If you're just starting out in life and don't have a lot of money, it might be hard to set aside money for saving and investing. It's worth the trouble, though. The longer you save money, the more it can grow. Plus, whether you're making $15,000 per year or $150,000 per year, sometimes things go wrong, and an emergency fund can help you get through tough times. Even with very low, poverty-level pay, you can find money to save.
When you have a relatively low income, finding money to save isn't always easy. One trick is to save your change, so when you buy something for cash, put the coins you get back in a jar or piggy bank. Over time, you could build up real money. You might also choose to set aside a little bit of money -- even if it's just $10 or $20 -- every time you get paid. Another way to find money to save is to lower your expenses. Whether you get a roommate, live at home or cut unnecessary leisure time expenses, you might be able to stretch your money further.
Opening Brokerage Account
While some investment houses have minimums that run into the thousands of dollars, others will let you open an account with just about any balance. Another way to save is to open an account at a bank that pays a new account bonus. That new bonus could work out to a meaningful return.
The investments you choose are going to depend on what you plan to do with the money. If you're saving to have some emergency money or to make a purchase relatively soon, such as a car, you might want to keep it in a bank account where you can get to it quickly. Longer-term savings can go into bonds or, if you plan to have the money stay for a long while, stocks or stock mutual funds. Stocks and bonds offer higher returns than interest-bearing bank accounts, so your money will grow more, but their higher risk means your investment returns will fluctuate as they rise in value. Forbes magazine recommends focusing on investments that don't have a lot of expenses, such as management fees, and leaving them alone rather than trading them frequently, because fees can eat into your returns.
Free Money From IRS
One of the best ways to save is to take advantage of the IRS' Saver's Credit. As of 2013, if you are at least 18, not a full-time student and independent of your parents, the IRS will give you back up to 50 percent of what you save for retirement, up to $2,000 per year. Assuming that you're single, to qualify for this free money, you must have an adjusted gross income, which is usually no more than what you earn, of $17,750 or less. Incomes between $17,251 and $29,500 still get a credit, but it is smaller.
- MSN Money: Four Easy Ways to Start Saving
- CBS MarketWatch: Five Steps to Jump-Start Your Retirement Savings
- Scottrade: Online Broker Comparison
- Money Crashers: Best New Bank Account Promotions, Offers and Free Money
- Forbes: How to Open Your First Online Brokerage Account
- IRS: Retirement Topics -- Retirement Savings Contributions Credit (Saver’s Credit)
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.