It can be tough to make the right decision regarding money, primarily since financial literacy isn’t taught in regular schools.
This is why it’s essential to seek out guidance and get your financial situation in order.
It is a myth that you need to have a lot of money to start investing. In fact, people with lower incomes have the most to gain from investing.
One of the most important things you can do for your finances is building an emergency fund. Of course, it is often possible to use a credit card in an emergency, but this is not ideal.
Not only do credit cards have a high-interest rate, but using them can also damage your credit. It’s also not always possible to rely on a credit card to bail you out.
Building an emergency fund is frequently overlooked because many people don’t feel like they make enough money to start saving.
Or, if you have credit card debt, it can be tempting to use any extra money to pay it off sooner. Financial advisors confirm that you should start building an emergency fund even if you have outstanding debts.
The reason why having an emergency fund is essential is because you can use it without accruing interest.
If you live pay-check to pay-check as many lower-income people do, it is all too easy to regularly get stuck using your credit card and never paying it off.
Credit cards vary in interest rates, but they always cost more money than using your emergency fund.
The amount you waste on paying credit card interest can be put towards your emergency fund as you slowly pay it off. Plus, savings accounts can earn you interest in the long run.
Fixed Deposit Account Investment
Once you have some money set aside for your emergency fund, it can be a good idea to invest in a fixed deposit account.
This is a type of savings account where deposits are made for a specific period and earn you a fixed interest rate.
Basically, you agree to leave a definite amount of money in an account for a particular amount of time.
Usually, the longer you leave it, the more you can earn. The main perk is that the interest on your fixed amount is guaranteed.
The downside is that you cannot access the money during the period that you agree to.
Depending on the account, it may be possible to withdraw in an emergency at a cost. If you withdraw it early, you will not make any interest.
While this isn’t a quick way to get rich, it is a risk-free way to make some money. The rates are fixed, so you know exactly what you can earn going in.
It is a rule of thumb when it comes to investments that the higher the risk, the higher the reward. But if you don’t have a lot of money to take risks with, slow and steady wins the race.
A lending business is another popular way for people with less money to potentially make an earning.
However, it can be quite risky if not done properly. There are many companies that do micro-lending, which means that only a tiny amount of money is necessary for the investment.
Lending business involves lending small sums to people around you if they need instant cash for a short period.
After the time is up, they are expected to pay you back with interest. You can do this on your own at a higher risk or go through a verified company to be extra safe.
It is always important to sign a bond noting the amount that was lent and the agreed payback and interest. It is good practice always to collect collateral worth more than the amount that you are lending.
That way, you have a backup plan for recovering the money in case they fail to pay at the agreed time.
An example of people who request money through lending is to advance their business and need some extra cash fast.
However, there are many different situations where someone may seek out to borrow money in this fashion.
You don’t have to have deep pockets to start investing. People with lower incomes have the most to gain by using their money smartly.
Part of becoming financially literate is learning about investments that you can make to make more money.
Building an emergency fund, opening a fixed deposit account, and lending money is a great way to start.
Saving for retirement young can also be seen as a smart investment. Here’s all the tips you need to get started.
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