Money is something we all cannot get enough of. No matter how much you have, getting more always feels good. Just ask Jeff Bezos.
But when you don’t have a lot to begin with, having more money means so much more. It means being able to have that holiday you’ve always dreamed of. It means being able to retire well and retire young. For many of us, it means being able to create the life we want.
When it’s put like this, it’s clear that we all should be doing something to increase how much money we have.
If this is something that’s been on your mind, then you should know one of the best ways you can grow your money is by investing it. While it’s great to start a business and become the next Amazon, the truth is that’s not going to happen for most of us.
However, there’s nothing stopping you from piggybacking off Amazon’s success and growing a tidy nest egg from their performance. And the great thing about this is anybody can do it. You only need the right information and a spot of savings.
In this article, we’ll provide the information you need to learn how to grow your money in 2020. As for the savings part, we’ll leave that up to you. Here are 4 ways to get started on creating a sizable nest egg in 2020.
Important note: As the SEC is keen to remind people, investing is risky and you should only invest money you can afford to lose. That aside, you should only make the decision to invest when you’re on top of your debt and have enough set aside in rainy day funds (ideally 3-6 months’ salary). If you’re A-okay on these counts, then let’s dive into how to increase your money this year.
#1: Save money in a High Yield Savings Account
A great place to start the process of growing your money is to park it in a high-yield savings account. These savings accounts are perfect for people who want to start their first foray into the investing landscape but with a gentle landing. High yield savings accounts function pretty much like any other savings account, except that they provide significantly higher interest rates on your savings.
To get an idea of just how significant these rates are, banks typically pay around 0.01% to 0.05% APY on a standard savings account. But on a high yield savings account, you can earn rates up to 1.61%, depending on the bank you’re choosing. In addition, most have either no minimum required balance or have a minimum balance that’s so low, it won’t be a problem.
Some of the options you can explore include CIT Bank, which requires a $100 minimum balance and offers between 0.95% and 1.40% APY. But ensure you read through all the information you’re provided so you can understand exactly how much interest you can expect and what fees are applicable.
#2: Try out a Robo Advisor
We’re in the space age where you can get a date online, go to school online, and these days, even go to work online. It makes perfect sense that you should be able to have your own personal AI-powered investment advisor at your beck and call.
While Robo advisors have been around for a while, there aren’t many people who understand what they do and how helpful they can be. Robo advisors are generally investment AI, offered as apps, which help you find, select, and manage an investment portfolio with minimal effort on your part. Often, all you need to tell these advisors is what kind of stocks you’re interested in and how much you want to invest.
Many of these advisors are made especially for small-dollar investors, and either require low account minimums or no account minimum. They also offer the opportunity to invest in “fractional shares”. This means instead of coughing up $1,400+ on a single Tesla share, you can buy a slice of that and still enjoy the returns.
If there’s any downside to these trusty investment sidekicks, it’s that they typically charge a fee of around 0.25% per year. And some are even free. Some of the great options you can check out include Betterment and Wealthfront, which both charge about 0.25% annual fees. Another great option is M1 Finance, which charges absolutely no fees, and has no minimum balance.
#3: Become a Peer to Peer Lender
Peer to peer lending is an investment opportunity that is steadily growing in popularity. It works by connecting people who want to invest money with people who want to borrow. Think of it as a direct marketplace where you can scrutinize prospective borrowers and decide whose project will offer you the best rates of return.
Since peer to peer lending takes bankers out of the equation, it eliminates many of the costs and expenses commonly associated with lending. This means borrowers can access loans at cheaper rates. In addition, since the lending platform has lower expenses, it also means lenders can enjoy better interest rates, making everyone happy.
There are many lending platforms to choose from. Some of these provide a range of projects spanning several industries that lenders can choose to invest in, while others focus on a single industry. Lending Club is one of the most popular options on this scene and offers rates between 5.05% to 8.74%.
#4: Invest in your retirement
Although many do not realize this, one of the most profitable ways you can grow your money is by investing in a retirement account. Here’s why. Retirement accounts are typically also investment accounts. This means while your money is in there, it doesn’t just sit idle. It gets invested in a broad range of products and will earn you money.
In addition, your contributions to a retirement account are typically tax-deductible, plus the growth on the money is tax-free until you withdraw it. This means you get to save more money towards your future while being able to enjoy more of your income in the present. That’s a good deal.
If you already have an employer-sponsored 401(k), you can make direct deposits to the plan out of your paycheck. You don’t have to start by putting hundreds or thousands of dollars in. You can save any amount you want, depending on the rules established by the plan. Some plans also provide for an employer match. This means your employer will match your contributions to the plan, leading to more savings for you.
If you don’t have an employer-sponsored 401(k), you can open a traditional or Roth IRA by yourself. The difference between the two is contributions to a traditional IRA are tax-deductible but Roth IRA contributions are not tax-deductible. Both plans are allowed to grow tax-deferred though. This means you only pay tax when you want to withdraw the money. And if you’re making the withdrawal after 59 ½ years old (having had the plan for more than 5 years), you get the whole thing tax free.
As you can see, there are many ways you can get to work on growing your money, even with little savings. Even better, with every dollar you earn on your money, you can begin to see the power of compounded interest which lets you earn even more on your money.
So, take the first step today with the little you can spare. Bezos didn’t do it all in a day, and neither can you. The key is to start, and watch the rest fall into place.