How to invest small amounts of money

More and more young people are starting to invest, especially now that savings rates in many countries are lower than ever. Investing can be a great way to grow wealth, but in many cases wealth itself is often a stumbling block. Many people still believe you need a lot of money to start investing. This is a misconception: you can invest effectively with small amounts to build a fund for the future, save for your dream vacation or simply put your unused money to work.

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Use the return-on-return effect to your advantage

Investing is worthwhile even with small amounts of money as it allows you to grow your wealth over time through the power of compounding. Every little bit you invest can generate returns, and those returns, in turn, generate more returns, creating a snowball effect. This means even modest, consistent contributions can add up significantly over the years.

In the case of saving, money often loses value due to inflation. Investing gives your money the potential to outpace inflation and really do it's own work for your funds.

Starting small also helps you build good financial habits, gain experience, and develop confidence in investing—all of which set the foundation for long-term financial success.

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You don’t need to be an expert

The number of investors grows yearly because many people, like you, want to get more out of their money. Investing has also become easier than ever. The myth that you need to understand Wall Street inside out or read financial supplements is simply not true.

Here are the key things to know before investing:

1. Only invest money you can afford to lose.
2. Patience is a virtue, especially when it comes to investing.

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Investing small amounts from €1 a day

How much you invest depends on what you can spare each month. Every little bit helps. Setting aside just €1 a day adds up to €365 a year or €3,650 in ten years. With an annual return of 5%, that could grow to €4,820.48 in ten years.

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The power of compounding

The earlier you start investing, the better. Consistently setting money aside over time allows your money to work for you. Compounding creates a snowball effect—earnings generate more earnings.

For example, investing €50 a month (€600 a year) with a 5% annual return would result in €3,481.17 after five years. In 20 years, this would grow to €19,239.57.

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A half-million dream fund

Patience can pay off big time. Starting early makes reaching long-term financial goals, like saving for retirement, much easier. To save €500,000 by age 65 with a 5% average return, you’d need to invest about €333 monthly if you start at age 25. Wait until age 55, and you’d need to invest about €3,150 a month to reach the same goal.

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Tips for investing small amounts

You don’t need a fortune to start investing—small amounts can go a long way. Here are some tips:

1. Skip unnecessary expenses: For example, skip the “last drink” at Friday night drinks and invest that money instead. It adds up over a year.
2. Quit smoking: Use an app or our handy budgeting sheet to track how much money you’re saving, and invest that amount. With cigarette packs costing around €8, you’ll save significantly.
3. Round up your purchases: With the Peaks app, you can use the Round-ups feature to round up everyday purchases to the nearest euro and deposit the difference into an investing account.

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Important to know: Investing involves risk, and you may lose (part of) your initial deposit. The calculations above are based on an expected return, which may differ in reality. Always consider potential variations, both positive and negative.