Small Investments, Big Money

Many people think they need a lot of money to start saving and investing beyond their bank account, but that's simply not true.

You don't need a lot of money to get started, all you need to know is where to go to begin and then start investing small amounts of money that over time can turn into a big portfolio.

Because most beginning investors are young and they simply don't have a lot of money left over to invest, they put off investing. But whether you are new to investing or simply want to begin investing with a little money to start and add to it over time, there is no reason to wait. There are several great options to consider and all of these options allow you to begin with $1,000 or less and add $50 or less each time you make additional investments.

401(k) Plan
Minimum to start: $0
Minimum to Add: 1 percent of each paycheck per pay period
Where to Learn More: Your employer

If you work for an employer who offers a 401(k) plan (or similar type of plans such as 403b and 457 plans), and you want to start saving for your retirement, then look no further than your employers 401(k) plan — there you have one of the easiest and best opportunities to begin saving and investing ever. These plans allow eligible employees to enroll to have a small amount of savings deducted from their paycheck each pay period, in increments as little as 1 percent per paycheck.

So if you earn $30,000 annually, and are paid every two weeks, you can sign up to have as little as $11.50 deducted from each paycheck. Best of all, that savings will be deducted from your pre-tax pay, so you will see that your take-home check is reduced by about $9. And many employers will add a matching contribution of half of what you save (up to a limit of course — typically set at 6 percent), which in this example would be about $5.75. So, in this example, for as little as $9 per pay period from your take-home-pay, you can save and invest about $17 each pay period into your 401(k) plan account.

Of course, workers are strongly advised to contribute at least 10 percent of their gross income to their 401(k) plans to build an amount at retirement that can provide the retirement income needed. Also, these plans offer a menu of about 12 diversified stock and bond investment options among which you can allocate your savings. But best of all — the savings can be deducted right from your paycheck and there are no additional transaction or brokerage account fees — there is no better investing option than this for people who can only afford to start small.

529 Plan:
Minimum to start: $25
Minimum to add: $15 per month, using automatic deduction from another account
Where to Learn More: www.savingforcollege.com

If you want to start saving and investing for a child's future education costs, and need to start small but can continue to add ongoing amounts, then look no further than a 529 education savings plan.

Every state offers at least one 529 savings plan which allows anyone to open an account and begin investing. The growth and future withdrawals are exempt from taxes when used to pay for qualified education costs of the beneficiary.

Also, many states offer state tax deductions for contributions by their residents who save in their plans — so look into your states 529 plan first. Best of all, many 529 plans allow folks to start up an account with as little as $25 and make ongoing additions of as little as $15 as long as these are set up as automatic electronic deductions from another account or paycheck.

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