Investing your money can be a great way to grow your wealth over time. However, many people believe that they need a large amount of money to start investing. Fortunately, this is not the case. With as little as a few pounds each month, you can start investing and building your wealth. If you are frugal and also follow strategies such as stoozing, you can quickly generate a second or third income stream.
Being frugal can be important, it is a way to minimise debt, secure your future and remove many money troubles from your mind. However, a general rule to follow is, you cannot save an extra £10,000 a year – you must earn it!
Research suggests that most millionaires have a minimum of 3x streams of passive income and famous investor Warren Buffett advised “If you don’t find a way to make money while you sleep, you will work until you die.” Never save to save, save to invest and you will see your income compound over time.
Here are the top ways to invest small amounts of money.
- High-Yield Savings Accounts
One of the simplest and safest ways to invest small amounts of money is to open a high-yield savings account. High-yield savings accounts offer a higher interest rate than traditional savings accounts, allowing you to earn more on your money. Most banks and online savings accounts require a minimum deposit of £10 to £500, which makes it accessible for those with small amounts of money to invest.
Many banks offer 2x types of savings accounts, one where regular access can be granted but with a lower % in interest gained; or locked in for 12 months and this interest is generally higher. So what % interest could I earn? We’ll with the cost of the living crisis currently tightening its grip on the economy, you can still lock in up to 4.5% on your savings. £10,000 in this account will generate £450 per month if you are paid the interest monthly.
- Robo-Advisors
Robo-advisors are automated investment platforms that use algorithms to manage your investments. They require a low minimum investment, typically around £500, and offer a diversified portfolio of low-cost index funds. With a robo-advisor, you can start investing small amounts of money and benefit from professional investment management without paying high fees.
- Stocks and ETFs
Investing in stocks and ETFs (Exchange-Traded Funds) is another way to invest small amounts of money. With the advent of online brokerages, it’s now possible to invest in stocks and ETFs with as little as a few dollars. If you’re just starting out, consider investing in ETFs, which provide exposure to a diversified portfolio of stocks for a low cost.
A personal preference is the S&P 500 invested through Vanguagrd – This is personal preference and we do not receive any monies as a result of promoting vanguard -, they will invest money into the top 500 companies in the USA. Many people have asked how I have guaranteed 10%+ returns each year on my investments, and in all honesty, I just invested in this fund and waited. I’m a firm believer in bluechip stocks, they are relatively low volatility and the chances of multiple bluechip companies going into administration are very low indeed – Microsoft, McDonald’s, Sony etc.
Many think you need hundreds of pounds to invest, I started with £10 a month and quickly grew it to invest 40% of my income. This then compounded to further increase my income, my stocks grew, and the dividend income was reinvested, and that in turn allowed for the portfolio to grow at a rapid rate.
Currently stocks are valued incredibly low as we are in uncertain times, if we look back at the 2008 financial crisis the same story could be seen. Some withdrew and sold their stocks, others, however, purchased the stocks incredible low, rode the wave, and waited for the value to increase over the years – traditionally the S&P500 will always recover (This is not guaranteed, however).
- Micro-Investing Apps
Micro-investing apps allow you to invest small amounts of money regularly, typically through automatic investments from your bank account. These apps invest your money in a diversified portfolio of low-cost ETFs, and often offer features like rounding up your purchases and investing the spare change. With micro-investing apps, you can start investing with just a few dollars and benefit from the power of compounding over time.
- Real Estate Crowdfunding
Real estate crowdfunding allows you to invest in real estate projects for as little as £500. With real estate crowdfunding, you can invest in a diversified portfolio of real estate projects, such as commercial properties, rental properties, and more. This type of investing offers the potential for higher returns than other investment options, but it also comes with higher risk.
6. Invest in yourself
look at any extra income as a way to further improve you and your knowledge. If we spend 100% of our time working, when can we improve and better ourselves? If you hold an extra skill, qualification specialism you will propel and improve your salary and earning potential. Many successful individuals will dedicate time each day to personal development – this could even be improving confidence, reducing anxiety, or developing their public speaking skills. That £10 you earn a month could go towards purchasing a book or a monthly Audible subscription, which will allow for your earning capacity to increase.
Qualifications, books, courses, networking events, it will all support a brighter tomorrow – remember a 1% improvement each day will correlate to a 37% improvement over a year. Build your skills, increase your income, and then invest that new income into some of the above ideas to further build wealth.
7. Pay off debt
Finally, it is important to remember that if you currently have debt, this should be the priority to pay off first before taking on any of the above. Any interest or income generated from the above will generally be snowballed out by any interest you’re paying on debts or loans. The average credit card APR is 29%, if you are earning 10% on stocks & shares, you are at a net loss of 19%. A general rule to follow, pay off high-interest debt first – Not including mortgage as this is a long-term pay plan -, save a 3-6 month emergency fund, and then start investing in the above models.
In conclusion, there are many ways to invest small amounts of money and start building your wealth. From high-yield savings accounts and robo-advisors to stocks and ETFs, micro-investing apps, and real estate crowdfunding, there is a solution for every type of investor. Choose the investment option that best suits your financial goals and start investing today.
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