Find how you can start to invest, even if you have limited savings or a low income or even if you live in or near poverty. In fact, for anyone that is new to investing in stocks, Exchanged Traded Funds, mutual funds, or really any investment, it is often a good idea to start with just a little bit of money as it helps you reduce risk as you learn as well as get comfortable with the process of investing.
There are many tools available to help you invest in the stock market using just a little bit of money. Some of the options that can assist include smart phone apps, mutual funds with one dollar up front initial investments, ETFs that take advantage of commission free trading, free investment money from 401(k)s, clubs that allow investors to pool together small amounts of money for investing, and more. You can start to invest with spare change or even a dollar or two. Another way for a low income family to get started investing is to save money, as the fact is that every dollar saved can be used to start an investment account. Or the money can help you build a long term retirement account.
We have information below on some of the various ways to start investing with little money. These tips and financial literacy ideas can help you whether you are a low-income family, recent college graduate or in school now, a teenager, high school student, or really just anyone with limited funds available to them. Even low income single mothers with a limited income can start to invest for their own as well as their kids long term financial needs, even including their retirement.
Technology can help you invest with little money
There are a number of low cost and/or free smartphone applications that can be used to invest in the stock market. Many of the apps are free to download as well as use for iPhones or Android phones, which means they are great tools for low income families, millennials, college students and others who want to get started. Find more details on investing apps for kids.
Most of the smartphone apps, such as Stockpile as well as Robinhood, allow the purchase of fractional shares of stocks in a brokerage account. The trades may be given free or as low as 99 cents are less. Fractional shares of stock mean you can spend even just a few dollars to buy less than one share of a stock, bond, or ETF. This means anyone can start to invest in the stock market with only a couple or few dollars or so to their name. Using technology to buy stocks is more common and there are great investment applications for lower income households. Many teenagers, children and their parents use these cutting edge, user friendly applications to invest. The apps also provide free information on building and enhancing overall financial literacy. Parents can even up accounts for their kids, and learn about children investing with little money.
Mutual funds with no-loads and low initial investments
Low income families can invest in mutual funds that have very low minimum investments. A mutual fund is an investment vehicle that can allow you to buy US stocks, foreign shares, Real Estate, commodities like cold, and thousands of other types of investments in a diversified portfolio. A mutual fund can also be bought in an IRA, a regular investment account, SEP, or other type of accounts. Read more on what mutual funds are.
There are mutual funds that can help low income families that have little discretionary income or savings available to them get started. Many funds have smaller initial investments of $100 or so.. But even if that is too much money for you to come up with, some funds even let you get started with just one dollar.
Charles Schwab offers various index funds such as Schwab S&P 500 Index that has no up front load costs as well as a minimum $1 investment. It is also possible to invest in mutual funds if you open a brokerage account with Acorns, Robinhood, or other online or smart phone type investment companies.
Save money to invest on a budget
This is what we think is the most effective way to get started with investing, and you can start with literally no money available to you. It does take some discipline, mindfulness, and a commitment to paying yourself first though. But using the approach of saving money (even a $1 or extra change), then pouring those savings (no matter how small) into an investment, this approach allows low income families and even those living in or near poverty levels to get started. Using the money you can easily and quickly save, and then investing it, is a great way for single moms or dads to save as well as anyone living on a budget.
Technology can be a great option here for saving/investing. Free smartphone apps can be used, such as Stash or Bank of America Keep the change. These will round up all your savings to the next highest dollar amount, and that incremental round up of cents can be invested into the stock market. There are also apps on Android and the Apple App store for saving money (coupons.com, Ibotta, etc.) that allow you to automatically redeem coupons, provide cash rebates, and they offer many other savings potentials. Get a list of free budgeting apps that can help you invest.
This is where the discipline, budgeting skills, and commitment come into play, and all of those are important financial literacy skills. You need to take all those savings and invest it. Whether it is $1 or $100 that you saved, do it. Invest on a daily basis, or in “real-time” as well using Robinhood or other apps. This means if you save some money using coupons at the grocery store, take every dollar and invest. This may be the best way for someone with limited income to get started with investing, or to build up their accounts and invest more. Our partner site also has information, and find how low income families can save money.
Pool your money to get started investing into stocks with only a few dollars
This is another option. There are investment clubs that are more “formal” to set up. But anyone can set up more “informal” type investment club type vehicles out there. Low income families, kids, women or anyone can informally combine small amount of money to start to invest as a group. Just agree to terms and conditions first before you start to ensure you are all on the same pages when it comes to investing your money.
This can be a great option for parents to help their kids get started investing. Or close friends can start an informal investment club to buy some stocks, and maybe each person only gives a few dollars to get started. Or invest with other family, siblings, or really anyone. There are many females as well that combine small amounts of money, share financial knowledge, and start to invest as a group. Get free information on financial literacy skills development for women.
It can be possible for each person to give a few dollars. Something like $5, $10, or $20 (or even $1) can be enough to get started. Just get a few people together with a few bucks contributed from each person, open an investment account, and start to buy some stocks, mutual funds or other investments.
Free money from 401(K) retirement investment accounts
These retirement accounts are really the only legitimate way to get free money to invest. 401(K) investment accounts, as well as 403(B) at non-profit companies, allow people to invest as little or as much money as they want. These retirement plans are also a great way to invest in stocks, funds, real estate or any type of investment, and they can help those that even have limited financial resources available to them. Now 401K accounts are not available to everyone; it is estimated that about 55% of Americans have access to these types of retirement accounts through their employer.
As long as you have access to 401K account at work, these types of accounts in effect provide you with free money in 2 ways. The first way is due to the fact that the vast majority of employers match the employees 401(K) contributions (up to a certain dollar amount). This means if you invest even just 1% of your income (which is not a lot of money), then your employer will most likely match your contribution and say give you an additional .5% of your income. As an example, if a low income household were to invest $5 per pay period, they will get a free $2.50 from their employer each pay period. Learn more on the benefits of 401K plans for low-income families.
A 401(k) gives you free money in another way as well, and those funds can be used to purchase stocks. That is from a tax deduction. You will get a deduction on your federal and state income taxes by contributing to a 401(K) – this means you will either pay the government less money for your income taxes or get a bigger refund back. That cash can also be re-investing into the stock and bond market as well. Or if a Roth 401K is used, then you will be able to withdraw that money tax free at a future date. Or if you are working for yourself, find retirement plans for self-employed workers.
Low cost brokerages for investment trading
Almost all investment companies, such as Fidelity, Vanguard, and E Trade, offer commission free trading to their brokerage clients as well as very low minimal initial investments to open an account. They also allow accounts to be created with only a few dollars in up front funding from the client. This means anyone can open an IRA for their retirement, create an investment account, trade stocks or just invest with only a few dollars in up front costs. Many online brokerages even let parents open accounts for their kids, and they can buy stocks, options, bonds, currencies and they only need to invest very little amounts of money (specifically since they are teens or kids). A brokerage is also a source for free financial literacy advice as well as educational programs.
You can take advantage of their very low up front costs to open an account, then since there are zero trading fees when buying stocks, then this means brokerages (online or offline) such as Etrade or Fidelity or TD Ameritrade are great options for low income families. They also offer free equity research plans, give financial advice on how to build up retirement plans, and offer other benefits. Many even offer robo advisor services that give low income clients free investment advice to help them reduce their risk.
Invest, no matter how little money you have
Even if you do not have a lot of funds available to you, it is possible to start to buy stocks, real estate funds, or really countless other types of investments. The point is to get started investing, whether you are low income, living in poverty, or whether you are financially stable with adequate discretionary income/savings. Find how just investing a little bit of cash each day (even cents!) can add up over time as well. If you start very early, or help your kid incest, it is even possible to invest $1 a day to become a millionaire.
Using the list of free or low cost resources above, you can buy stocks or mutual funds even using your spare change or a dollar. Or using apps on your smartphone to round up your purchases which then can be used to buy stocks. Or automatically invest your savings into the stock or bond markets. There are many ways to get started investing, even if you are a low to moderate income family or individual.
By Jon McNamara