Are you on a tight budget and looking to make more money in the coming year?
One of the best ways to make more money is through investing. Now, we know what you’re thinking, “I’m not rich, and I hardly have any money to spare, so I can’t invest.”
This simply isn’t the case. If you have $100 to spare, you can start investing your money today.
Check out this guide to learn how to start investing on a tight budget.
1. Set Up a High-Yield Savings Account
Setting up a high-yield savings account is one of the easiest ways to invest your money. The great thing about a high-yield savings account is that your money will grow at a faster rate than if you were to put it in a traditional savings account.
Most high-yield savings accounts come with an annual percentage yield of around 0.5 to 1.0 percent. While this may not seem high, most traditional savings accounts only offer an APY of about 0.05 percent. This means you can save ten times more money with a high-yield savings account.
If you set $10,000 into your high-yield savings account that has an APR of 1.0%, you’ll earn about $100 in interest in one year. Here are some of the best high-yield savings accounts to check out:
- Synchrony Bank: Offers 0.6% APY and requires a $0 minimum deposit
- Quontic Bank: Offers 0.65% APY and requires a $100 minimum deposit
- Comenity Bank: Offers 0.6% APY and requires a $100 minimum deposit
- Vio Bank: Offers 0.57% APY and requires a $100 minimum deposit
As you can see, you don’t need to have a lot of money to pursue this investment strategy!
2. Invest in Cryptocurrency
Cryptocurrency can be intimidating to many beginner investors. Many people find it confusing, and many people think that you need a lot of money to get started.
But, investing in cryptocurrency isn’t as confusing as you think, and you don’t need to put down a large sum of money to get started. In fact, some digital currency exchanges allow you to purchase Bitcoin and other forms of digital currency for as little as $2.
There are hundreds of different cryptocurrencies, so to make things easy in the beginning, choose just one to invest in. A lot of people start with Bitcoin cash because it’s been in the game for a while and doesn’t seem to be going anywhere.
3. Use a Robo Advisor
Do you not have the means to hire a full-time financial advisor? Do you hate dealing with the minute details of investing? Does rebalancing your portfolio sound like a huge headache?
If you found yourself nodding “yes” to these questions, then consider using a Robo advisor. A Robo advisor is a service that manages your investments using computer algorithms. Because Robo-advisors come with low overheads, their fees are also relatively low.
Typically, you’ll have to pay just 0.25% to 0.5% of your account balance each year to your Robo advisor. Many Robo advisor firms also allow you to open an account without paying a minimum balance.
Once you set up your account, your Robo advisor will automatically select investments based on your preset criteria. For example, if you state that you want to be cautious with your investments, your Robo advisor won’t invest your money in volatile stocks.
Some Robo advisor firms also offer free educational tools, so you can learn about investing your money if you want to take a more hands-on approach in the future.
4. Invest in Mutual Funds
Like Robo-advisors, mutual funds allow you to take a hands-off approach to investing. With a mutual fund, you pool your money with other investors into a portfolio of stocks and bonds.
Then, a stockbroker or financial advisor manages the funds. Mutual funds are a great option for those who don’t have a lot of market experience or don’t have time to monitor the stock market.
However, mutual funds come with a slightly higher start-up cost than the other investment strategies on this list. Typically, you’ll need to invest between $500 and $2,000 to start. However, many investment firms accept a lower starting balance in the range of $100 to $300, just as long as you can commit to depositing $50 to $100 every month.
5. Invest in Exchange-Traded Funds
An exchange-traded fund (ETF) is a commodity that trades like a stock. Unlike mutual funds, they don’t require a minimum investment, making them a great option for those on a tight budget.
ETFs come with a specific share price, and you can purchase them through virtually any broker. Just keep in mind that each time you make a trade with your ETFs, you typically need to pay a trading commission. Trading commissions can cost anywhere from $4 to $11. While this may not seem like a lot of money, paying this each time can quickly eat up your investments.
6. Download an Investment App
Nowadays, there are many apps out there that allow you to invest your spare change with the click of a button. For example, the Acorn app rounds up your linked debit and credit card purchases and invests the money in a diversified portfolio or an ETF.
In this way, it works like a Robo advisor by doing the leg work for you. There’s no minimum deposit to sign up for the app, and you can start investing as soon as you’ve accumulated $5 in round-ups.
How to Start Investing: Are You Ready to Begin?
Now that you know how to start investing, it’s time to figure out your investment strategies. Most seasoned investors will tell you that it’s smart to diversify your portfolio, so if you want, you can make use of all of the above investment strategies.
Be sure to check back in with our blog for more tips on how to invest your money!