Easy Ways To Start Investing With Little Money

November 22, 2020

Due to advances in technology and investing techniques, everyday individuals can now easily invest in investment opportunities that were not accessible in the past.

One of the most important skills for building wealth is developing good financial habits. Putting away a small amount each paycheck can go a long way. Getting started earlier in life can put you in a much better financial position later in life. In this article, we’ll define “little money” as anything less than $100.

Make Room in Your Budget

Learning how to budget is a good financial habit to adopt. Budgeting allows you to create a spending plan for your money. It ensures that you’ll have enough money for the things you need and eliminate spending on the things you don’t need. Following a budget can help keep you out of debt, grow your savings, or reach your financial goals faster.

If you have no money to invest, you can start by rearranging your budget. If you take a look at everything you spend in a typical week you could find one or two expenses you can eliminate. Skipping the morning lattes and buying take-out a few times a week. Without a budget it’s hard to correlate our daily expenses to our financial situation. Buying take-out twice a week doesn’t feel like a big deal in the moment. However, when you sit down with a budget and add up the cost of 10 Chick-Fil-A meals, those insignificant dinner bills add up to way too much.

In other words, budgeting is important if you want to keep a close eye on your daily spending habits, you should start to understand the impact of seemingly small expenses, and take control of your spending. Once you do start, you'll gradually find ways to cut more expenses and direct the savings straight into investing.

Savings accounts

Savings accounts could be a great option for earning a profit on the money you set aside from your income. Savings accounts are backed by FDIC insurance and offer protection for amounts up to $250,000. Most people start their first investments by opening savings accounts when they are young. Traditionally, people open a savings account at the same bank where they have a checking account. This allows for quick transfers when you need them all in one central location.

Online banking has created a new category of “high-yield savings accounts”. According to Investopedia “the difference between high-yield savings account rates and the national average, the increase in earnings is significant. If you're holding $5,000 in savings, for instance, and the national average is 0.10 percent APY, you would return just $5 over the course of a year. If you instead put that same $5,000 in an account earning 2 percent, you'd earn $100.

Given the difference between high-yield savings account rates and the national average, the increase in earnings is significant. If you're holding $5,000 in savings, for instance, and the national average is 0.10 percent APY, you would return just $5 over the course of a year. If you instead put that same $5,000 in an account earning 2 percent, you'd earn $100. Eventually, when you get more experience and understand investment forces, you can move on to more advanced investment options that offer potentially higher profits.

Use an Investment App

You can start investing with as little as the equivalent of just one or two lattes per week thanks to several investing apps. Apps like Acorns, Betterment, and Stash Invest are some of the most popular apps you can start investing with $10 or less. They’re not gimmicks either! They’re legitimate apps that are used by millions of people.

Acorns is a micro-savings and micro-investing app that is one of the most well-known apps. This app works by “investing your spare change” through an automatic process. You can connect the Acorns app to your bank account and purchases made using your debit card are rounded up to next dollar for saving. Acorns puts the money into one of several low-cost ETF portfolios. These are good vehicles for small savers, as we cover below. Not only do apps like Acorns help you start saving money but also helps you stash away money when you’re ready to start investing more.

Use Robo Advisors With No Minimum Initial Investment Requirement

Apart from investing apps, there are also full-blown robo-advisors that are also available through smartphone apps.

Betterment is the largest — and perhaps the best-known — independent robo advisor. When you invest with Betterment, you are invested into a globally diversified portfolio of index-tracking exchange traded funds (ETFs). Based on your desired level of risk, Betterment recommends an optimized portfolio and manages buying and selling the funds in that portfolio for you. Betterment also provides advice based on your goals and the time or amount you want to invest. All you need to do is fund your account. No minimum investment is required, so you can begin investing with just a few dollars. Betterment charges an annual fee of 0.25% of your account balance. It offers taxable accounts, as well as retirement accounts. Now is the Time to Think About Investing

You Can Easily Get Started

There are plenty of ways to start investing with little money. Following a few of these investment strategies will easily get the ball rolling for a small amount of money. You just have to develop a plan and start as soon as possible. Being patient and prioritizing your finances can put you in a better financial position in the future. Saving and investing even $50 a month can potentially add up to $600 a year. If you don’t start investing when you have a little bit of money, you may never reach your financial goals at all! With these simple investment strategies, there is no excuse to wait until you have saved thousands. That’s the bottom line. You can start today!