Many people think that buying stocks or having investments requires a lot of money. In reality, investing for the future can be done if on the budget of someone who is living paycheck to paycheck. The key is knowing where and how to accomplish the task.
For most people, even saving a little money out of each
paycheck is very difficult. Between the
bills that have to be paid each month, and the special little surprises which
arise, most people just aren’t able to save any money.
In addition, for those who are living paycheck to paycheck,
it seems that only those individuals that already have money are the only
people that can really afford the methods that are necessary to save. It is hard to invest in stocks when you need
a minimum of $2,500 to even open a trading account. Even worse, let’s forget trying to open a
long-term annuity when you need $10,000 just to talk to a broker.
The reality, however, is that a lot of people save for the
future without having a lot of initial capital to invest. The trick to building a savings for the
future is twofold: having a plan that you can afford to stick with, and knowing
the ways that you can save with only a few dollars.
By following some or all of the techniques outlined in this
article, you can have a savings for the future.
Just remember: savings is not built overnight. You will not get rich overnight, either.
Sharebuilder
After the stock market gains of the 1990’s, and the big name
IPO’s of the last few years, it seems that everyone is talking about the stock
market. Of course, in order to invest in
the next Google, you usually several thousand—or tens of thousands to get in on
the hot stock market properties.
In actuality, however there is a way for the small investor
to begin to acquire stocks on a small scale.
That way is called Sharebuilder.
Sharebuilder is a company that allows you to invest in stocks in dollar
amounts, not shares of stock. With this
method, you can actually invest as little as $5 or $10 in Microsoft or Intel
and own fractional shares of stocks.
While it may seem odd to own 12.453 shares of a company’s
stock, these are real shares. By owning
fractional shares of stock, you will have all of the rights and privileges that
come with ownership. You will be able to
vote for corporate board members, decide on company issues, and even be invited
to attend annual stockholder meetings.
Of course, with all good things, there are some
restrictions. First, Sharebuilder only
places order for partial shares of stock once a week. Each week, you tell Sharebuilder how much
money you want to invest, and which stocks you would like to purchase. Each Tuesday, the company purchases these
stocks with your money—and for all of their members.
The cost for buying shares is $4.00 per stock purchased. Of course, they do have three different
membership levels, ranging from the single fee to recurring monthly fees as
high as $20. These fees lower the individual
weekly purchase price per stock, and gives you access to other investor tools.
For people who may want to buy stocks in real-time,
Sharebuilder also offers this to their members.
Of course, the fees for purchasing stocks in real-time is comparable to
other brokerage firms.
Finally, when you are ready to sell your stocks, the fee to
do this is more than $4.00. In fact, the
commission charged by Sharebuilder to sell stocks in a particular company is
the same as the fee for real-time trades, depending on your membership
level.
This means that you are probably not going to be buying and
selling stocks on a regular basis.
Instead, you will be buying stocks and holding on to them. Of course, for the long-term investor—or the
individual with who needs help to remain focused on the overall goal—this may
be a great feature of the program.
One Share
In addition to saving for their own futures, there is a
great way to teach children about investing.
One Share is a company that allows people to buy one share of
stock. The idea behind this, of course,
is not to get rich, or even have a large investment for the future.
Instead, the idea is to purchase one share of stock in a
major company, such as Apple or Microsoft to display on your wall. This shows children, and adults for that
matter, that they actually do own a piece of a major company.
The downside of using One Share is that every share of stock
purchased has a transfer fee (which is around $40) added to the price of the
share of stock. In addition, you can
also purchase a nice frame if you are giving the stock as a gift.
Again, this is not a way to get rich on the stock
market. However, if you are a parent who
has decided to get your savings and future in financial order, it is a good
idea to pass this on to your children.
There is no better way to teach a child about money and investment than
showing it to them with a real life example.
Savings Bonds
When most people think of savings bonds, they may think of
something that was received for winning the school spelling bee, or a gift
given by a grandmother to start that proverbial college fund.
In reality, savings bonds can actually be great ways to
invest. Especially if you are a person
who has trouble putting money away without finding reasons to spend it, savings
bonds may be just the answer.
Savings bonds can be purchased in amounts as small as
$25. And instead of having to go the
bank to buy savings bonds, they can now be purchased online. When you purchase the bond, it accrues
interest twice a year. The beauty comes
in the fact that a savings bond cannot be cashed in for its accrued value until
after 12 months from the original purchase date. This means that the money invested cannot be
touched for at least a year.
Now, in reality, the interest that savings bonds accrue is
not that high. However, when you
consider that you can invest $50 a month, or $600 a year, draw interest on it,
do this for the next several years, and not be able to easily touch it, you
will find yourself with a pretty good amount of money later on.
A Savings Plan
Now, you can have all the knowledge in the world about the
above listed plans, but if you don’t have a plan for actually saving money,
then no amount of information is going to help.
The first step to actually making savings a normal part of
your life is to treat it as a monthly expense.
Just as you do with your car payment, mortgage, or even cable bill, plan
your savings as a bill. And just as you
should with an expense, make it an expense that you can afford.
Secondly, make your savings plan something you are proud
of. While so many people might see this
as common sense, it is not! Most people
buy a car because they are proud of its appearance, or a home because of its
location. Well, putting money aside in
stocks, savings bonds, or even just a savings account should be viewed as
creating assets—assets for the future.