As back-to-school season approaches, students are not only preparing for a new academic year, but also making important financial decisions –– from paying tuition, managing rent and a budget, or thinking about life after graduation. Balancing limited funds, new independence and pressures to save for the future can make it difficult to know where investing fits in.

Many young adults are interested in investing, but may not know where to start. While investing can seem complex and intimidating, you don’t need extensive financial knowledge or a lot of money to begin learning the basics. Building smart financial habits early can help you make more informed decisions, avoid red flags and feel more confident about your financial future.

Understand the basics first

Before investing, it’s important to understand the basics: what investing is, how different options work and what risks may be involved. An investment is a way to put your money to work with the expectation that it will grow over time, provide income or both. There are many ways to invest, but starting with the basics can help you choose options that align with your goals, budget and comfort with risk.

There are also different approaches to investing. Active investing involves either you or a financial advisor acting on your behalf, investing with the intention of outperforming the market’s average returns. Another approach is passive investing, meaning investments are in funds such as exchange-traded funds and indexes that track and invest in the whole stock market and require little to no involvement from investors to receive average market returns. Each approach has different costs, risks and levels of effort, so it’s important to understand what fits your personal situation and risk tolerance.

There are many types of investments, including cash equivalents, fixed income investments, stocks and investment funds. Before choosing an investment, take time to research the products, platforms and the person or firm offering it. No investment is risk-free, and there is no “perfect” option for everyone. Rely on credible, verifiable sources, make sure you understand the risks, and confirm that anyone offering investment advice or products is registered to do so before making a decision.

Common red flags targeting students and young investors

Prior to investing, students and young investors are encouraged to familiarize themselves with warning signs that are common to most scams, especially ones that may target those who are inexperienced within the financial landscape. Here are several common red flags that may target young investors:

• Promises of guaranteed or high returns: Returns cannot be “guaranteed” with investments. Additionally, with high returns come high risks. Be wary of offers that seem too good to be true.
• High pressure opportunities: Legitimate investment opportunities will not come with high pressure to make a financial decision fast. Registered firms and individuals will encourage new investors to take their time, research and ask questions.
• Online hype or social media marketing: Thoroughly research any financial opportunities found on social media. Additionally, be cautious towards financial influencers or “finfluencers”, as they may not be registered to provide financial advice in Canada.
• Referral programs: Watch out for referral programs where you earn money through recruiting friends. Be cautious of opportunities that focus heavily on recruiting friends rather than on a legitimate investment product or service.
• Unverified platforms or individuals: Do not proceed with an opportunity if you cannot verify the registration of the individual or firm it is coming from. Investment opportunities should only come from verifiable sources and you need to be registered to sell investments.

Scam artists are professionals at their craft and the red flags are not always obvious. Prior to investing, ensure you have done your own research, understand any and all investment opportunities and approach them with caution. As long as students and young investors take the time to research what to look out for and are mindful of their investments, they can protect their financial future. For more information and resources, visit CheckFirst.ca.

Here’s what international students should know

If you’re an international student, Canada’s financial landscape may look different than what you may be familiar with. Take time to learn how investments, fees, taxes and investment accounts work in Canada before you invest. Ensure you have a strong understanding of what you are investing in, the risks involved and whether it aligns with your financial future and long-term goals.

Before investing, make sure you have a stable financial foundation, and are taking care of day-to-day finances and expenses. As a student, you may be balancing tuition, rent and other living costs while adjusting to a new nation. Investing should not come at the cost of your financial wellbeing, and you should prioritize your needs and financial stability.

It is also vital to know who you’re investing with. If someone offers you an investment opportunity or financial advice, verify that the individual or firm is registered to do so in Canada. Remain especially cautious of opportunities shared through social media, messaging apps or personal connections, and do not let external pressure or a shared community or background persuade you to make a decision prior to your own research and verification. You are not obligated to invest immediately, so take the time to learn in order to make informed, thoughtful financial decisions and protect your funds.

Ready to get started? Here are the small steps to take

You don’t need to have all the answers before you start learning about investing. As a student or young investor, one of the most important steps you can take is building your financial knowledge and knowing what aligns best with your goals.

Before investing, consider what you’re saving for, the level of risk you are most comfortable with and how investing fits into your overall budget. Take the time to research various options, only use verified, registered sources and only invest in products you thoroughly understand. Starting small, asking important questions and building healthy financial habits can help you make more educated financial decisions as you continue down your investing path.

Investing as a student or young investor can be a valuable way to build financial knowledge and confidence. By understanding the basics, recognizing common warning signs and verifying information through trusted sources, you can make more informed decisions and take positive steps toward your financial future.

Whether you’re just starting to learn about investing or are already exploring investment opportunities, visit CheckFirst.ca for information, tools and resources to help you along the way, and to verify investment opportunities before you invest.