How Much Money Do You Need to Start Investing?

My mother had never invested a dime. As a single mother and high school math teacher, we always lived paycheck to paycheck. I never really wanted for much. But we were never swimming in luxury either.

I remember asking her one time about investing for retirement, and she just laughed. She didn’t know how to invest, and she never thought she had enough money to even try.

Times are different now. Thanks to smartphone apps, the internet, and an incredible breadth of knowledge at our fingertips, it’s easier than ever.

Now, it’s easy to start investing even if you only have a little bit of money. You don’t need much to get started. Technology makes investing ridiculously easy.

Here are a few simple ways to start investing while serving in the military, even if you don’t have much to get started.

Getting Started with the Thrift Savings Plan

It’s incredibly easy to get started with the Thrift Savings Plan (TSP), the federal government’s version of a 401k retirement plan or for its civilian and military employees. If you are a member of the military, you can sign up to contribute monthly to your TSP account.

You can complete Form TSP-U-1 or use myPay through DFAS to start your contributions. Most services now use myPay exclusively.

You have to contribute at least 1% of your base pay to start contributing to TSP. For an O-1 with less than two years of service, that’s about $30 per month, or $15 per paycheck, that you can contribute to TSP. Of course, there are limits, too.

You may be thinking, “What is $30 per month or $15 per paycheck going to do for me?”

It’s a start! That’s all you need – a foot in the door.

Then, I boost my TSP contributions by 1% every January after I get my yearly cost-of-living pay raise. It’s been an easy way to increase my annual contributions without even realizing it.

You’ve already factored in your current paycheck into your budget. Any pay raise or promotion that you receive is like free money. That new money won’t affect your budget; add it to your retirement investing. Your budget will never realize it’s missing it.

This brings up an important concept: dollar-cost averaging.

What Is Dollar-Cost Averaging?

Quite simply, dollar-cost averaging is investing a fixed amount of money at regular intervals. Many people invest a set amount each month. A great example is automatic investing through your Thrift Savings Plan, 401k, Roth IRA, or other accounts.

So, in the example above, the $15 per paycheck is dollar-cost averaging.

Every month, you invest that $30 and you purchase as many shares as your money will buy on the day the order goes through. So, if the share price goes up to $15, you will buy two shares.

However, if the price falls to $10 a share, your investment will purchase three shares. The benefit is that you buy fewer shares when the price is high and more when it is lower (remember, the goal is to buy low and sell high).

Dollar-cost averaging helps you invest consistently with whatever amount you can afford. By investing consistently, you can take advantage of opportunities when prices drop.

Buying Shares in Mutual Funds and Index Funds

Another good way to start investing is to buy shares in mutual funds and index funds.

Mutual funds are pools of investments managed by professionals. Investors buy shares of a fund, which then buys and sells stocks and bonds for the group instead of the individual investor.

Index funds are portfolios that buy shares of stock in the same weights and manner as a stock market index. For example, an S&P 500 index fund would own shares of the 500 companies that comprise the S&P 500 index.

Index funds take the guesswork out of a mutual fund manager’s job because they can only own the stocks and weight the fund like the index in most cases.

You can typically buy shares of mutual funds and index funds through a discount broker like Ally Invest, Charles Schwab, and many others. You may also be able to purchase mutual funds and index funds through your bank.

Many banks have an investment arm that lets you move money quickly to invest. You can also buy shares of funds directly from the mutual fund companies, such as Vanguard or Fidelity. Many mutual funds and brokerage firms require a $500 initial deposit to begin investing.

If you’re a brand new investor, those minimum amounts may be out of reach. But some mutual funds and index funds waive the account minimums if you set up automatic monthly investments. Many offer small monthly recurring payment options, as low as $25 to $50 a month.

Where to Get Started for Almost Nothing

Other options can help if you’re particularly nervous about investing on your own. You may like robo-advisors such as Betterment or Wealthfront, which make it easy to start investing with minimal cost and take most decisions out of your hands.

Betterment and Wealthfront are good examples of low-cost, ethical companies that can help you choose your first stock or mutual fund if you feel intimidated.

Both use computer models and algorithms to find the best investment mix for you based on your age, goals, income, and taxes. They provide recommendations and help you invest.

Several smartphone apps like Stash or Acorns can help you start investing with small amounts of money. Both apps let you start investing with as little as $5.

Stash offers a broad range of mutual funds, and it targets younger investors by grouping stocks and funds into fun categories, including social media companies like Snap and Meta Platforms. Stash lets you invest in fractional shares with small investments.

The Acorns app lets you save your spare change from regular purchases. When your balance reaches $5 or more, Acorns invests it in a diversified portfolio of stocks and bonds.

Don’t forget the new Blended Retirement System, which has applied to new service members since 2018. If you’re in the Blended Retirement System, the Department of Defense will automatically contribute 1% of your basic pay to your Thrift Savings Plan.

The 1% automatic contribution takes effect after 60 days of service, and the DOD will also contribute up to 4% in additional matching contributions after you complete two years of service.

Start Investing Today

You don’t need much money to start investing. Smartphone apps and online discount brokerages have lowered the barrier to entry for even the newest, most novice investor. If you don’t feel capable of investing your funds, there is help for that too.

The worst thing that you can do is let the thought of investing paralyze you. You need to start investing for your retirement.

And now it’s easier than ever to start investing. Today’s Wall Street isn’t the same one that scared our parents into not investing. You don’t need much money to begin investing. So get going!

What’s holding you back from investing for your retirement? Are you worried about making a mistake? Do you still think that you can’t afford to invest?