55% of Americans believe they don't have enough money to invest, but did you know that you can get started investing with just $500? Yes, $500 is not a ton of money, but it's definitely enough to get something started. When it comes to investing, you don't need to be a millionaire to get your foot in the door. Learning how to invest $500 can put your money to work for you and get you started building real wealth.
The truth is the sooner you start investing your money, the better. Many Americans have no retirement savings at all! The best thing you can do for your financial future is to learn how to invest and grow your money even if you start with a small amount. (Don't have $500 to invest yet? Check out our suggestions on how to make $500 fast).
Check out the best ways to invest $500!
Here are 8 solid ways to get started with investing 500 dollars!
1. Start contributing to a 401k or an IRA
If you have access to contribute to your employer-sponsored retirement plan, like a 401k or 403b, $500 is a great amount to get you closer to your annual contribution maximums. Speak to HR about how you can make a one-time $500 deposit to your account.
Some employers offer a company match which means they will match up to a certain percentage of your salary that you invest.
For example, if your employer offers a 3% match of your salary and you make $500 a week, they would match up to $15 per week. So, your 3% becomes 6% because your employer matches the percentage you are saving into your retirement plan. Make it your goal to maximize your employer's match to earn as much free money as possible!
Another great way to invest 500 dollars for retirement is to set up and contribute to a traditional IRA or a Roth IRA through a brokerage and automate your transfers.
2. Buy a certificate of deposit
Need a safe place to keep your emergency fund or saving for a short-term goal? A certificate of deposit, aka CDs, is a safe way to invest 500 dollars.
Certificates of deposit are one of the safest investing avenues that exist because you get a guaranteed return on your investment in terms of the interest that is paid to you based on the initial deposit agreement you enter, regardless of what's happening in the economy. Not only is your return guaranteed, but your money is also FDIC insured.
It's important to keep in mind that interest rates on CDs are only slightly higher than savings accounts. However, when it comes to emergency funds or money you need for short-term goals, the whole idea is to keep that money easily accessible and not tied up in any investments. This way, when you need it, it's there.
The last thing you want is for the money you might need relatively soon to be tied up in an investment or impacted by a market decline.
3. Start a side hustle
Want to earn some extra money? Starting a side hustle is one of the best ways to invest $500! It is a good amount to buy goods or supplies to start out with or to get a website up and running.
For example, buying popular items to flip for a profit is one of the easiest side hustles to start. You can find popular items such as furniture, appliances, gently used baby products, etc., on websites or yardsales.
Facebook Marketplace, eBay, Poshmark, consignment shops, and thrift stores are a few places you can find great items to flip. You can then resell them for a higher price through the same avenues.
Learning how to invest $500 into a side hustle can help you begin earning multiple income streams and may even become a full-time business for you!
4. Set up a DRIP (Dividend Reinvestment Plan)
A dividend reinvestment plan is basically when you buy dividend-paying stocks. You can then reinvest whatever dividends you earn into buying more stock over time. Your money then gets to grow over time through these reinvestments.
5. Buy savings bonds
If you are risk-averse, then savings bonds are one of the best ways to invest $500. Savings bonds are less risky than stocks, but they earn less money too. However, it's always good to diversify your investments, so savings bonds can be a great place to start investing. The United States government created savings bonds to fund federal programs.
Bonds are low-risk and backed by the Full Faith and Credit of the American Government and are among the safest ways to invest. You purchase a bond for face value, and when the bond is redeemed, you receive the principal amount plus interest.
Of course, the amount you earn depends on the type of bond and whether you wait until it matures or if you cash it out early. You can invest in savings bonds electronically on the TreasuryDirect website.
6. Invest with a Robo-advisor
A Robo-advisor is one of the easiest ways to invest 500 dollars. Robo-advisors are automated investing services that manage your investments. It uses technology that bases your investments on the information you provide and finances.
Many financial institutions offer ways to invest through Robo-advisors. This is a great option to get started investing without tons of money. In fact, many financial services companies will automatically invest your spare change! Automate your investments and put your money to work with a Robo-advisor.
7. Pay your student loans or other high-interest debt
I'm a huge fan of getting aggressive with any debt you might have, and $500 can make a big difference. Think credit cards, student loans, car notes, etc. The return on your investment by paying down debt can save you a ton of money in interest.
This is the interest that you won’t have to pay to your creditors if you get rid of your debt as quickly as possible. Paying off debt can be one of the best ways to invest $500 because it can save you hundreds to thousands of dollars in interest.
8. Get help from financial experts
There are several well-vetted platforms out there that can help you improve your finances and teach you the financial concepts you need to know as well as the actions you need to take to build long-term wealth.
Clever Girl Finance is one of them! Our expertise and unique approach to financial education can give you a fresh perspective, new information, motivation, and accountability.
There is so much you can leverage to help you get your finances in order. Books, podcasts, and videos are great examples of things that can help. You'll learn how to deal with the things you struggle with when it comes to your finances.
Invest for financial success
When you invest 500 dollars, you start putting your money to good use, and it paves the way to future investment opportunities. Once you start earning more money and get more established financially, you can start to diversify your investments.
Stocks, bonds, and real estate are excellent ways to invest your money and build real wealth. Learn more about how investing works with our FREE course bundle!
Got more to invest? Check out our tips on how to invest $20k!