If you want to invest but don't believe you have enough money to get started, we have good news. You can begin with as little as $1. In fact, if you're nervous about the prospect, starting slow (say, with $50) may be the way to go. It gives you time to learn the ropes and develop your own investment strategies. Here, we'll show you how you can get started, even if you don't have much money.
Open a retirement account
There's a retirement account for everyone. Here are a few of your options.
401(k)
If your company offers a 401(k) plan, you're in luck. This plan is usually an excellent option for several reasons.
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A 401(k) is professionally managed, so you don't need to understand the ins and outs of investing just yet.
Your investment funds are withdrawn from your check pre-tax. For example, if your gross (before tax) income is $1,000 per week and you contribute $50 weekly, you'll only pay taxes on the remaining $950. You don't pay taxes on retirement income until you withdraw the money.
A 401(k) is a "set it and forget it" plan. Once you've determined how much risk you're comfortable taking and how much you're going to contribute, the work is done for you.
Traditional IRA
Like a 401(k), a traditional IRA is funded with pre-tax dollars, meaning you won't pay taxes on the money until you withdraw it. There's no minimum to open an IRA, which makes it perfect if you're just starting out. If you're under the age of 50, the most you can contribute in 2023 is $6,500. If you're over the age of 50, that amount is bumped to $7,500.
Roth IRA
A Roth IRA is funded with after-tax dollars, meaning you won't owe taxes on the money when you withdraw it in retirement. Like a traditional IRA, the most you can contribute in 2023 is $6,500 if you're under the age 50, and $7,500 if you're over the age of 50. If you're single, you must earn less than $138,000 annually to make a full contribution. If you're married filing jointly, your annual income must be less than $218,000.
There is no minimum required to open a Roth IRA.
Buying fractional shares is another great way to get your feet wet. With fractional shares, you can buy a "slice" of a stock rather than an entire share. For example, if a stock is selling at $100 a share and you purchase $20 worth, you would own 0.2 (20%) of a share.
With companies like Charles Schwab, Fidelity Investments, E-Trade, and Vanguard selling fractional shares, it's easy to get started by visiting our list of the best brokerage accounts.
Open a high-yield savings account
Whether you're building an emergency savings account, saving up to buy a home, or putting money away for a dream vacation, high-yield savings accounts are currently paying excellent rates.
There's another advantage of high-yield savings accounts, particularly if you're anxious about losing your money. The Federal Deposit Insurance Corporation (FDIC) covers savings accounts up to $250,000 per depositor, per bank, in FDIC-insured banks. The National Credit Union Administration (NCUA) offers the same protection for members of federally insured credit unions.
Before you open a high-yield savings account, though, it's important to know that rates do not remain steady. Instead, they're loosely based on what the Federal Reserve is doing and can change at any time, without notice.
Investing is less about how much money you have to invest and more about how committed you are to investing for the long term.
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