Investing even very small amounts can reap big rewards. Here are 7 ways you can start investing with little money today. For many people, the word “investing” conjures up images of men in suits, monitoring the exchange of millions of dollars on a stock ticker. I’m here to tell you: You don’t need to be the Wolf of Wall Street to start investing. It’s okay if you’re more of a mouse of Main Street. Even if you only have a few dollars to spare, your money will grow with compound interest.
The key to building wealth is developing good habits—like regularly putting money away every month. Swap out the barista-made cappuccinos for coffee at home and you could already be saving more than $50 a month. Once you have a little money to play with, you can start to invest. In 2021, you can get a date, a ride or a pizza with the swipe of a smartphone screen. Investing is no different. If you can automate your bills, why not your investments? It’s just as easy. With a robo-advisor or savings account, you can make your money work while you play. With a stock trading app, you can play with a little money and learn valuable investing lessons at the same time. Just like Halloween costumes, investing comes in many different forms. It shouldn’t be a scary word.
With so many different options, investing for beginners is simpler and more straightforward than ever before. Soon you’ll see how addictive growing your money can be. Here are 2 simple ways to get there:
Saving money and investing it are closely connected. In order to invest money, you first have to save some up. That will take a lot less time than you think, and you can do it in very small steps. If you’ve never been a saver, you can start by putting away just $10 per week. That may not seem like a lot, but over the course of a year, it comes to over $500. Try putting $10 into an envelope, shoebox, a small safe, or even that legendary bank of first resort, the cookie jar. Though this may sound silly, it’s often a necessary first step. Get yourself into the habit of living on a little bit less than you earn, and stash the savings away in a safe place.
The electronic equivalent of the cookie jar is the online savings account; it’s separate from your checking account. The money can be withdrawn in two business days if you need it, but it’s not linked to your debit card. Then when the stash is large enough, you can take it out and move it into some actual investment vehicles. Start with small amounts of money, and then increase as you get more comfortable with the process. It may be a matter of deciding not to go to McDonald’s or passing on the movies, and putting that money into the cookie jar instead. Chime currently offers a strong 0.50% APY for their online savings account. There is no minimum deposit required and the yield is earned on all balances (no minimum balance required).
Chime is also a top choice for your savings because they include a bevy of other features that really focus on the individual saver.
And if you need a little boost to start saving while earning your APY, Chime can round up your purchases to the nearest $1 to help you save faster and earn faster. 7 Easy Ways To Start Investing With Little Money - AspirationWith Aspiration Plus, your interest bumps up to 1.00% APY (Variable). You’ll pay $15 a month for this option, though, or $12.50 a month if you pay annually. Aspiration also has a choose your own monthly fee model that has all the basic features but doesn’t offer interest on your savings. A few other features that make Aspiration a strategic way to start saving money. Spend $1,000 in the first 60 days and earn a $100 welcome bonus with Aspiration’s Standard’s no interest Spend & Save account. Or earn $150 when you spend $1,000 in the first 60 days if you have Aspiration Plus. Everyday cash back, including up to 0.5% back at popular retailers like Walmart, Target, and CVS. Up to 10% cash back at Conscious Coalition members. Fee-free ATM use at 55,000 locations worldwide. Plus members get one out-of-network ATM fee reimbursed each month.
Combine the money you save on fees with your cash back and you have a little extra that you can put toward your investments each month. Best of all, Aspiration is heavily focused on making the world a little better. With every enabled swipe of your debit card, Aspiration puts money toward reforestation projects. You’ll also earn more cash back by shopping with purpose-driven brands like TOMS and Warby Parker. 7 Easy Ways To Start Investing With Little Money - EmpowerIf you’re looking for automatic savings with budgeting built-in, Empower is another great option. You’ll get 0.05% APY* with your Empower Interest Checking Account. But, you’ll also get a slick Automatic Savings feature. Simply tell Empower your savings goals, and Empower will automatically transfer small amounts of money over to savings, without you having to lift a finger.
Robo-advisors entered the investing scene about a decade ago and make investing as simple and accessible as possible. You don’t need any prior investing experience, as robo-advisors take all of the guesswork out of investing. Robo-advisors work by asking a few simple questions to determine your goal and risk tolerance and then investing your money in a highly-diversified low-cost portfolio of stocks and bonds. Robo-advisors then use algorithms to continually rebalance your portfolio and optimize it for taxes. There’s no easier way to get started in long-term investing. Most robo-advisors require just $500 or less to start investing and charge very modest fees based upon the size of your account. All offer automated investing plans to help you grow your balance.
If there’s any downside to Robo-advisors it’s cost. Robo-advisors charge an annual fee equal to a small percentage of your balance. The industry average is about 0.25%. So, if you invest $10,000, you’ll pay $25 a year. That’s not a lot of money, but it begins to add up if you amass hundreds of thousands of dollars. It’s important to note that robo-advisors fees are on top of the fees charged by the exchange-traded funds (ETFs) that robo-advisors buy to make up your portfolio. You can avoid paying the robo-advisor fees by building your own portfolio of ETFs or mutual funds. For the vast majority of investors, however, that’s a lot of additional work and responsibility. The bottom line? Robo-advisors are cheap and well worth it.