How to Invest on a Shoestring Budget

If you would like to invest but think you don't have the money, think again. Even when money is tight, you can find ways to start setting aside small amounts and investing them, taking advantage of compound interest over the course of your lifetime.

The beauty of investing is that unlike purchasing a car or even a home, it doesn't require a significant down payment. But most people know the old adage of paying yourself first is easier said than done. The cost of living, as well as unplanned expenses, can make anyone feel that saving to invest is an uphill battle.

Even when you're living on a tight budget, though, it's possible to start investing small amounts and let them add up over time. Here are some thoughtful ways to put away extra cash without breaking the bank, which will provide you with the means to start investing.

Key Takeaways

  • Investing is possible even when money is tight, and saving small amounts now lets you take advantage of years of compound interest.
  • A high-yield savings account can help you start building wealth.
  • Consider signing up for an automatic savings plan and putting away bonuses and income tax refunds.
  • Make use of tax-advantaged retirement plans, including those sponsored by your employer.
  • New investment platforms like micro-investing, robo-advisors, and real estate crowdfunding can allow you to invest small amounts regularly.

Start With a Budget

Investing is great if you have plenty of extra money lying around. But what if you don't? A lot of us put off saving and investing because we may not think we have enough money or because retirement is too far away to think about. Others have a lot of debt to shoulder and aren't sure how to tackle both financial tasks responsibly.

If you have a lot of high-interest debt, such as credit card debt, you may want to consider paying it off first. Otherwise, you may lose more to interest payments than you can earn from saving and investing. Look into using the snowball or the avalanche methods to begin paying down debt.

One of the things you need to have—other than money—is discipline. Saving and investing are a commitment, and you'll have an easier time sticking to that commitment if your whole financial picture is organized.

Start by making a budget and setting financial goals. Determine your income and monthly spending obligations, such as rent, insurance, or student loan payments. Once you know what you must spend, look at what's left to figure out how much you can reasonably afford to set aside each month.

This will likely be a small amount at first. That's okay. The goal isn't to save thousands of dollars immediately. You want to start building the habit of saving and eventually invest that money to build wealth. Even if you have as little as $10 each month initially, it's better than nothing.

Open a High-Yield Savings Account

An easy way to start building wealth is by opening a high-yield savings account. Unlike a standard checking or saving account, high-yield accounts earn significantly higher interest rates. This means that the money you set aside will earn more money for you every month just by being in the bank.

Traditional banks may require a minimum deposit for high-yield savings accounts. But many credit unions and online banks have no minimum deposit. You can start with just a few dollars at a time.

If you're trying to save up enough to begin investing in a mutual fund or another investing vehicle with a minimum deposit, a high-yield savings account is a smart place to keep your money until you have saved enough.

Make Saving Automatic

Consider an automatic savings plan, a savings program offered by many banks and financial institutions, such as Bank of America's Keep the Change Program.

These automatic plans don't require you to do much. You can continue your normal spending and banking. The bank will round purchases made with your debit card to the nearest dollar, then deposit the change daily into your savings account for free. At the end of the year, you receive a statement letting you know how much you've saved.

The account your bank deposits round-ups into won't earn much interest. But automatic saving is a small, easy step you can take toward beginning to create a savings cushion. Best of all, it will happen whether you are planning for it or not.

Once you've started to build up a good cushion in your account, you can transfer it to a high-yield account or look into investing it elsewhere.

Set Aside Bonuses and Refunds

If you get an employee bonus or a tax refund, it can be tempting to use it as extra income. But since it's money you weren't counting on having, a better long-term strategy is to treat it as an extra investment. Since these are generally additional to regular earnings, you're less likely to feel the pinch if you put them away.

Loyalty programs and using credit cards that offer cash-back rewards are other tools that can further your savings goals. Since this is extra money that you're not actually earning from your job—meaning it won't affect your monthly budget if you put it aside—you may want to consider participating in these types of programs as well. Then, when you get cash-back rewards, set them aside in a separate account for investing.

If you are using a cash-back credit card to get the rewards, make sure you are paying off your balance each month. Otherwise, you may spend far more in interest payments than you can earn in rewards.

If your bonus or tax refund is large enough, you can use it to open an account at a brokerage and start investing. Rather than picking individual stocks, which can be challenging for new investors, look into exchange-traded funds or mutual funds.

Mutual Funds

A mutual fund is a single fund that invests in a variety of stocks, bonds, and other assets. They are run by professional money managers. Different funds have different goals; for example, some my focus on stocks from specific types of companies. Others may focus on dividends (regular payments made to investors). Either way, since a professional is running the fund, you don't need to pick the assets. You choose one fund, and someone else takes it from there.

For smaller investments, hundreds of mutual funds allow a small initial investment of $500 or less. Morningstar’s mutual fund screener lists 200 different mutual funds that will accept a $500 minimum deposit.

When you are just starting to invest, any dividends your mutual fund pays will likely be quite small. Instead of getting a check for a few dollars every month, look for funds that will automatically reinvest your dividends, which grows your investment portfolio.

Exchange-Traded Funds

Exchange-traded funds (ETFs) are similar to mutual funds, except that while mutual funds' prices are set at the end of the trading day, ETFs trade like stocks, and their values change based on each trade. For example, you can buy an ETF like the Standard & Poor's depository receipt (SPDR) Trust, which attempts to mimic the performance of the S&P 500 without the hassle and costs associated with purchasing 500 individual stocks.

ETFs not only provide the opportunity to own a single investment that encompasses a large number of stocks but also offer the opportunity to diversify your portfolio. Like mutual funds, a variety of ETFs are available to match your investing goals. A number of financial websites contain readily available information the average investor can use to research ETFs and their performance simply by searching the ETF ticker symbol.

For smaller investments, hundreds of mutual funds allow a small initial investment of $500 or less. Morningstar’s mutual fund screener lists 200 different mutual funds that will accept a $500 minimum deposit.

Once you're ready to invest, check out low-cost online brokers. A good place to start is Investopedia's list of the best discount brokers.

Use Alternate Forms of Investing

New technologies and software companies have also created other ways of investing outside of managing your own brokerage account. For many new investors, these platforms are more accessible and can help you start investing sooner.


Micro-investing apps let you invest small sums of money to buy fractional shares of mutual funds or stocks. For many, minimum investments start around $5. This low barrier to entry means you can start investing, even if you don't yet have much saved.

For example, Acorns, one micro-investing app, works like an automatic savings account. You choose what type of investment account you want to open and connect the app to your bank account. When you make a purchase, the amount is rounded up to the nearest dollar, and the extra is automatically invested in your Acorns account.

Before beginning to use an investing app, check the platform's security features to make sure that your money will be protected with FDIC insurance.


Robo-advisors are automated financial planning platforms driven by algorithms. They were created to make investing as simple and accessible as possible. With little to no human contact, these companies collect your financial information and goals, offer advice, then invest your assets automatically, enabling you to pay lower fees.

These platforms can be especially helpful for those at the beginning of their journey to financial independence. The 2022 Investopedia Financial Literacy Survey found that Generation Z adults (i.e., those 18 to 25 years old) were more financially sophisticated than any prior generation was at their age. However, even though 26% of those surveyed were already invested in the stock market, only one-fourth of this group felt they understood the market well enough to explain it to someone else.

Get Your 401(k) Match

Participate in your employer's 401(k) plan, especially if it includes a match. Take time to read the descriptions of each investment the plan offers, figure out how much you can set aside from each paycheck, and determine your level of comfort with the various tiers of risk the plan's investments hold. Index funds are a good start for people who aren't familiar with the particulars of investing, and most, if not all, 401(k) plans offer them.

Researching your options is a critical step if you want to maximize your returns. Take time once a year to reassess your plan to ensure that your fund is meeting your investing goals. Don't forget to rebalance your investments. Past performance is a good predictor of the future, but remember, it's not always a guarantee.

Many financial websites have excellent resources to research the performance of individual stocks as well specific mutual funds. Keep in mind that a fund's performance is only one of many important parts of the equation. Watch out for excessive administrative fees, which can eat away at your earnings.

In 2006, a flurry of lawsuits over 401(k) plan fees prompted an investigation by a congressional committee into fee disclosure. The Department of Labor offers a guide to the average cost of fees and a checklist you can use to evaluate your current plan.

Open a Roth IRA

Approximately 57 million Americans work for employers that don't offer a 401(k) plan, but that doesn't mean those workers can't successfully save and invest on their own.

If you don't have a workplace retirement plan, you can still open a Roth IRA for yourself. (You can also open a Roth IRA even if you have a 401(k) at work.) This is a tax-advantaged retirement savings account, and most banks and brokerages will allow you to open one. If your bank has a minimum initial investment that is too high for you, many micro-investing apps offer IRAs as well.

In 2023, you can contribute up to $6,500, or $7,500 if you are over age 50. This money won't be taxed when you withdraw it after retirement.

Real Estate Crowdfunding

In the past, investing in real estate was a lofty ideal for the average investor, but not anymore. Real estate crowdfunding is a new style of investing that raises capital for real estate projects and investments via the Internet and social media outlets.

When investors engage with a crowdfunding company, that company invests their cash in a series of real estate projects, including hotels, medical and care facilities, and condominiums. Many of these crowdfunding companies will accept low initial investments, allowing average investors to reap the rewards of owning real estate while cutting out the headaches and large expenses related to property ownership.

How Do I Start Investing on a Small Budget?

To start investing on a small budget, sign up for an automatic savings plan through your bank, then transfer your money to a high-yield savings account where it can start to earn interest. If you receive a bonus at work or a tax refund, set it aside for investing, rather than spending. If your employer offers a 401(k) match, make sure you are contributing enough from your paycheck to get the full match. If you want to invest in traditional mutual funds, look for one that has an initial investment of $500 or less.

How Can I Minimize Investing Fees?

You can minimize investing fees by using a micro-investing app or a robo-advisor. Since most of these platforms are automated, they can charge lower fees than traditional brokerage firms. If you do use a traditional brokerage, always check the fees before you make an investment decision.

Is $100 Too Little to Invest?

There are many ways to start investing with as little as $100 or less. Instead of opening a traditional brokerage account, look into a micro-investing app or a robo-advisor. Many of these investment platforms have low minimum initial investments. It is better to start investing sooner rather than later, even if you can only contribute a small amount. This lets your money grow over time through compound interest.

The Bottom Line

When it comes to investing, it isn't the amount that matters—it's getting started. Start by getting your finances organized with a budget and by paying down debt. Then start setting aside small amounts of money every month, even if it's just $5 to start.

By using high-yield accounts and new investment platforms, you may be able to start investing sooner than you thought possible. And when you invest now, your money has more time to grow and build wealth.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Bank of America. "Keep the Change Savings Program."

  2. Morningstar. "Basic Fund Screener."

  3. S&P Global. "SPIVA Results by Region: U.S."

  4. Acorns. "Save, Invest, and Learn From One Easy App."

  5. FINRA. "Investing in Your 401(k)."

  6. U.S. Government Accountability Office. "Changes Needed to Provide 401(k) Plan Participants and the Department of Labor Better Information on Fees; Recommendations."

  7. Georgetown University McCourt School of Public Policy. "What Are the Potential Benefits of Universal Access to Retirement Savings?"

  8. Internal Revenue Service. "Retirement Topics - IRA Contribution Limits."

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.