Investing Habits for the Financially Frugal

For a lot of people who are looking to be more frugal with their finances, investing can seem like an intimidating option.

There is risk inherent to most investments, after all, and if you’re taking a careful approach to personal financial management it can be tempting to avoid that risk altogether and opting instead for long-term savings plans.

That may well be the right decision for any given person. However, investment should also be considered.

5 piles of coins on wooden table with soil and a small plant growing out of each one

Change Investing, Gold, & Mutual Funds — Investing Habits for the Financially Frugal

In counting good personal money management among ways for people to manage their finances more effectively, we once asserted that you can always improve in this area — whether you’re in your 20s, 30s, or even closer to retirement age.

It’s never too late to invest, and if it feels like a risky option to you, there are some fairly conservative ways to go about it.

That brings us to three investing methods:

  • Spare change investing,
  • Gold trading and,
  • Mutual funds

that we’re going to cover in more detail below.

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Change Investing

Small change investment wasn’t really a known concept just a short time ago.

Thanks to the expanding world of financial mobile apps, however, it is now a fairly well established method.

The idea is for these apps to connect to credit and debit cards, and invest the change left over from purchases.

As an example, if you use a card to buy something for $3.70, the extra $0.30 that would take the purchase to the nearest dollar is funneled into the investment app.

That way, you slowly build up a fund, which is managed more or less automatically (with some consideration of your preferences) in the app.

There is some debate over change investing. People see legitimate benefits in the practice, in that it allows for investment with relatively little commitment, it’s exceedingly simple, and it can yield a slow but steady return.

On the other hand, some are averse to automated trading and would like more control over their investments.

Still, for people who are more conservative about personal finance, it can make or a fairly safe way to start growing a fund.

The apps won’t make you a ton of money, but again, there can be a slow and steady return, even if only a modest one.

open silver money suitcase filled with wads of money bills with other bills spread around outside it

Gold Trading

For those who would rather avoid the stock market altogether, gold is often highlighted as the go-to conservative investment.

This is because gold, typically speaking, is not prone to sudden or severe changes in value.

It is also because gold has a reputation for gaining strength when markets weaken.

Investors who worry that markets are depleting their funds often move some of those funds into gold as a means of protection, and in doing so help to boost the price of gold for others.

There are certainly some in investment circles who believe these favorable aspects of gold are somewhat overstated, and they’re right in the sense that there are no guarantees (and some talk about gold as if it is one).

That said, the long-term gold trading charts do show that the precious metal tends to make gradual gains over time.

The same charts certainly show some occasional dips, but they back up the idea that as a conservative, low-maintenance, long-term investment, gold can be a sensible option to explore.

laptop screen showing graphs with a tablet to the left side

Mutual Fund Investment

Mutual funds are also fairly common solutions for people who are looking for less risky investments.

A mutual fund is defined as a pool of investors’ money that is invested on their behalf by a professional — who, in turn, profits via an “expense ratio.”

This is basically a small percentage of each individual’s funds, which means that if you invest in a mutual fund, you will be paying a portion of what you pay to that fund’s manager.

In exchange, however, your money is put to work for you in conditions that are generally believed to be favorable for generating gradual gains.

With numerous investors’ money pooled together, and professional oversight of the fund, investments can be strategically diversified and organized in a way that minimizes risk.

As with the other forms of investment discussed here, this doesn’t mean that you’re guaranteed to profit.

But it is a more conservative approach that some will appreciate.

Investing Habits for the Financially Frugal

Ultimately, for the financially frugal, it’s easy to shy away from the idea of investment altogether.

Risk is never appealing, and if you guard your money closely it may be that much more daunting.

These are handy examples to keep in mind, however, of ways you may be able to put your money to work for you without the risk or stress factors associated with some other forms of investment.

This is a collaborative post

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Last Updated on 28th September 2020 by Emma

About Emma

I'm here to help you become confident in making the best money decisions for you and your family. Frugal living has changed my life, let me help you change yours.

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