When you hear the word “investing” do you think of all the possibilities or does your mind immediately go to something you’ll never be able to achieve? A lot of people think investing is only for those with thousands of dollars to throw around. But you can actually invest safely with very little money – pennies even.
Of course, with the coronavirus pandemic in full swing right now and the future of the economy being uncertain, investing can seem even scarier than usual. Financial experts are trying to encourage everyone not to panic (which we agree, don’t panic!) and to try to ride out the wave as best as possible. But with things as they are, investing may be the furthest thing from your mind.
Invest with What You Can Afford
While it’s impossible to know when we’ll see the light at the other end of the tunnel, it’s important to remember that this too shall pass. So, if you have a few extra dollars (yes, that’s really all we’re talking about here – dollars!) each month, don’t put off investing for fear of the future. Even the tiniest returns can be helpful and used to build upon larger returns in the future when perhaps finances aren’t quite so tight.
To determine what you can afford, create a list of all of your monthly expenses and incoming funds. Don’t forget to include a budget for things like groceries, gas, and anything you are currently putting money aside for, such as an emergency fund. Subtract your expenses from your incoming to see how much extra money you have each month to work with.
Start with Something Safe
Investments don’t have to be high risk when you are working with little money. Start with something small and safer. In time, as your investments grow or your financial situation improves, you can take more risk and invest where you’ll see a greater return.
5 Easy Ways to Safely Invest During the COVID-19 Pandemic
High Yield Savings Account
A high yield savings account is probably the safest way to start investing. While you’re not going to see a large return from this, having your money in a high yield savings account is the easiest way to earn a little bit of interest on money that you have anyway.
There’s really no risk involved, and you can still access your money when you need it. Online accounts are most likely to offer the best interest. NerdWallet often has fairly current lists of high yield savings accounts or do a thorough search online yourself. Many accounts can be opened with a $0 minimum.
Spare Change Apps
Spare change apps like Acorns or Chime are an easy and passive way to invest. Apps like these round up to the nearest dollar (or more if you choose) on every purchase you make and place the difference in savings or investment accounts.
So, while you’re going about your usual business of paying bills, buying groceries, etc. a small chunk of change from each purchase starts accruing.
Passive ways of investing like this are great because they really take the burden off of you to do that initial investing, which is often the hardest part. It’s more of a set it and forget it method – but of course, don’t forget it! That savings will eventually add up and it’s best to have a goal for how you will continue investing it when it does. Each app works differently, and some have a very minimal monthly fee. Do your research to find one that would work best with your goals.
Pay off Debt
Paying off debt doesn’t exactly seem like an investment, but it is! If you have debts that you are paying interest on, paying off those debts gives you an immediate return! U.S. households with credit card debt pay an average of $1,162 each year on interest alone. The sooner you can pay off your debts, the more money you’ll be saving and with that, you can further your investments.
Employer-Sponsored Retirement Plan
If your employer offers a 401(k), this is definitely a place you want to start investing. Depending on the retirement plan, you can typically have a percentage of your paycheck setup as a payroll deduction to go directly to your 401(k), sometimes even as low as 1%.
Any contribution you can make to this account is a good thing for your future and contributions are even tax deductible! Some employers will even match your contributions, which basically means free money towards your retirement. If your employer does match, try contributing as much as you can to capitalize on this while it’s available.
Open Your Own Retirement Plan
If you don’t have a 401(k) as an option at your job, you can always begin the process of investing in your retirement fund yourself! Traditional and Roth IRAs are the standard option for this. Both differ when it comes to several factors, including taxes, so do some research or talk to a financial advisor to determine which one is best for you.
Take Care of Your Present While Investing in Your Future
As you can see, investing can happen even with little money and low risk! A small return today can help you get to a larger return in the future, so don’t be afraid to start, even if it’s small.
We are all uncertain of how long we will be facing the brunt of the coronavirus pandemic, so be sure to take care of your present too!
If you don’t already have an emergency fund saved up, definitely try to work on building one. They are good to have at any time but could be a lifeline for you during these trying times. If you’re looking for additional ways to save or earn extra money, check out some of our other resources: