Having just $400 to invest may seem limiting, but it’s enough to get started building wealth over time. With some smart planning, even a small amount of money can grow significantly through the power of compound interest. This article will explore 8 ways to make the most of $400 for investing, from opening a high-yield savings account to investing in yourself through education. By consistently putting $400 to work through various investment vehicles, you can develop good financial habits and progress towards meeting bigger investing goals in the future.
Open a High-Yield Savings Account to Safely Earn Interest
Opening an online high-yield savings account is a great place to start investing $400 safely. The FDIC insures these accounts up to $250,000 per depositor, so your money is secure. High-yield savings accounts currently pay around 2% APY interest, allowing your $400 to grow each year. Choose an account like CIT Bank or Ally Bank that has no minimum balance and start earning interest on your money.
Invest in a Retirement Account for Tax Advantages
Contributing $400 to a retirement account like an IRA or 401(k) allows you to invest the money for the future and gain tax advantages. At age 59.5, you can withdraw Roth retirement funds tax-free. With a traditional IRA or 401(k), your contributions lower your current taxable income. Invest the $400 in mutual funds or ETFs within the account and take advantage of decades of tax-deferred growth.
Put Your Money into a High-Dividend ETF or Stock
Dividend stocks and ETFs generate income by paying out a portion of company profits to shareholders. $400 can buy you several shares of dividend ETFs like VYM or VIG, which hold stocks with strong dividend track records. Or buy shares of a mature, high-yield company like AT&T or Verizon. Reinvest the dividends to compound your earnings over time.
Invest in Yourself via Books, Courses, or Training
Spending $400 to invest in yourself can upgrade your skills, advance your career, and increase lifetime earning potential. Use $400 to pay for career-advancing courses, training materials, professional workshops, educational books, or skill-building apps. Investing in learning yields tremendous dividends and equips you for future success.
Pay Down High Interest Debt for a Guaranteed Return
Using $400 to pay down credit cards or other debt with interest rates above 10% provides a guaranteed return equal to the interest rate. You save money on interest payments by retiring debt sooner. Paying off smaller debts frees up cash flow to invest elsewhere. Review debts and accelerate payoff of the most costly high interest accounts first.
Investing $400 may not seem like much, but consistent investments in the right places can grow significantly over decades. Use $400 to start building lifelong habits – saving, investing in stocks and funds, paying off debt, and investing in yourself will all enable your wealth to grow.