4 Ways to Build a Giant Nest Egg by Starting Off Small

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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Only 34% of Americans who use a savings account also use a retirement account, according to a recent survey by Discover, and nearly a quarter don’t save at all. One of the major reasons respondents shared for their inadequate savings was a lack of income.

But it’s possible for many people to save for retirement and other goals without earning a lot of money. If you find yourself in this situation, we’ll help by sharing why saving now is better than waiting and providing tips on how to set aside more money for retirement.

Why saving a little now is better than nothing

“The longer you’re invested, the more time your money has to compound,” said Tripp Yates, a certified financial planner and certified public accountant at Eaglestrong Financial.

To give you an idea of how much compounding interest can benefit you, here’s a chart that shows your returns if you invest $100 per month starting at ages 25, 30, and 35.

If you start investing $100 per month for retirement at age 25, you’ll have over $100,000 more by age 70 than you would if you started five years later. That’s a huge difference, especially considering you’ll have saved only $6,000 more over those five years.

The same rule applies to the concept of saving a little bit now rather than waiting for your income to grow. Even a few dollars a week can benefit from the power of compounding interest.

Starting is the hardest part, said Yates. “But once you make a decision that you’re going to save, you only have to make that decision one time,” he said. “Start small, and you can always increase it later.”

Even if your meager savings aren’t enough to retire on alone, you’ll develop the habit of saving so it’s easier to continue to do so as your income increases.

4 tips to save for retirement without a lot of money

If you’re not sure you can manage to save for retirement, here are a few tips that can help you set aside a little money each month.

1. Have your savings taken out of your paycheck

If your employer offers a 401(k) or similar retirement account, you can have your contributions taken out of your paycheck before you get paid. This is one of the most important things you can do for your future.

For starters, you might get tax savings. With a traditional 401(k), for example, the government doesn’t tax the contributions you make to your retirement account. So, if your effective tax rate is 20% and you contribute $1,200 in a year, you’ll save yourself $240 in taxes.

Also, 76% of employers match contributions their employees make to their 401(k) accounts, according to a report by the Society for Human Resource Management. So, if you contribute $1,200 in a year and your employer matches that contribution, you’ll instantly double your investment.

“You do not want to leave that money on the table,” said Yates.

2. Use a micro-investing app

Since Acorns launched in 2014, several micro-investing apps have followed, making it easier for people with low incomes to save for the future. Here’s a quick summary of some of the top options.

Acorns

Acorns works by connecting to your checking account or credit card. When you use your accounts, Acorns rounds up each transaction to the nearest dollar and then deposits the difference into your Acorns account to be invested in $5 increments.

You also can set up recurring investments, and you can invest your money in a taxable account or a retirement account.

Visit Acorns

Finhabits

Finhabits is a retirement savings app that allows you to save as little as $5 a week. Just connect your checking account and set up your weekly contribution.

One thing that makes Finhabits unique is the fact that you don’t need a Social Security number to sign up. All you need is an individual taxpayer identification number.

Visit Finhabits

Stash

Stash allows you to start investing in two ways. First, you can deposit as little as $5 at a time directly into your Stash investment account. Stash offers both taxable and retirement accounts.

Second, you can sign up for Smart-Save, which, when connected to your checking account, calculates when you have spare cash and transfers a portion of it to your Stash account. From there, you can keep it in the general account, transfer it back to your checking account, or invest it.

Visit Stash

3. Boost your income

Finding ways to earn more money can be hard. But there are several things you can do now to start the process. Here are just a few ideas:

  • Ask to work overtime at your job.
  • Change jobs.
  • Learn a valuable skill or obtain a professional license.
  • Start a side hustle.
  • Learn how to earn money from your hobby.
  • Adjust your tax withholdings (this works best if you typically get a big tax refund each year).
  • Sell unused stuff around your house.
  • Use cash-back websites when you shop online.

There are several other ways to make extra cash online. The important thing is that you start looking for opportunities that work for you.

4. Cut back on your expenses

“No matter how much money you make, if you don’t have a set budget, you’re always going to find a way to spend more money instead of saving it,” said Yates.

As a result, it’s critical that you create and maintain a budget for your big expenses and everyday purchases. Break down your spending into different categories and make sure your expenses don’t exceed your income. Then, look for ways to cut back on unnecessary expenses, such as eating out, entertainment, and travel.

Also, look to cut bloated spending in areas such as groceries, utilities, and gas. Consider using a budgeting app to help you achieve your goal.

Keep the end goal in mind

Saving for a goal that’s decades away might not seem important if you’re dealing with money struggles now. But your 65-year-old self will thank you down the road if you start saving for retirement early, even if it’s only a small amount. As time goes on, you can increase your savings rate, but developing the habit now will help make it easier.

If you ever feel unmotivated to save for retirement, think about how you want to spend your time once you’re no longer in the workforce. Write it down and refer to it often to keep yourself excited about the future. Then search for more ways to make those goals happen by investing your money wisely.

Want to get started investing?

Here are the top investing options for 2018!
NameCommissionAccount Minimum 
Blooom$10/month$0Visit Blooom
Future Advisor0.5%$0Visit Future Advisor
Betterment0.15% – 0.35%$0Visit Betterment
Personal Capital0.49% – 0.89%$25,000Visit Personal Capital
Wealthfront0.25%$500Visit Wealthfront
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.