Ever stared at a $20 bill and wondered if it could be worth more than just another meal or streaming subscription? I’ve been there too, The good news? That small amount can absolutely be the start of your investing journey – no joke!
Many folks think investing is only for people with thousands of dollars sitting around, but that’s simply not true Even $20 can grow into something meaningful when invested wisely and consistently Let me walk you through exactly how to make that happen.
Small Money, Big Potential: Why $20 Matters
When I first considered investing, I thought my small amount was basically worthless in the investing world. But here’s what I’ve learned: small, consistent investments can snowball into impressive sums over time thanks to compound interest.
Think about it this way – investing $20 a month for 30 years at an average 8% return would give you around $29,000. Not too shabby for just skipping a few takeout meals each month!
Best Ways to Invest Just $20
Let’s get practical. Here are the most effective ways to invest that $20 bill burning a hole in your pocket:
1. Low-Cost Index Funds Through Commission-Free Platforms
According to Chris Heerlein, CEO of Reap Financial, one of the smartest moves for small investors is putting money into low-cost index funds through brokerages that don’t charge trading fees.
Why it works: With fractional shares now widely available, you don’t need hundreds of dollars to start investing in the market. You can literally buy a tiny piece of a big fund with your $20.
How to do it: Set up an account with a no-fee broker like Robinhood, Fidelity, or Charles Schwab. Then set up automatic weekly purchases of $20 into a total market ETF.
2. Vanguard S&P 500 ETF (VOO)
Money expert Andrew Lokenauth recommends the Vanguard S&P 500 ETF (VOO) as an excellent starting point for tiny investors.
Why it works: This fund tracks the S&P 500 (the 500 largest U.S. companies), giving you instant diversification. Lokenauth shared that he started with just $25 in this ETF last year and it grew by 12% – pretty impressive for such a small investment!
How to do it:
- Open an account with a platform like Robinhood that allows fractional shares
- Search for “VOO”
- Invest your $20 (you’ll get a fraction of a share)
- Set up automatic investments if possible
3. Vanguard Total Stock Market ETF (VTI)
If you want even broader exposure than the S&P 500, consider the Vanguard Total Stock Market ETF.
Why it works: This ETF tracks the CRSP US Total Market Index, which includes thousands of stocks across different sizes and sectors. It’s diversified across both growth and value styles.
How to do it: Lokenauth personally puts $40 monthly into VTI through M1 Finance, which allows automation of micro-investments without fees.
4. Micro-Investing Apps
For absolute beginners, micro-investing apps make the process ridiculously simple.
Options include:
- Acorns: Rounds up your purchases and invests the spare change
- Stash: Start investing with as little as $5
- Public: Social investing platform with fractional shares
Why it works: These apps remove the intimidation factor and make investing almost as easy as using social media.
The Magic Isn’t Just in What You Choose
Here’s something many investment articles won’t tell you: with small amounts like $20, your investment behavior matters more than exactly which fund you pick.
The real power comes from:
- Consistency – Investing $20 regularly beats throwing in $100 once a year
- Automation – Set it and forget it so you don’t have to rely on willpower
- Zero fees – With small amounts, even tiny fees can eat your returns alive
- Patience – Time in the market beats timing the market every time
Avoiding the Fee Trap
When you’re starting with just $20, fees can absolutely destroy your returns. That’s why choosing the right platform is crucial.
Look for:
- Commission-free trading
- No account minimums
- No maintenance fees
According to the SEC, a portfolio with a 1% fee will be worth $30,000 less over 20 years than one with a 0.25% fee (on a $100,000 initial investment). Imagine how fees affect smaller investments!
Realistic Expectations: What Can $20 Actually Do?
Let’s be real – a single $20 bill won’t make you rich. But that’s not the point.
That $20 investment can:
- Start building the investing habit
- Help you learn market basics without big risks
- Grow to meaningful amounts when consistently added to
If you invest $20 weekly ($1,040 annually) for 30 years at an average 7% return, you’d have about $163,000. That’s the power of consistency and compound interest!
My Personal Small Investment Experience
I started investing with just $25 in a total market ETF through Robinhood. Was it going to change my life overnight? Nope. But it did something more important – it got me in the game.
That small investment made me pay attention to the market. I learned more because I had skin in the game. And most importantly, it showed me that investing wasn’t some mysterious activity only for the wealthy.
Three years later, I’ve built that account up through small, regular contributions. Nothing dramatic, but steady progress that’s teaching me patience and discipline.
Beyond Basic Index Funds: Other Options for Your $20
While index funds are typically the smartest place for beginners to start, there are other options worth considering:
Dividend Reinvestment Plans (DRIPs)
Some companies let you buy stock directly from them, often with no fees, and automatically reinvest dividends.
Pros: No broker needed, automatic reinvestment
Cons: Limited to individual companies, less diversification
Cryptocurrency
Some platforms allow you to buy fractions of cryptocurrencies like Bitcoin or Ethereum starting with tiny amounts.
Pros: Potential for high returns, exposure to new technology
Cons: Extremely volatile, high risk of loss, not recommended for beginners
High-Yield Savings Accounts
While not technically “investing,” a high-yield savings account can grow your money safely (though slowly).
Pros: No risk of loss, FDIC insured
Cons: Lower returns than market investments, may not beat inflation
Common Questions About Investing $20
“Is it even worth investing such a small amount?”
Absolutely! The habit of investing is often more valuable than the initial amount. Plus, compound interest works its magic over time regardless of your starting point.
“How fast will my $20 grow?”
That depends on where you invest it and market performance. Historically, the S&P 500 has returned about 10% annually before inflation (around 7% after). But remember, past performance doesn’t guarantee future results.
“Can I lose all my $20?”
If you invest in individual stocks or speculative investments, yes. But with broad market index funds, while your investment will fluctuate in value, total loss is extremely unlikely unless the entire market collapses permanently.
“What’s better – saving $20 or investing it?”
Ideally, do both! Have an emergency fund in savings before investing. Once that’s established, investing gives you the chance for higher long-term growth.
Start Your $20 Investment Today: Step-by-Step
Ready to put that $20 to work? Here’s exactly what to do:
- Choose a no-fee platform – Robinhood, Fidelity, M1 Finance, or Public are all good options
- Open an account – You’ll need basic personal information and to connect a bank account
- Transfer your $20 – Most platforms have no minimum to start
- Choose your investment – For beginners, VOO or VTI are excellent options
- Set up automatic investments – Even $5-10 weekly will build your investment over time
- Don’t touch it! – Let time and compound interest work their magic
The Bottom Line
I remember wondering if investing my first $20 was even worth the effort. Now I know that small, consistent investments are absolutely worthwhile – not just for the money they might make, but for the habits and knowledge they build.
The most important investment you can make is simply starting. That $20 bill could be the beginning of your financial education and a more secure future. The key is taking that first step, however small it might seem.
So yes, you absolutely can (and should!) invest that $20. Your future self will thank you for having the wisdom to begin, regardless of how small that beginning might be.
Remember: The best time to start investing was 20 years ago. The second best time is today – even if all you’ve got is $20.
