How to Start Investing on a Small Budget

How to Start Investing on a Small Budget

Investing your money is vital to set yourself up for future success – and growing your money for use in emergencies, for special goals, or even for retirement are worthwhile objectives. However, when your budget is stretched or your income is inconsistent, it can be challenging to create and manage meaningful investments.

However, there are several ways in which, over time, you can create wealth and set aside money for when you need it most. In this article, we’ll explore several ways that you can begin investing on a small budget. 

This article is not intended as tailored financial advice, and we cannot be held liable for any loss incurred. When starting your investment journey, we recommend requesting the help of a licensed financial advisor – our guide can help you find the right one.

Try the ‘drip feed’ method

As its name might imply, the ‘drip feed’ method involves setting aside smaller amounts of money to slowly create a larger fund over time. The idea behind this method is to put spare change or optional expenses to better use, where it can grow and accumulate in value over a period of time.

To use the drip feed method, set aside a means to save smaller amounts of money each month – this could include setting aside an extra surplus in your budget, or even simply forgoing a morning cup of coffee. A cup of coffee each morning could easily amount to more than R10, and more than R70 each week – and while these are smaller sums, investing them in a savings account of your choice can enable them to accumulate over time.

Explore ETFs

Exchange Traded Funds, or ‘ETFs’, are ‘baskets’ or ‘groups’ of assets such as stocks which see their market value divided into a pre-determined number of units. Buying these units enables you to acquire a group of shares with varying risk and potential growth over time.

Buying into an ETF enables you to spread your wealth over several assets, and many ETFs are designed to incorporate a mixture of more speculative or conservative stocks to help balance their risk. While no investment is totally risk-free, ETFs are designed to be an easy method of introductory investing.

Buy fractional shares

You don’t necessarily need to purchase an ETF or a singular share in a company in order to invest in the stock market or an identified opportunity. Many trading platforms will instead allow you to buy fractional shares, which means that you can purchase a percentage of a share (rather than a share outright) for a lesser sum of money.

Investing in fractional shares can enable you to repeat your purchases and accumulate value in your owned shares over time – meaning that you can spread out the total cost of an investment.

Use high-yield savings accounts

High-yield savings accounts and Money Market accounts can enable you to earn a fixed monthly income through investment so long as you maintain a minimum account balance. If you are able to afford this opening deposit, you could opt to invest your money in such an account and then use the interest you accumulate for other investment purposes.

While the likes of Money Market accounts are traditionally low-risk, you could opt to use your accumulated interest to diversify your investments and either select another low-to-medium risk investment, or make far more speculative investments if you are prepared to take on a more significant level of risk.

Save your spare change

Many of us might be tempted to use our spare change for sundry expenses, but saving these funds can enable you to accumulate enough money to invest, or at the very least open a savings account with a minimum balance over time.

Start your own business

If you have thought about opening or running your own business, what better way is there to invest than for yourself and your goals?

If you have the money to spare, investing in the tools and resources you will need to make a business endeavour a success is one way to manage your own investment and secure your own profit. 

Read more from our blog: