How to Really Get Started with Investing When You Don’t Have a Lot of Money Yet

When you think of investing, traders in suits along Wall Street might appear in your mind’s eye.

For many, the idea of investment can be a little intimidating, with young people in particular being scared of stocks and investing.

In truth, however, anyone can do it. And thanks to the wonders of modern technology, you don’t even need a lot of money to begin!

Here’s our comprehensive guide to investing — what it is, why you should do it, and tips for you to get started, even if you’re low on capital.  

What it is

When you make an investment, you pay for something and expect a return after some time. Most people invest to turn a profit, meaning they expect their initial payments to appreciate, or increase in value.

And there’s more to investing than just the stock market. For example, you can buy a material object, like a collectible item — not for use or consumption, so you can sell it for a profit in the future.

You can also invest in bonds, real estate, or mutual funds. Even paying for post-graduate studies to earn higher salaries in the future is considered a form of investment.

In short, the types of investment vary based on the kind of returns they are expected to produce, and the kinds of risks they entail.

And although they look similar at first glance, investment is not speculation, which involves attempting to profit off periods of economic security or market inefficiency.

Investing should not been seen as gambling, either, as investments last for a longer period of time and are made through tried-and-tested systems instead of emotionally driven decisions.

Woman standing against backdrop of a graph showing upward trend

Why you should do it

At this point, you may be asking: Why invest when saving money in a bank (piggy or otherwise) carries virtually no risk at all? It’s mainly because of inflation.

The inflation rate, which determines a currency’s purchasing power — and thus the price of goods and services — over time, can cause your savings to devalue in the course of a few years.

And even if your money is in a savings account and accrues interest annually, interest rates rarely keep up with inflation rates. Consequently, it’s not likely for that interest to completely offset the effects of inflation.

You can avoid this by investing the money instead. Returns usually grow faster than the money put in a savings account, and will be untouched by inflation. 

As an added bonus, if you decide to try compounding, you’ll be reinvesting your returns over time, and the appreciation there will begin to build up, too. 

Despite this, savings accounts are still great tools, and saving as a habit should not be completely dismissed. Investment is a great and relatively secure way to supplement your salary and savings as a source of passive income. 

How to get started 

Now that you know more about investment and how it can help you, it’s time to get started with these beginner, and budget-friendly tips. 

The first thing is to consider when to get started, and as most financial advisors and educators will tell you, that time is now!

Think of it in terms of the snowball effect: The earlier you begin investing, the better chance you have of enjoying the benefits of your returns. And as you gain experience and capital, more opportunities will be available to you. 

However, there are a couple of things you need to do before you start investing. First, make room in your budget, especially if you’re going to start with a small amount of money. 

By visualizing how you’re allocating the money you have, you can determine if you’re financially ready to begin investing. And if you’re able to set up an emergency fund, too, all the better!

This will serve as a safety net in case unexpected circumstances happen that negatively impact your financial situation, such as sudden unemployment. 

Second, pay off any debt you may have. This will give you the peace of mind to invest, without worrying about the monthly deductions debts would take off your available money. 

After you’ve finished your preparations, it’s time to decide where to make your initial investments. Fortunately, even if you’re starting out small, many options are available to you.

upward trend graph on tablet screen

Where to invest

If you want to play it safe, consider getting a CD, or a certificate of deposit. This is a type of time deposit usually offered by banks. They promise to pay you a fixed interest rate if you agree to deposit funds in their institution.

While it offers relatively smaller returns, it’s arguably the least risky choice on the list.

Another relatively low-risk option is to invest in any available employer-sponsored pension schemes to prepare for retirement. What’s great about these schemes is that you can give it as little as 1% of your salary a year and build your contributions from there. 

However, if you’re willing to try taking on some more risk, start investing in the stock market. With the Internet, you can dip your toe in without making a huge upfront commitment. You can do this by being smart about opening a brokerage account.

Most investors use these accounts to hold the funds they use for investment. But it’s important to remember that not all brokerage accounts are created equal. The type of account can depend on your saving goals, and if you want to adopt a hands-on or passive style of investing. 

Further, the fees will differ depending on the type of account. For instance, opening an account with the help of a financial advisor will cost more, as you’ll be paying them for their time, advice, and the management of your portfolio.

But if you go the modern route and get a robo-advisor, you can get automated financial advice for little to no cost — and they’ll even be customized to fit your goals. You can access these services right from your smartphone with the help of apps like Public and Robinhood.

Still unsure?

If you feel you’re not truly ready to try any of the above options, invest in financial literacy education instead. This way, you’ll be able to make better-educated decisions when you actually start investing. 

The resources here on Tuppenys Fireplace are a great place to start learning the basics of money management. And by saving tuppence at a time, you’ll undoubtedly work your way to a position where you can make the most out of your finances.

This is a collaborative post.

JULIE P. JOHNSON is an educator who is dedicated to helping people become more financially literate. She loves to create intricate mosaics in her spare time. 

Start taking back control of your money by grabbing your copy of the Money Saving Starter Guide today.


Last Updated on 1st September 2022 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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