We tend to underestimate the power of small money, as we wait for larger amounts. Many will prefer to talk about the millions they are investing rather than the few hundreds, what we forget is that a million is made up of very many ones. If you take out a euro from one million euros, you no longer have a million, that’s how powerful one euro can be.
As we wait to have millions, we are spending billions. But have you sat to think how much power that little amount you have has? Let’s look at the power of €50. That is less than what you pay for your insurance or even your monthly ticket. A night out will cost you much more than that. Most of us send much more than that to relatives in Kenya who don’t need it, just as a token of reminder that they have a relative abroad. Let’s look at how much you can do with that €50.
Earlier this year, I saw someone post a challenge to save €1 everyday for the whole year. If you have more you can use multiples of ten, so €10 or €100 or €1000 each day for the whole year. At the end of the year you’d have €365 from a “petty” one euro that you never pay attention to. Now back to the €50. How much can you do with €50?
You can have a savings account
To ensure you keep your end of the bargain, you can even put up a standing order (Dauerauftrag) in your current account to send €50 to your savings account every month. At the end of the year you’d have €600. That can pay for a holiday within Europe or even pay for your return ticket to Kenya for Christmas with the family. It might not be a lot of money but it trains your discipline for saving, as you research of where to invest. Next when you know where to invest and the amount needed to get in, then you can easily increase how much you save.
You can invest in the stock market with €50 a month.
The minimum number of shares you can buy on the stock exchange is 100, hence as long as you are buying shares that are trading below € 50, you can invest. There are actually many fundamentally strong companies that are trading below Kes 50 at the moment that you could actually be accumulating ownership in with this € 50. Let’s use an actual scenario. Assuming you had been investing € 50 per month accumulating shares in the last one year you would have accumulated 1,800 of these shares. You would have spent € 600 (€50 x 12) in total but the value of your shares would have been € 750 (after brokerage commissions). Of course past performance is not necessarily an indicator of future performance with shares and you would have to do further research on the particular share you are buying but this goes to show that with €50 you can actually activate the process of growing the value of your money.
You can invest in Treasury Bonds with € 50 saved for 10 months.
The minimum investment in a Treasury Bond is €500. You can put aside your €50 in a savings account and when it accumulates to €500 you simply go and purchase a Treasury Bond. Depending on the rate offered at the time, this bond will pay you some interest every six months. (Read about how Treasury Bonds work: Investment Opportunities other than Real Estate)
You can create or join an investment group (chama) with €50.
Come together with 10friends and each contributes €50 a month. Pooling the money increases the impact of your €50. As friends you can put together €500 a month and subsequently €6000 a year. With such an amount you can buy shares, property or even start a business. Depending on your dedication and that of your friends, you can take the group seriously and make serious investment together. (Read: Making your Kawaida Chama into a Money Minting Venture and Chama into a Conglomerate).
€50 a month over time is a very significant portion of your Retirement Plan.
If you prefer the formal Pension Fund (Renteversicherung) or Life Insurance (lebensversicherung), you can sign up for a private one that you’ll pay to monthly. €50 a month saved over 10 years and earning just 10% p.a. will accumulate to just under €10,000. Do not hesitate to start with or put an extra €50 in your pension fund.
Adapted from Centisible Woman by Waceke Nduati-Omanga.