To start investing, you don’t necessarily have to be the world’s richest person living. Many people refuse investing because they think they need to have a great amount of money, as in thousands of dollars, to begin investing. This is totally untrue. In fact you can invest in stocks regularly by saving loose change. Interestingly, you can start investing with an amount at hand as little as $50 per month.
There are several ways to begin investing with a small amount of money, with many online and application-based platforms making it faster and easier than ever. All you need to do is to begin somewhere. The moment you do, it will get convenient eventually.
The key to growing wealth is building good habits, like placing your money away monthly. If you let investing as part of your habit, you will be in a much more robust financial situation down on your way.
Below are some simple ways to start investing with a small amount of cash.
- Try the piggy bank method
Investing money and saving money are relatively connected. Basically, you have to save some cash up, for you to invest money. And you can actually do that in very small steps. If you are not used to saving money, you can begin by keeping at least $10 per week. Over the course of the year, it can get to over $500.
You may find piggy bank some silly method, but to tell you, it is often an important first move. Practice the habit of spending a little bit less than you earn and put your saving away in a safe place. Piggy bank’s electronic counterpart is an online savings account. You can withdraw money if you need it.
- Place your money in mutual funds with low initial investment
Mutual funds are investment securities that lets you invest in a portfolio of stocks and bonds with a single transaction, making them the best for beginners.
But the problem is, many mutual fund companies require initial minimum investments ranging between $500 and $5,000. Those minimum amount might be out of your reach, especially if it is your first time to invest with a small amount of money at hand. However, some mutual fund firms will ignore the account minimums if you agree to automatic monthly investments ranging between $50 to $100.
An automatic investment agreement is actually convenient if you can do it through payroll savings. Just ask your human resources department how to set it up.
- Paying your debt
There are two reasons for suggesting to pay your debt: firstly, you should not be investing a small amount of money if you have an existing debt, especially debt that is unsecured; secondly, paying your debt is one of the perfect ways to lock in an above average and a definite rate of yield on your money. This is particularly true if the interest charge on your credit card balance is in double digits.
For instance, you have a balance in your credit card of $1,000 with an interest rate of 15.99% every year. By paying your credit card off, you will lock in a nearly 16% amount of return on your money. By surfing the balance to one of the many credit cards with 0% interest, you can make that card go away faster. Through this, each of your payment goes directly to the balance on the card and not to interest, however, this kind of offer may last a limited time so better pay your debt off quickly.
- Engage in your employer’s retirement plan
There is a way that you can start investing in an employer-sponsored retirement plan with amounts that are so small you would not even feel them. This is especially a good way, if you are currently experiencing tightening of budgets.
For instance, you plan to invest only 1% of your salary in the employer plan. What makes the investment easier is that the tax deduction that you would get for investing will make the contribution even smaller. The moment you engage to a 1% contribution, you can increase it steadily yearly. If you get a 2% increase in pay, it will effectively be dividing the increase between your retirement plan and your checking account. But, if your employer gives a matching contribution, the arrangement will get even better.
Investing despite the initial small amount of money can grow big rewards. Start with a small amount, afterwards increase as you get more used to the process.