But if you only have a small amount of money to spare, why bother investing at all? Here’s how to invest with $100 and why it’s important, according to Cruze.
The return also depends on the market’s performance, but the average return is about 10% per year, as measured by the S&P 500 stock market index.
Plus, there’s compound interest. Compounding is when the interest you earn in an investment account earns interest. It’s interest on your interest.
For example, Cruze explained that if you’re 22 years old and only invest $100 with an annual return of 10%, by the time you retire at age 65, $100 will grow to $7,239 without additional contributions.
Before you start investing , Cruze recommends paying off all debt, except your mortgage, and having three to six months’ worth of expenses saved in an emergency fund .
When you start investing, Cruze said the goal is to put 15% of your income toward your retirement accounts, such as a 401(k) or 403(b) through your employer or a Roth IRA .
Invest Early
Can $100 really make a difference? Absolutely, Cruze said. “Building wealth is all about taking small steps,” she explained.
The best thing you can do is to start early and develop the habit of putting money away. Investing early allows you to take advantage of compound interest (and potentially higher-risk strategies) without worrying about short-term market ups and downs.
In the video, Cruze explained that if you started investing $200 per month at 21 years old and stopped at age 30, you’d have $2.3 million. If you started investing $200 per month at age 30 and stopped at 68, you’d have $1.3 million.
“Time is on your side,” Cruze said. “Even if you can invest $100 or $200 a month and you start as early as possible, it’s going to pay off.”
You can still catch up if you wait, but you’ll need to put away more to get the same return. According to Associated Bank, for every ten years you wait, you’ll need to invest around two to three times as much money per month.
Adjust Your Contributions
If you get a raise, earn more at a new job or your spouse’s income increases, then it’s time to bump up your investments. “I recommend adjusting the amounts you invest as your income grows,” Cruze said.
Ultimately, the goal is to get to that 15%, which Cruze said will set you up for a great retirement.
Avoid Crypto
Cruze says to avoid crypto at all costs unless you have disposable income and want to take the risk. “[Crypto] does not have a long track proven record,” Cruze said. “Make sure that you put your money in proven methods that have worked for decades.”
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