A national survey by Commonwealth reveals the barriers reported by college students with low-to-moderate incomes (LMI) embarking on their investment journey and opportunities for key stakeholders to address them.

Investing has long been viewed as a wealth-building tool that can yield significant financial benefits over time. The growing number of investing apps, which are becoming increasingly popular among young adults, has created unprecedented access to capital market opportunities for students interested in investing. This interest marks a significant shift towards earlier financial engagement among younger generations with Gen Z reporting they began to save and invest at 19 years old, compared to baby boomers who started at age 35. However, despite an increase in the number of retail investors with lower incomes over the past decade, participation in capital markets remains lower among households with LMI, including college students with LMI. 

Recognizing the importance of investing, college students with LMI say they are interested in participating in capital markets but report significant barriers to starting their investment journey. In a new area of research, Commonwealth explores the opportunities and challenges reported by college students with LMI who are interested in and actively investing. It also offers areas of opportunity where financial institutions, fintechs, higher education bodies, and government may foster an inclusive investing ecosystem for college students with LMI. 

The study, The New College Investor: Opportunities and Challenges for Building Wealth, explores the responses of 1,012 college students with LMI and recent graduates (with a focus on Black and Latin students) who are looking to or have experience with investing. The study explores the gap between interest and action, investing as a viable pathway to building wealth, and barriers that prevent students from investing. These barriers include limited exposure to investment options, student debt, and other systemic barriers. It also analyzes opportunities for stakeholders within five solutions: inclusive product design, technology, cross-collaboration, support networks, and policy programs.   

Key Findings

• A significant 80% of student respondents with LMI who are not investing are interested but report facing significant challenges in transitioning from “interested observers” to “active investors.”
• A majority of respondents (71%) identify investing as a viable way to build wealth. Respondents with dependents report being more likely to invest (48%) than those without dependents (38%). While 48.75% of investors report having no dependents, this percentage rises to 68.73% for noninvestors.
• Sixty-five percent of interested non-investor respondents report a fear of losing money as a key barrier to getting started on their investing journey.
• Thirty-seven percent of respondents report a lack of confidence as another barrier preventing them from starting their investing journey.
• Survey findings reveal that gender disparity is prevalent among student investors, with  50% of men reporting that they are actively investing, compared to 34% of women.
• Sixty-two percent of respondents express concern about their limited understanding of investment options and strategies. 

“Young adults are recognizing the importance of building wealth through investing,” said Timothy Flacke, Co-Founder and Chief Executive Officer at Commonwealth. “Currently, 18% of individuals aged 18-25 are already investing, but many more young adults wish to participate in capital markets. Financial services firms, fintechs, and others have a significant opportunity to help students and recent graduates start building wealth by enabling them to start investing early in their careers.”

Currently, there are 16.6 million undergraduate students enrolled in academic institutions. Among these post-secondary attendees, approximately 75% are enrolled in four-year institutions, while 25% attend two-year institutions. Forty-two percent are students of color, and 16% live in poverty. This is a rarely tapped consumer market for industry stakeholders that could yield financial benefits for potential clients interested in building their wealth.

There is a tremendous opportunity for industry leaders—financial institutions and fintechs, higher education bodies, and government—to empower college students in their investment journey. Areas of opportunity include developing inclusive products tailored to the needs of students with LMI, cross-collaborating to offer financial capability programs focused on real-world insights, establishing support networks, and identifying new and existing policies focused on wealth-building. By addressing these areas, industry leaders have a chance to help students overcome barriers, build a strong financial foundation that strengthens their investor identity, develop good habits, and cultivate an investor mindset within a more inclusive investing ecosystem. 

This research is part of Commonwealth’s broader wealth-building effort to enable innovative, equitable, and inclusive investing opportunities and solutions for individuals from LMI households.

Commonwealth would like to thank Firstcard for inviting their student body and customer base to participate in our survey.

This project is made possible thanks to the generous support of Wells Fargo Foundation.