, it is also possible to borrow money from your plan without triggering the penalty fee, provided that you stick to the repayment schedule.

Basic Information About Markets, Instruments, and Ways to Gain Exposure

When we hear the word investment portfolio, we often think about exchange-traded stocks, but an investment portfolio can be filled with several other things. There are several markets available and many different instruments suitable for a student investment portfolio.

Generally speaking, a lot of the investments will be based on any of these four pillars:

Stocks (equity)
Bonds and other debt instruments
Forex (foreign currency), and in recent years, cryptocurrency
Real-estate
Commodities

These are the underlying categories, and a wide range of instruments have been developed to gain exposure to them. You do not have to actually buy physical gold and hide it under your bed in your student room at Purdue to gain exposure to the gold-price, you do not have to purchase a property and own it in your own name to get exposure to the real-estate market, and so on. Below, we will take a look at just a few examples of routes that can be workable for a student investment portfolio.

Mutual Funds

A mutual fund in the United States is a professionally managed investment vehicle that pools money from many investors to purchase a diversified portfolio of assets, such as stocks, bonds, or other securities. When you invest in a mutual fund, you don’t own the individual assets directly. Instead, you own shares of the fund itself, and your results are based on the fund’s overall performance.

Some mutual funds are actively managed, meaning the managers try to beat the market through research and stock selection, while others are passively managed, simply tracking a market index like the S&P 500.

One defining feature of mutual funds is that they are priced once per day, after the markets close. This price is called the Net Asset Value (NAV), which represents the value of all the fund’s holdings divided by the number of shares outstanding. If you buy or sell a mutual fund, your transaction is processed at that day’s NAV, not at an intraday market price like a stock or ETF.

From a student perspective, accessing the mutual fund market can be a bit tricky, because many of them have minimum investment requirements in the $500 to $3,000 range. There are exceptions though, and some mutual funds allow very small investments, making them more accessible to students who want to start out small and grow their portfolio over time. There is for instance the Fidelity ZERO Total Market Index Fund (ticker FZROX), a fund with no minimum investment required (for retail accounts) and also a 0 % expense ratio. This fund was designed to provide a broad exposure to the U.S. stock market, and it tracks the Fidelity U.S. Total Investable Market Index, which covers large , mid , and small cap U.S. companies (excluding micro caps under certain thresholds). Another example of a mutual fund that is accessible for students is the Schwab S&P 500 Index Fund (ticker SWPPX) which tracks the S&P 500 Index (500 very large U.S. companies). This mutual fund has no minimum investment requirement for retail investors and the expense ratio is circa 0.02%.

Note: Some mutual funds lower their minimum thresholds when you invest through certain retirement plans, e.g. the 401(k).

You can use mutual funds to gain exposure to all the asset classes mentioned above, i.e. stocks, bonds, commodities, forex, and real-estate. Some funds are mixed, e.g. the balanced mutual funds that invest in both stocks and bonds. An advantage of buying fund shares instead of investing directly (e.g. buying individual stocks) is that you can attain a high degree of diversification from day one, even if you only have a small amount of money to invest. A down-side is that you will pay for the professional management of the fund, unless you pick a fund with no management fee (no expense ratio). You also need to look out for sales charges or commissions, also known as loads.

Generally speaking, mutual funds are less tax-efficient than exchange-traded funds (ETFs) in the United States. For active traders (rather than investors), it is also a downside that shares are only bought and sold once a day.

Exchange-traded Funds (ETFs)

The exchange-traded fund (ETF) is similar to the mutual fund, but with some notable differences. Just like a mutual fund, it will pool money from many investors and invests it in a diversified portfolio that follows a specific strategy. Unlike a mutual fund, the shares of an ETF are listed on an exchange (e.g. the NYSE or Nasdaq) where they are traded in a manner similar to stocks. The fund shares are bought and sold throughout the trading day, at market prices that fluctuate based on supply and demand. Prices for ETFs update in real-time during the trading day, unlike mutual funds which are priced only once per day after market close. Just like a stock trader, and ETF trader can use limit orders, stop orders, and margin.

In the United States, ETFs are typically more tax-efficient than mutual funds. Most ETFs use a structure called an in-kind redemption process when large investors (authorized participants) redeem their ETF shares in exchange for assets from the fund. Instead of the fund selling its securities (which would trigger capital gains), ETFs transfer securities to authorized participants through this process, meaning they don’t have to sell assets and realize capital gains, which would trigger capital gains tax.

Note: This tax advantage applies primarily to U.S.-domiciled ETFs held in taxable brokerage accounts. When fund shares are held in a tax-advantaged account like an IRA or 401(k), taxes are generally deferred (or eliminated, in Roth accounts), so this advantage is less relevant there.

Just as with mutual funds, you can use ETFs to gain exposure to many different asset classes, including stocks, bonds, commodities, forex, cryptocurrency, and real-estate. When you pick a highly diversified ETF, you get a high degree of diversification from day one.

In the U.S., the minimum investment in an ETF is generally the price of a single share, which can range from less than $50 to a few hundred dollars, depending on the ETF. Some brokers makes investing in ETFs even more accessible for students, by allowing the purchase of fractional shares. With some of these brokers, it is possible to invest as little as $1 into an ETF, and this is especially useful for students who are starting out with a small account balance and want a dollar-cost averaging approach.

REITs

In 1960, Congress passed the REIT Act and established the legal foundations for Real-Estate Investment Trusts (REITs) in the U.S. The idea was to make large-scale, income-producing real estate investment accessible to everyday investors, not just institutions or the wealthy. The REIT is similar to a mutual fund, but for real estate, allowing individual investors easily get gain diversified exposure to the real-estate market.

Today, many different REITs exist, with different focus. Here are a few examples:

Residential REITs that invest in apartment buildings, student housing, etc.
Office REITs that invest in office buildings, corporate headquarters, etc.
Retail REITs that invest in shopping malls, outlet centers, etc.
Industrial REITs that invest in warehouses, distribution centers, logistics hubs, manufacturing space, etc.
Healthcare REITs that invest in hospital buildings, skilled nursing facilities, etc.
Hospitality REITs that invest in hotels, resorts, etc.
Infrastructure REITs that invest in cell towers, broadcast towers, etc.
Data Center REITs that invest in data storage facilities, server facilities for cloud computing, etc.
Specialty REITs that invest in niche sectors, such as cold storage or billboard advertising.

Equity REITs own and manage physical properties, and is the most common type of REIT. Mortgage REITs (mREITs) invest in mortgages and mortgage-backed securities. You can also find hybrid REITs that combine both equity and mortgage strategies.

There are retail brokers who will allow you to buy a single share in certain publicly traded (exchange-traded) REITs. Since some REITs have a low share price, they are accessible even for a small-scale investor. At the time of writing, the share price for Industrial Logistics Properties Trust (ILPT) is for instance trading for less than $6 per share.

REITs that are registered with the U.S. Security Exchange Commission (SEC) but not listed on any public stock exchange are usually only offered to investors through broker-dealers or financial advisors, and you can expect the minimum to be at least $1,000 $2,500. They are therefore not within reach for the average student investor. Private REITs that are not registered with the SEC target accredited investors or institutional investors due to regulatory limits on who can buy them, and the minimum investment is usually $10,000 to $25,000 or more.

Investment-focused Clubs and Paths at Purdue University

There are investment-focused clubs at Purdue where students can engage in finance, investing, and related activities. There is for instance the Investment Banking Club (IBC), a student-run organization open to all students. It focuses on providing practical experiences and networking opportunities in the field of investment banking.

If you have time and energy for something more demanding, you can take a look at the Purdue Investment Banking Academy (IBA), an initiative from the Purdue University’s Mitchell E. Daniels, Jr. School of Business. The IBA aims to provide students with a comprehensive understanding of investment banking, and offer courses such as “Introduction to Finance with Excel” and “Finance Industry Exploration,” which are designed to introduce freshmen to various finance sectors and assist them in designing a unique program of study that will make them stand out to finance industry employers.

You might also want to consider getting involved with SMIF, a student organization that allows current Purdue students the chance to invest real money in the stock market through the Student Managed Investment Fund. The organization currently manages approximately $400,000. The investment policy is focused on capital preservation and value investing. SMIF is open to undergraduate and graduate students. Students are assigned to smaller, industry-specific teams, and each team is expected to present and discuss their investment recommendations at monthly club meetings. The club as a whole votes on the investment decisions presented by the teams.

Finding the Right Investment Broker for Your Situation

As mentioned above, you will need to find the right investment broker for your investment strategy, and in this section we will look a little more closely at that process, and bring up a few points that are good to keep in mind as you evaluate brokers.

There are many brokers who love to market themselves as “student-friendly” to reach Purdue students, but what does this really entail? Any broker can call themselves student-friendly, so you need to check out the find print to find out if they are actually suitable for you or if you would be better off with another broker. Generally speaking, a student investor wants the same things as other investors, e.g. a functional investment platform, low costs, smooth transactions to and from the brokerage account, a suitable assortment of investment opportunities, and skilled and responsive customer support. Of course, the broker also needs to be legally approved to be a broker in the United States. You are not shopping for exotic features or the most outlandish investment opportunities, you are looking for reliability, low friction, and a clean path to automate small investments while you focus on classes.

Regulation

Always confirm independently that the broker has the required permits to offer brokerage services in the United States. Any fraudster can lie and claim whatever on their site. You need to verify directly with the applicable authority, and not through any links provided by the broker.

Be suspicious if names and company details do not match exactly. Some fraudsters set up scam sites where they use a name very similar to a real, licensed broker.

Fee schedule

Make sure the cost schedule aligns with your investment plan. This includes all fees and costs, even miscellaneous ones like the FX conversion if you plan on investing in foreign assets.

A commission-free brokerage model is common now, but some brokers compensate by charging a lot in other ways, e.g. custodian fees, platform fees, fx conversion fees, live data feed fees, deposit fees, withdrawal fees, inactivity fees, etcetera

Accept options and futures add-ons only if you actually plan to use them soon (and if you are a beginner, you should not). Otherwise, leave those permissions off.

Minimum deposits and investment sizes

Students typically start out small, so make sure the broker accepts small minimum deposits and small investments.

Deposit and withdrawal methods

Make sure the broker accepts a method for deposits and withdrawals that you are okay with. It should be safe enough and not cost you a lot to use. If a broker claims to be licensed in the United States, but wont accept standard U.S. transaction methods, consider it a warning signal. A broker that claims to be U.S. licensed while only accepting Western Union transfers or cryptocurrency is likely to be sketchy.

Test deposits and withdrawals with tiny amounts, and only scale if everything works well.

Autoinvest

It can be smart to pick a broker where you get access to an auto-invest feature. You can for instance use it for automatic investments when your deposits land, and to auto-invest any dividends if you own dividend-paying stocks.

Mobile app

Even if you do the bulk of your investing and account management on your desktop or laptop, it is good to have access to a functional mobile app as well.

Turn on log-in and transaction alerts, to get an early warning if something is going on in your account.

Safety

Two-factor authentication is industry standard and you should not accept anything less.

Customer service

You need access to skilled customer support staff that can answer questions with specifics rather than repeating marketing blur or giving you vague readings form a script.

Before you sign up, reach out to the support an ask a few specific questions, e.g. how FX conversion is calculated on dividends or how tax forms are delivered. Evaluate the quality of response time and support.

Reputation

Check a broker´s reputation within the trading community before you sign up. Beware of fake reviews. Members of the investment clubs at Purdue might have personal experience with the broker you are considering, so don´t be shy to reach out.

Demo Account

Getting access to a free Demo Account with play-money is nice, since it allows you to learn how the platform works without making costly beginner mistakes.

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Investing, not trading

You are investing, not trading, and this is important to keep in mind when you evaluate brokers, since a lot of retail brokers are designed for traders. As an investor, you are not chasing sub-millisecond speed, you have other priorities.

Basic screeners and model portfolios can be fine guides if they are transparent about holdings and costs. Social feeds, gamified badges, and confetti do nothing for your outcomes, turn these features off.

Foreign students in the United States who want to invest

If you are a foreign student, ask early whether the broker supports your visa and residency status, whether it accepts an ITIN or equivalent, and what tax withholding applies to dividends. An ITIN is an Individual Taxpayer Identification Number issued by the Internal Revenue Service (IRS) in the United States.

Multi-currency cash balances can reduce repeated conversion costs if you receive money in one currency and invest in another, but they add complexity to statements and filings. If your plan includes moving away from the United States, pick a broker with clear asset-transfer procedures and no punitive exit fees.

General Tips for Student Investors

Leverage and margin

Leverage and margin involves borrowing money from your broker and risking it. It is not recommended for beginners. If your broker has auto-enabled it, turn it off manually in your account.

Derivatives

A basic investment plan for a beginner should not involve derivatives. If you want to dabble in derivatives to learn, make sure you know what you are doing, and be aware of the additional risks involved with leveraged derivative products.

Derivative permissions in your account should match your current skill, not what you might possibly want to use in the future. Defined-risk spreads can be useful for learning, but approval levels that allow naked exposure make little sense when your priority is building a quiet long-term investment portfolio.

Welcome bonus, deposit bonus, etc

Do not accept any type of bonus or promotion without understanding the terms and conditions. Some bonuses and promotions are tied to horrible conditions.

Record keeping and tax season

Create a single folder with monthly statements, annual summaries, and trade confirmations. Label it by tax year.

A Consolidated Tax Statement typically includes:

1099-DIV (for dividends)
1099-B (for capital gains/losses from selling investments)
1099-INT (for interest income)
And sometimes 1099-MISC or 1099-OID depending on the account activity.

Keep information stored safely, and in more than one place. You do not want to lose it because your phone got stolen.

Screen discipline

Being a good investor is not something measured in screen time. If you catch yourself doom-scrolling the financial news or obsessively checking your investment account, take action, because these are not good habits. A small first step can be to remove the investment app from your home screen on your phone. Put a fixed time in your weekly schedule that you devote to reviewing your investment account and learning more about investments in general.

Automation and low-maintenance

Keep your allocation simple, and let automation handle the grind. The goal while you study is not to squeeze out every basis point, it is to build a clean, low-maintenance setup that keeps buying quietly while you finish assignments and plan what comes after graduation. When your income rises, you can add features, if you want to. For now, low fees, clean statements, predictable funding, and honest logs beat flashy extras every time.

Is Active Trading Ever A Good Idea for Students?

Yes, but conditions apply

Active trading can be a good idea under certain circumstances, but only if you keep it really small and consider it a learning experience rather than something you expect to profit from. Never risk any capital you can not afford to lose. Step away if you notice any signs of treating trading like gambling.

Trading is very different from investing, since it is much more active. You need to stick to a trading strategy that is strong enough to justify all the costs (spreads, commissions, etc), and you need to have a solid risk-management routine in place to avoid getting wiped out. A very high percentage of all beginners who try trading (students or not) end up losing all the money in their account and never turn into profitable traders.

Trading is active, especially if you go for intraday trading, also known as day trading. You will need to devote full attention to the market during your selected day trading sessions, and it can be a very draining process. Swing trading and position trading is less intense, and can be a better option for someone who has to juggle full-time university courses, a part-time job, social activities, etc.

No matter how great your strategy look on paper, it will not hold up if you´re lax about risk management. You need the right tools to measure and handle risk, and personal risk-management rules that you can stick to through tick and thin.

Before you even consider putting a penny on the line, you should be able to describe a tested edge, run it inside clear risk limits, and fully know what the costs are. When you get started, allocate a set amount of money to trading and keep it separate from everything else, including your investment account. Keep learning with tiny positions. The test is simple: after all the costs have been added up (commissions, spreads, financing, swap fees, taxes, transactions, etc), does your method still yield a positive, stable profit?

Trading styles

Day traders (intraday traders) open and close positions within the same trading day. They never leave any positions open over night. Day trading involves frequent decisions, clear entries and exits, and sizing rules that map risk to account equity. You’re trying to harvest price moves that exceed your costs. Scalpers and high-frequency traders are extreme even by day trading standards, and typically use specialized software and ECN brokers.
Swing traders keep positions open for a few days or weeks. It is less intense than day trading, but you need to manage the risk that comes with having positions open outside the trading day. Also, some students find it difficult to relax and focus on their studies when they have positions open, and are actually more suited for day trading, since day trading allows them to stop thinking about the account once a session is over and all positions are closed.
Position traders keep their positions open even longer, sometimes months or even over a year. The line between position trading and short-term investing can be blurry. Compared to day traders and swing traders, position traders tend to rely more on fundamental analysis.

Regardless of which method you pick, you need to make sure your schedule allows focused sessions and regular reviews. It is not just about opening and closing positions; you will devote a lot of time to gathering information and analyzing it. It is also a good idea to keep a trading journal and analyze your own strengths and weaknesses.

Temperament matters a lot and you need to have a big heap of emotional discipline to make it long-term in the trading world. Do losses trigger revenge trades, or can you accept them without drama? Can you obey a written stop-loss point instead of “seeing how it goes”?

To a certain degree, it is also about finding the right trading style for your temperament. If you get night mares from sitting with risk overnight, day trading may fit. If you prefer to put a lot of analysis behind your decisions, swing trading or position trading fits better, as you will have more time to come up with your conclusions.

If all these rules feel suffocating and you find yourself tinkering with the stop-losses mid-trade, passive investing will likely beat your active trading results over time even if your backtests with play-money look great.

A real edge you can describe in one sentence

If technical analysis is your thing, make sure you build strategies that you can actually explain in one sentence.

Examples:

“I buy breakouts that align with higher-timeframe trend and above-average volume, and I exit on failed retests or a fixed ATR stop.”
“I fade two-sigma moves back to VWAP only during the main session, and I do no trades into news.”
“I hold commodity trends when term structure confirms and exits trail under the prior swing.”

If the sentence is fuzzy or your strategy relies on “I’ll know it when I see it,” the edge probably lives in hindsight.

Do the math

It is fairly easy to come up with a trading strategy that will beat a passive index fund if you don´t take costs into account. When you start adding up the costs, the picture will change. Make sure you do the math, and include every applicable costs, e.g. spreads, commissions, financing, swaps, and expected slippage during busy moments. Small accounts and strategies that rely on tiny positions feel fixed fees more.

Taxes also tilt the field, as taxes are often much more brutal for traders than for investors, especially if you do not go into trading armed with a clear plan to keep taxes down. Law makers in the United States tend to be eager to encourage individual long-term investors by offering them various types of tax-advantaged accounts. Helping traders succeed is not as high on the list.

The trading platform

You need a different type of brokerage account and trading platform for trading than for investing, especially if you are going for intraday trading. For a day trader, even tiny delays can turn a profit into a loss. As a day trader, you need clean and super fast data feeds that don’t freeze during news, order tickets that preview margin and show fee and FX impact, and advanced stop-loss and take-profit orders. Exportable audit logs with timestamps, venue flags, and reject reasons are not a luxury, they are how you measure slippage and improve routing. The backtesting environment should include realistic costs and slippage.

Risk management

Risk management is essential and need to be approached differently as you transition from investing to trading. Among other things, you will need to understand the benefits of a fixed-fractional risk per trade, a cap on total exposure by theme, and both daily or weekly loss limits that stay firm. For overnight holds, plan for gap slippage in your sizing.

Each new thing you dabble in needs a new risk-management plan. If you go from day trading to keeping positions open over night, you need a new plan. If you decide to venture out into derivatives, remember that for options, a correct direction can still lose due to decay.

Many novice traders have a solid risk-management routine written down, but fail to stick to it under pressure.

It does not have to be all-or-nothing

You do not have to chose between trading and investing, provided you have enough time, energy, and money to do both. A common compromise is a core-and-satellite approach. You put most of you capital in low-cost index funds, a keep smaller sleeve for active trading. Contributions to fund the core are on autopilot. Reviews of both happen on fixed schedules. This keeps compounding on track while you build trading skills.

Pros and cons of active trading

If you manage a small account and can’t or won’t wait decades for compounding alone, a measured trading sleeve may be reasonable as long as you protect downside. If you have domain knowledge in a narrow corner (e.g. earnings microstructure in a sector, or futures calendar spreads in one commodity) your edge might be strong enough to can exceed costs. If you need to hedge concentrated exposure from an equity grant, active tactics can cut risk in ways passive funds won’t.

With that said, trading typically require more time and energy than investing, especially if you go for intraday trading or swing trading. It is also more stressful and the sessions can be really intense. The stress makes it easier to fall prey to emotional decision making, and this is where many beginners wipe out there accounts.

If your time is thin, your stress tolerance low, or you can’t resist adding revenge trades after a loss, it is much better to stick to investing. If your strategy depends on thin tickers or late fills that slip often, or if your broker’s costs are high relative to your average trade size, indexing wins. If your backtest edge disappears when costs widen by a realistic hair, or when you remove one parameter, indexing wins. Many people blow a lot of money on trading before they realize these truths.

Curious about how active trading and day trading actually works (and the risks)? See DayTrading.com for a neutral primer before you decide.

A career in trading

If your goals include building skill for a career in trading, the reps have value beyond P and L. In other words, if you’re trying to become a professional trader, the practice you get from each trade matters, even if you’re only breaking even right now.

By managing a small, private trading account, you can learn invaluable skills, as long as you treat the project seriously. Do not keep feeding a losing account willy-nilly, thinking it is okay because “you are learning”. Being loosey-goosey with your money is the opposite of learning how to become a skilled trader. A good starting point is to run two sleeves for three months and evaluate them down to the smallest details. Sleeve A is investments, a simple passive core with scheduled buys. Sleeve B is trading, in your chosen active style (with tiny positions sizes). Pre-define entries, exits, and risk. Track expectancy, variance, max drawdown, slippage versus model, time spent, and rule breaks. If Sleeve B shows positive expectancy after full costs, fewer rule violations over time, and drawdowns you can live with emotionally, keep a small trading allocation alongside the core. If not, pause, fix the weak spots, and retest later rather than forcing it.

Stay Away From the Get-Rich-Quick Schemes

Some trading styles look fast, exciting, and “simple.” Most of the time they’re just expensive ways to learn the same lesson: complexity and leverage can wipe out a student budget in not time. If your goals are passing classes, keeping stress reasonably low, and building a small portfolio that survives midterms, you’ll want to steer clear of products that stack the odds against you from the start. Two repeat offenders are binary options and financial spread betting. Both can give the appearance of being easy because they are just yes/no decisions, but in practice, the pricing, house edge, and the way platforms get paid make them dangerous for a student budget.

Spread betting sites are legal and regulated in the UK and certain other countries, but not in the US. Still, many online platforms based in lax jurisdictions (think banana republic paradise islands) are marketing their products to individuals in the United States. If you sign on and deposit to one of these sites, you are likely to be scammed. The normal trader protection rules that exist and are enforced when you use a legal broker in the U.S. will not be there for you.

Binary options are legal in the U.S., but only when traded on regulated exchanges overseen by the Commodity Futures Trading Commission (CFTC). Two key platforms are Nadex and Kalshi.

What are binary options?

A conventional binary option is a fixed-payout bet on whether the price of an asset (e.g. a stock) will be above or below a certain point at a set time. If you’re right, you receive a preset payout. If you’re wrong, you lose all the money you risked.

Note: In recent years, the popularity of the binary options have caused platforms to develop different variants, and some of the binary options available online today do not work exactly like conventional binary options.

Binary options can look like a good way to make money from the markets without actually having to buy and sell assets, but if you look closer at the design, you can see that the odds are stacked against you.

Here are a few examples of why it is best to stay away from binary options, especially if you are an inexperienced student trader with a small budget:

With a conventional binary option, there is no credit for being close in your prediction. With normal trading, you can put in a stop-loss and make the position close automatically at a certain price point, e.g. when you have lost 90% of your stake. With a conventional binary option, this is not possible. You either get the payout, or you lose the entire stake. This is a quick way to burn through an account balance.
The potential reward does not match the potential risk. A typical binary option will have a pre-determined payout in the 70% – 90% range. This means that when you lose, you lose 100% of your stake. When you win, you only make a 70% – 90% profit.

With binary options, your broker is typically also your counterpart in the trade. This means that when you lose 100% of your stake, it goes to the broker. And when you win, the broker only has to pay you a 70% – 90% profit. This is a great set-up for the broker and not a great one for you. To break-even, you need to be correct much more than half of the time, since you are constantly losing more when you lose than what you are profiting when you win. With that said, having your broker as your counterpart is not unique to the world of binary options. Many novice traders start out with so-called dealer desk brokers (market maker brokers), which will be your counterpart in the trades.

Binary options platform typically lean heavily towards super short lifespans for their options. While it is theoretically possible to create a binary option for any length of time, e.g. 2 months from now, binary options platforms targeting retail traders (non-professional traders) tend to focus on very short-term binary options, and it is not unusual to fund options that expire 30 seconds or 1 minute from purchase. Predicting market movements within such a short timeframe tend to be guess work rather than market analysis. Combined with the all-or-nothing design of the conventional binary option, these short time frames make it easy to burn through an account balance in no time. If you were doing normal day trading, you would also be dealing with short time frames, but you would be able to put in stop-loss orders to reduce some of the risk.

Just as with normal day trading, super short timeframes increases the risk of turning trading into gambling. The feeling of risking $100 on a 1 minute binary option is very similar to the feeling of plunking down $100 on red at the roulette table in a casino. Yes or no, win or lose, and you´ll find out the result really quick. The feeling of seeing your $100 turn into $190 in a minute can be quite addictive. Short expiries deliver constant feedback, and calling it trading instead of gambling gives the illusion of increased control.

Binary options compress all the hardest parts of trading into a tiny package: predicting direction and timing (especially when time-frames are short), paying a thick spread (the odds are not in your favor), and managing emotion when outcomes hit every few minutes. One or two bad sessions can wipe a month of careful saving. The structure encourages “martingale” behavior, i.e. doubling size after a loss to get back closer to even, an approach that works right up until it doesn’t, and your account is empty. This is the opposite of a student-friendly setup.

As mentioned above, binary options are legal in the U.S., but only when traded on regulated exchanges overseen by the Commodity Futures Trading Commission (CFTC). Two key platforms are Nadex and Kalshi. Yet, the internet is filled with foreign trading platforms marketing binary options to retail traders in the United States, and it can be very difficult for U.S. authorities to shut them down since they are strategically based in countries where the legal system will not do much about them as long as they are only causing problems abroad. If you sign up with a poorly regulated binary options platform, the risk of being scammed is high, and it can be very difficult to prove or do anything about. In addition to the money you lose, there is also a risk of your personal data being used for identity theft, and your identity can be used in other scams.

You can learn more about binary options by visiting BinaryOptions.net.

What is Financial Spread Betting?

Financial spread betting lets you bet per point of movement on a market instead of buying the asset. If the index moves in your favor, your profit equals the move times your stake. If it moves against you, you lose the same way. Spread-betting is typically offered with built-in leverage, which makes the product especially risky, as small moves translate into outsized swings.

Spread-betting became popular in the United Kingdom because it made it possible to profit from stock price movements without paying any stamp duty, and the profits are tax-free. The United States has a very different tax system, and there is really no reason for traders in the U.S. to use spread betting instead of trading. As mentioned above, it is also illegal in the U.S.

Still, some platforms based in lax jurisdictions market spread betting to U.S. residents, and the marketing material can make it seem very easy, exciting, profitable, and legal. An inexperienced trader in the U.S. without much knowledge about U.S. tax law can also fall into the trap of believing that financial spread-betting is a smart move to avoid certain taxes. The serious and regulated companies that offer spread-betting in countries where it is legal and regulated, such as the UK and Ireland, block U.S. Clients.

Examples of reasons why spread-betting platforms can be very appealing to students:

The sites are often designed to appeal to inexperienced traders who might feel uncomfortable engaging with true broker sites. If your head is spinning in circles as you try to make sense of ECN brokers and DRIPs, it might feel great to sign up with a site where none of those things matter.
Students with previous experience with sports betting (legal or illegal) can feel at home with financial spread-betting structured in a similar way.
Gamified account challenges are available, and some of them specifically target students in their marketing.
Since financial spread-betting sites targeting U.S. residents ignore U.S. law, they can go wild with practices that the U.S. authorities would clamp down on if a U.S. broker did it, e.g. enticing students with huge welcome bonuses with horrible strings attached.