How to Start Saving and Investing With Small Amounts of Money

How to Start Saving and Investing With Small Amounts of Money January 9, 2013

Millions of people have little or no savings. In fact, according to one recent report 64% of households have less than $1,000 in the bank. That’s the majority of Americans! And in today’s world, $1,000 just isn’t that much money.

I’m going to take a guess here and say that it’s likely that the majority people don’t have any savings because they never starting saving money in the first place. If most of your paycheck goes to paying bills and you only have a small amount left over, you may feel that it isn’t worth trying to build a savings balance.

But in order to save, you need to start somewhere, no matter how small it seems to be. There are ways that you can start saving at least a little bit of money each month. Keep doing that, and after many months you will have a respectable amount of savings that will give you all the incentive you need to make it even bigger.

Change your spending habits – a little

No matter what your financial situation is, you can probably find ways to free up at least some money for savings. It could be as simple as deciding not to go to dinner one night each week, and instead putting money into savings. If you spend $25 taking your family to McDonald’s one night each week, you can decide not to go and instead save the money.

Though $25 doesn’t seem like a lot of money, if you do that for 52 weeks in one year, your savings will grow to $1,300 (you‘ll then be well into the top 36% of savers in America!). That’s just for cutting out a single activity and redirecting the money into savings. How many other activities can you cut and increase your savings even more?

The old-fashioned cookie jar

People who are in tight budget situations are sometimes afraid to put money in the bank because it takes it out of reach in case they need it. But you can go old school at this, and save money in a cookie jar. You don‘t literally have to use a cookie jar, but you can use some other storage method that will allow you to save money a little at a time.

You can use the same method discussed above, putting cash into your cookie jar account, rather than going out to dinner or what other activity you decide to pass on. As your cash pile grows, so will the options on what to do with it.

Individual Retirement Arrangements (IRA)

An IRA is another great way to save small amounts of money. You can contribute to an IRA through a payroll deduction that you will hardly notice. If you are paid twice each month, and you contribute $50 to an IRA with each paycheck, at the end of one year you will have $1,200 in your account.

An IRA offers two other advantages. It is tax-deductible so it will reduce your income taxes. That way, the government is partially funding your IRA. Another advantage is that an IRA offers an opportunity to begin saving and investing money for the long-term. The sooner you begin doing that, the better the future will be.

Payroll deductions into a savings account

If you have direct payroll deposits into your checking account, you can just as easily allocate a small amount to go into your savings account. It doesn’t have to be a large amount, but by saving this way your money will build and you will hardly notice that it’s happening. You won’t be forced to make spending decisions, because the allocation is automatic; it will happen without any further action from you.

All you will need to do is pretend that the savings account doesn’t exist, so that you can give it time to grow.

Fast forwarding your small savings into big savings

The hardest part about saving money is getting started. Once you do, once you have a few hundred dollars put away, you can begin to fast forward the process.

You can do this easily by depositing your income tax refund, bonus check or the proceeds from the sale of personal assets into your savings account. A $1,000 income tax refund can nicely fill out a savings account that already has $1,000 in it. The deposit will give you a $2,000 balance before you know it.

Keep contributing beyond that balance and the account will grow and grow. It won’t be long before you will begin to feel prosperous. And that’s a really good feeling.

Have you avoided saving because you don’t think you can put away enough to make a difference?

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What Are Your Thoughts?leave a comment
  • hi,its really good post , its too much needed when you want to start investment so you must change your habits or earn extra . but you explain very well but IRA is must .

  • Thanks! I think the most important thing is just to get started, and not worry about how much you have to save. The will increase with time anyway, so it’s so important to establish the habit as soon as you can.

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  • This posting is marvelous and what a fantastic research that you have done. It has helped me a lot. thank you very much.Thank you for sharing I’m touched to be featured in your blog.It is extremely helpful for me.

  • Thomas

    I definitely define myself as a saving person. Reading this article I realize that I have considerable advantage here, thank you for sharing this information !

  • Penelope

    Investing is a good way to make your money work. For example, when your savings are somewhere in your home, then they don’t work. But in case you will find a way to invest wisely then you can boost your income. I think it’s worth to motivate yourself for saving money and imagine how it can change your life. I try to change my spending habits to save cash, when I will have enough I plan to invest it. It’s necessary to limit spending, borrowing and using different kinds of loans and no fax payday loans because until you don’t control your expenses it will be hard to save. But investing is always is always a bit risky so you can never be sure that you will get an expected result so it’s better to learn more about it before making any steps.