how2invest When You Have Little Money

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So you want to get into investing but don’t have much cash to throw around. Don’t worry, you’re not alone. Plenty of people are in the same boat but that doesn’t mean you can’t put your money to work. The key is starting small and building from there. Even with little money, you have options to get into the investing game and watch your money grow over time through the power of compounding returns.

In this article, we’ll show you some simple ways to start investing when your budget is tight. You don’t need fancy degrees or high-tech tools. All you need is the determination to make your money work for you and the discipline to invest regularly. We’ll explore easy options like index funds, dividend stocks, and micro-investing apps that let you get started with just your spare change. Ready to become an investor? Keep reading to learn how little money you really need and simple steps to build wealth over the long run. The investing world is open to you, even on a shoestring budget. Time to get started!

Start With Your Goals – Define Your Investing Objectives

To invest successfully when you don’t have a lot of money, you first need to determine what you’re investing for. Are you saving for something big like a down payment on a house, your kid’s college fund or retirement? Defining your objectives will help guide your investment strategy.

Once you know your goals, start with the basics like high-yield savings accounts, money market funds or CDs. These are low-risk but your money can grow over time through compound interest. Look for the highest rates you can find from reputable banks or credit unions. Every little bit helps!

If your timeline is longer, consider investing in the stock market. Look into low-cost index funds that track the overall market. They provide broad market exposure so your money has a chance to grow over the long run. Start with whatever amount you can, even if it’s only $50 or $100 a month. The key is to start now and increase contributions whenever possible.

Don’t forget tax-advantaged retirement accounts like Roth IRAs or 401(k)s, especially if your employer offers matching contributions. That’s free money that can really add up over decades of saving and compounding returns.

The most important things are to start now, keep fees low, and stay invested for the long haul. While the amounts may seem small at first, your money can grow over time through the power of compounding. With patience and persistence, you absolutely can build wealth and work towards your financial goals, no matter how much or little you can invest each month. Every dollar counts, so start today!

Choose the Right Investment Account – Taxable, Retirement, or Custodial

When you’re just starting out with little investment capital, the type of account you choose matters. Here are some options to consider:

Taxable Investment Account

This is a regular brokerage account where you can buy and sell investments. The downside is you’ll owe capital gains taxes on profits. But the upside is flexibility – you can withdraw money at any time without penalties. This is good if you want to start small while you’re learning the ropes.

Retirement Account (IRA or Roth IRA)

An IRA allows your money to grow tax deferred until retirement. A Roth IRA means paying taxes upfront so withdrawals in retirement are tax-free. Both allow up to $6,000 in contributions for 2020 (more if over 50). The money is locked up until age 59 1⁄2, but the tax benefits are huge. If you can swing it, maxing out an IRA is one of the best ways to build wealth over time.

Custodial Account (529 Plan or UTMA/UGMA)

If investing for a child’s education or other expenses, a custodial account lets you contribute money that can then be used by the beneficiary. A 529 college savings plan offers tax benefits and higher contribution limits. An UTMA/UGMA account gives the child more flexibility but funds become theirs at the age of majority.

The bottom line? Choose an account that matches your financial goals and risk tolerance. Then start small but think long-term. Compounding returns and tax benefits can turn modest contributions into a sizable sum over the years. The key is just getting started, even if you only have a little to invest each month. Your future self will thank you!

Invest in Yourself First – Increase Your Income Potential

Investing in yourself is one of the best ways to increase your income potential, especially when you have little money to start with. Here are some ways to invest in yourself:

Learn New Skills

Take a course on a topic that interests you or that aligns with your career goals. Sites like Udemy, Coursera, and Udacity offer affordable courses you can take online at your own pace. Learn skills that you can apply to your current job or that will qualify you for a higher-paying role.

Build Your Network

Connecting with others in your industry or area of interest can lead to new opportunities. Attend local meetups, join relevant social networks like LinkedIn, and reach out for informational interviews. Let people know you’re looking for new challenges and growth opportunities. Networking is a low-cost, high-reward activity.

Look for a New Job

If you’re in a job that isn’t challenging you or allowing you to progress, keep an eye out for new openings. Update your resume, create profiles on major job sites, and set job alerts for roles you’re interested in. Be willing to take a risk on a new job that may come with a pay increase. The added experience and skills will benefit your career in the long run.

Consider Freelancing

If you have skills that are in demand, consider freelancing on the side to generate extra income. Websites like Upwork and Fiverr are easy ways to find freelance work. Start small by taking on a few projects a month and build up from there. The flexibility of freelancing allows you to gain valuable experience while still working a full-time job.

Investing in yourself through continuous learning and career development is the gift that keeps on giving. While it may require time, effort and some financial resources upfront, the rewards of increased job satisfaction, higher pay, and career advancement will be well worth it in the end.

Use Micro-Investing Apps – Invest Spare Change

Micro-investing apps are a great way to start investing when you don’t have a lot of money. These apps allow you to invest your spare change from everyday purchases.


Acorns is a popular micro-investing app. It rounds up your purchases to the nearest dollar and invests the difference in a portfolio of ETFs. For example, if you buy a coffee for $3.75, Acorns will round up to $4 and invest the remaining $0.25. These small amounts add up over time without you having to do much. Acorns charges $1 per month for accounts under $1 million.


Stash is another option that lets you invest with as little as $5. It offers investment portfolios with ETFs and individual stocks. Stash charges $1 per month for balances under $5,000 and 0.25% per year after that. Stash makes investing easy by breaking down complex topics into simple explanations and visuals. It’s ideal for new investors who want to learn as they go.

  • Pros: Low cost, easy to get started, educational
  • Cons: Fees can add up over time, limited investment selection


Robinhood is a free stock trading app with no account minimums or commissions. While not technically a micro-investing app, the no-fee model allows you to buy fractional shares of stocks and ETFs with whatever money you have. You can invest in companies you know and love or broad market ETFs. Robinhood makes stock trading simple but you’re on your own to choose investments.

  • Pros: Completely free, flexible
  • Cons: No investment guidance, more complex than other micro-investing apps

Any of these apps are great for dipping your toe in the investing waters without needing a lot of money upfront. The small amounts you invest through micro-investing and fractional shares can add up to a nice nest egg over time through the power of compounding. While the fees seem small, be sure to compare them across apps to make the most of your hard-earned cash. With a little money and patience, you’ll be on your way to building wealth and a better financial future.

Try Peer-to-Peer Lending – Earn Solid Returns on Small Amounts

Peer-to-peer lending platforms like LendingClub and Prosper allow you to invest in personal loans with potentially solid returns, even if you only have a little money to get started.

How It Works

On these platforms, individual borrowers apply for personal loans. Investors like you can then browse loan listings and invest in fractions of loans that meet your criteria. When borrowers repay their loans, you earn interest. Many loans offer returns of 5-8% or more per year.

  • Browse loan listings on the platform based on loan amount, interest rate, loan purpose, borrower credit score, etc.
  • Choose loans you want to invest in and the amount to invest in each. Most loans are funded by multiple investors.
  • Your money is then loaned to the borrowers. As they repay over 3-5 years, you earn interest payments each month.
  • Invest as little as $25 in a single loan. Build a portfolio of multiple loans to diversify and reduce risk.

Pros and Cons

Peer-to-peer lending offers some attractive benefits for new investors:


  • Low fees. Most platforms charge 1% or less per year.
  • Solid returns. Interest rates often beat the stock market and high-yield savings accounts.
  • Easy to get started. You can open an account and start investing quickly with little money.
  • Monthly cash flow. Interest payments are distributed to your account each month.


  • Risk of default. Some borrowers may not repay their loans, potentially reducing your returns. Default rates vary but are usually under 5% for most credit score ranges.
  • Illiquid investment. Your money is tied up in loans for 3-5 years until they mature. You can sell loans on a secondary market but may get less than face value.
  • Tax implications. The interest you earn is taxable income. You’ll receive tax forms each year reporting your earnings.

Peer-to-peer lending provides an accessible way to generate solid returns on your money, even if you have only a small amount to get started. By investing in a mix of loans and keeping default risk low, it can be an attractive option for new investors to generate monthly cash flow and work toward larger financial goals.


You’ve got this. Even with little money to start, you can begin building your investment fund and creating a brighter financial future. Start small but start now. Open a brokerage account, set up an automatic contribution from each paycheck, and buy a few shares of an index fund. Your money will start working for you immediately. As your balance grows over time through regular contributions and market gains, you’ll gain confidence and experience. You can then explore individual stocks or other investment options.

The key is to begin. Don’t wait until you have more money or think you know it all. Take that first step now and start with something simple. Your future self will thank you. Through the power of compounding returns and time in the market, small amounts can grow into something great. You have the power to shape your financial destiny. The time is now, so go empower yourself and start investing in your future. You’ve got this!

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