How to Start Investing When You’re Broke

If you hope to build wealth over time, one of the best things you can do is start investing as early as possible. The longer you invest, the better the chance that your money will compound in a way that allows you to achieve financial independence during retirement.

What happens if you feel like you are too broke to invest, though? You might think you can’t start investing, but there are many tools available today to help you get a good start on your financial future.

Company Retirement Plan

One of the easiest ways to start investing is through your company retirement plan. You might not even think of it as investing, but when you contribute to a 401(k), you are putting money to work for you in an investment account.

Having the money taken directly from your paycheck simplifies the process — and you get to the point where you don’t even miss the money. Some companies also offer matching contributions. This means that your employer will contribute to your retirement account, matching your own addition up to a certain amount. This is free money that is invested on your behalf and that can grow over time.

Automatic Investment Accounts

If you don’t have access to a company retirement plan, you can still automate your investing to keep things simple. You can open an Individual Retirement Account (IRA) with a number of discount brokers, like TradeKing, ETrade, Betterment, Scottrade, Capital One Investing, Acorns, and others. Set up your account so that money is automatically moved from your bank account and into your investment plan, so you don’t have to think about it. Depending on the broker, you might need to commit $50 per month.

Most discount brokers will let you open an account with a very small amount of money, and invest small amounts at a time if you sign up for an automatic investment plan. Some brokers, like Betterment, are roboadvisors that will manage your asset allocation based on your risk profile. However, in order to take advantage of these types of services, you might need to commit to investing $100 per month.

If you feel like $100 per month is too much to contribute, Acorns is a discount broker that allows you to automatically invest pocket change, rounding up your transactions and putting the difference in an investment account.

Start With Small Contributions

You don’t need hundreds of dollars to start investing. Even though it feels like you don’t have enough to contribute to an account, the reality is that it’s better to invest a small amount than to invest nothing at all. Even small, regular investments can add up over time. Accounts like those with Acorns and the myRA pushed by the federal government can help you get a good start, even if you don’t have a lot of money to invest.

Make it a little easier to visualize setting aside money by breaking your contributions down into smaller amounts. Instead of focusing on $100 per month, think about breaking it down into $25 per week, or visualizing $5 per day, Monday through Friday. It doesn’t seem as difficult if you can break your contributions down into more manageable chunks.

It’s important to double-check fees and other costs, and to make sure that you are choosing an account that will help you reach your goals. Don’t forget to increase what you contribute as you are able. While investing a few dollars a month is better than not investing at all, and it can give you a solid start, the reality is that you will need to boost your investments as you earn more money.