Saving thousands is a big deal. Investing for the first time is an even bigger one. A good way to to look at it is that most successful investors started right where you are today. They finally reached the one-thousand dollar milestone and didn’t know what to do next. However, what they did know, was that before they jumped into the world of stocks and bonds, they had other considerations to go over.

One of the biggest considerations for investors with minimal funds is not only where you are investing your money but also how you are going to go about investing it. Will you choose a short-term investment with minimal risks or will you take part in a long-term investment?

Short -Term Investing

Short term investing can be summed up as investing for a year or two with a short-term goal in mind. Investments that are short-term usually have minimal risks but also offer lower returns. There are numerous types of short-term investments that you can put money into, but we will focus on the following: Certificates of deposits, money market accounts and money market funds.

Certificate of Deposits (CD’s)

Certificate of Deposits, otherwise known as CD’s, are low risk investments suitable for cash that you don’t need for months or years. These investments are sold by banks and usually deliver low returns. If you put money in the CD and don’t touch it, the banks will pay you a slightly higher interest rate versus a regular savings or checking account. Keep in mind that if you withdraw money from a CD before it has fully matured you will be responsible for a penalty fee. Although CD’s are known to be a safe investment, their low interest rate means your money grows at a very slow pace. 

Money Market Account

A money market account is similar to a savings account but earns a higher amount of interest. The minimum balance is usually a lot higher than a basic savings and can range between $500 to $50,000. When you deposit money into your money market account it earns interest on a daily or monthly basis and is paid on a monthly/quarterly basis. There are withdrawal and transfer limitations when it comes to these accounts. You are allocated no more than six payments or transfers between accounts during each monthly period.

Money Market Funds

Money market funds are mutual funds that invest in short-term, high-quality investments that mature within 13 months or less. They base their annual rate of return on the yield the fund has earned in a seven-day period. There are different types of fund investments including U.S. Treasury securities, CDs, federal agency notes, commercial paper and municipal securities. Money market funds can be bought and sold at anytime and usually pay investors a monthly dividend. Money market funds can be bought at a brokerage house, mutual fund company and some banks.

Once you have decided on a short-term investment you should begin with rule number one from Robert Palmer’s Saving Thousands Rules. Rule number one tells us that we should always shop around. This is in regards to all purchases including bank fees, ATM fees, monthly fees, etc. Before you make the commitment with a bank or credit union, go over all the fees involved. Will there be a monthly maintenance fee? Is there a separate bank fee? Be sure to go over all fees associated with the investment that you decide on.

Long-Term Investing

Long term investing is investments that happen over a longer period of time but have a bigger return. These investments can come in may shapes and sizes but we will focus on: Treasury Direct I Savings Bonds, Exchange traded funds, and individual retirement accounts.

Treasury Direct l Savings Bond

According to, I Savings Bonds are known as “a low-risk, liquid savings.” They can be used to supplement retirement income, give as a gift, or pay for education. I Bonds are sold at face value and can be purchased through TreasuryDirect or with your IRS tax refund. They are meant to be long-term investments that continue to earn interest for up to 30 years. Students looking to finance their education with I Bonds may be excluded from Federal income tax.

Exchange Traded Funds (ETFs)

Exchange Traded Funds, also known as ETFs, are funds that track indexes of NASDAQ-100 Index, S&P 500, and Dow Jones. ETFs experience price changes throughout the day as they are bought and sold but they have become a favored investment because they are tax efficient and have low operating expenses.

Individual Retirement Account (IRA)

An IRA is an account that collects any kind of investment you have to put into it and gives people a way to build tax-deferred savings for retirement. Investing in an IRA means your money can typically be withdrawn tax free in retirement.

Investments to stay away from:

Investments that are too good to be true.

Investment frauds which can come by phone or mail.

Phony investment brokers- always do your research. Use Rule #12 and always check references.

Telemarketing Fraud

Most importantly, don’t wait! The earlier that you invest, the more time your money can spend growing. Getting started is more important than finding the perfect fund or stock.