Investing your money is a smart option if you want to grow your capital and improve your financial position. However, if you only earn a limited income, then you might be worried that this isn’t going to fit your budget overall. Indeed, you could assume that the money for investments could be spent elsewhere. It’s a reasonable position to take but there are flaws with this logic as we’re about to discuss. Let’s explore why you should invest, even if you have a low income.
Are You Saving?
You might be on a low income, but you could still be managing to save a small amount in savings each month. A lot of people are able to do this by maintaining a level of frugality in certain aspects of their life. The problem is that saving this money doesn’t always provide long term benefits. You could end up cutting into your savings through the month or through the year to spend on either luxuries or necessities. This is one of the reasons why investing can be beneficial. It takes that option off the table and instead your money will slowly grow in the background.
Better Than Savings Accounts
Now, if you’re a smart saver, you could put your money in a high interest saving account. However, high interest doesn’t mean what it used to. You probably won’t be getting more than 1% in interest annually and that’s if you’re lucky. This amount is also taxable which means that it’s reduced even more. There’s also the problem of inflation. Right now, inflation is climbing dramatically. Eventually, it will reach the point where it wipes out interest completely and makes saving pointless. While investments come with more risks, they also give you higher gains overall.
Low Cost Investments
It’s easy to assume that all investments are going to be expensive and possibly far beyond what you can afford. However, this is not the case. There are lots of investment options that are available at low prices and could offer a huge ROI overall. For instance, you might want to explore penny stocks. Penny stocks, as the name suggests, are available for what amounts to pennies. Essentially, you’ll be investing in businesses that are just getting started on the market. Now, while 90% of new businesses will fail, there’s a 10% chance you could invest in the next Apple or Microsoft at the ground floor. This makes what’s a small investment with a low risk worth the cost.
Alternatively, you might be interested in cryptocurrency. Crypto is the buzzword on everyone’s mind when it comes to investments these days. You’ve probably heard about the people who invested in Bitcoin early and became millionaires overnight. While it’s difficult to buy Bitcoin these days due to the high cost, there are other cryptocurrencies that are far more budget friendly. Similar to other low risk investment options, these have the potential to go through the roof over the next few years. This is something to consider when making your first crypto purchase.
A Safety Net
Another reason to invest is that it will essentially provide a safety net if they are successful. In your life, you could experience various financial challenges. You might be hit with a redundancy or a bill that you can’t afford to pay. The right small investment can become your umbrella on a rainy day. Even if you only see small gains, it could still be enough to cover a cost that you weren’t expecting and that you weren’t prepared for. Particularly, if you diversify and have a few different pans on the stove to work with here.
A Great Retirement
The final reason that you should think about retirement is that a choice like this will bubble away nicely in the background, hopefully gaining in value. You won’t have to think about it and you can leave it for as long as you like. For instance, you could leave your investment for years or even decades and then look back on it to find it’s enough to pay for a happy retirement. This is the dream and it’s one that tends to come true for a lot of people.
We hope this helps you understand some of the key reasons why investing on a low income could be the right choice and what this might mean for you in the long term. If you find the right investments, you can either slowly or quickly grow your finances and ensure that you are in a stronger position for the future. You can also stop your savings from going to waste.