5 financial planners share exactly how to invest your first $100 (2024)

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• You don't have to be wealthy to start investing — $100 is a perfectly fine amount to tuck away.
• We asked five financial planners how best to invest that $100 and they suggested Roth IRAs and more.
• Consider target-date funds, investing in new skills, or putting money into a health savings account.

Pop culture often depicts investing as something that's only for the wealthy. Films show brokers aggressively buying and selling stocks before the market closes for the day, screaming into phones after losing thousands of dollars. TV shows depict billionaire investors signing over portfolios with the understanding that they'll only get richer.

This type of representation can make it hard for the average person to believe that they, too, can invest in the stock market, thinking instead that they must hit a certain threshold of income or savings before investing can become their reality.

But, this doesn't have to be the case. Even small amounts of money can be invested strategically through the best investment apps. Small contributions can make an impact, and no amount is insignificant. To prove this, Insider spoke with five certified financial planners, each offering advice for how they'd invest a simple $100.

1. Open a Roth IRA

Assuming you've got an emergency fund and have paid off any high-interest debt, Wesley Botto, a financial planner with Cornerstone Financial Group, recommends opening a Roth IRA.

Botto likes a Roth IRA because of its tax benefits. Taxes are "either gonna go up, stay the same, or go down. What do we think they're going to do? They're probably going to go up," he says. "You might as well go ahead and put it in an account that's not going to be taxed in the future."

When withdrawing funds from a Roth, as opposed to a traditional IRA, the money isn't taxed. Instead, the money you deposit is taxed at your current rate. While the IRS does set income limits for who is eligible to contribute, even if you earn too much, "you might be able to contribute to a Roth via a backdoor Roth," Botto says.

2. Invest in yourself

"With such a small amount, I really do think somebody would get the best return by looking at themselves," says financial planner Cynthia Meyer of Real Life Planning.

Meyer, who works primarily with real estate investors, suggests looking at ways to invest the money back into yourself — and create multiple streams of income — by taking a course, setting up a website, or buying equipment for a niche side hustle. "Somebody who's younger might not yet have realized the economic power they have by turning their own interests, hobbies, or skills into those multiple streams of income," she says.

"For something like real estate, for example, you need a lot of capital to get started in a meaningful way, but you don't need a lot of capital to put up your own website, and do something you're already good at," says Meyer.

3. Fill your health savings account

Frank McLaughlin, a financial planner with Merriman, agrees with Botto that a Roth IRA is the best place to invest $100. But he also saysa health savings account is a smart choice.

He likes HSAs because they can have even greater tax benefits than a Roth. "Not only do you get the tax-free growth and can withdraw that money tax-free, but you also get a tax break on the front end," McLaughlin says.

While there are certain requirements you have to meet to open an HSA, including selecting a high-deductible health plan, "As long as [the money is] used for qualified healthcare expenses — which everyone has — it's powerful there," he says.

4. Invest in your future — whatever that may be

"I take the word investment with some creative liberty," says Tania Brown, a financial planner and financial coach at SaverLife. "If you're looking to invest in your future, what future do you want to invest in?"

If someone's future goals include being debt-free, the right investment for the $100 would be in paying down their debt. Likewise, if someone's ideal future includes financial stability, it might make sense to put that money towards an emergency fund.

If you have kids, Brown offers a 529 plan as a great way to invest even a small amount of money towards education costs in a tax-advantaged way. "Depending on the state they live in, that [contribution] may be state-tax deductible," she explains.

"If they're just looking to stick their foot in something, maybe a no-load mutual fund," Brown suggests. She also wouldn't be opposed to someone buying just one stock at a specific company, which is known to be riskier. "The purpose is education," she explains. "It's a wonderful tool."

If someone loses money but learns a lesson about their comfort level, what they like and don't like, or how they'd prefer to invest in the future, it's better to learn and lose $100 than learn at the cost of several thousand.

5. Choose a target-date fund

When someone has a smaller sum and comes to Laurie Nardone, a financial planner and managing principal of Shira Ridge Wealth Management, she usually recommends investing in a target-date fund. "That's what I would do, and if they were young, I would suggest a target date of 2050," she explains. "Your $100 will be allocated in a strategically diversified way."

More than anything, she believes the $100 can be used to build a habit. "Just start," she says. "If you have $100, if you can add $10 a month, that does create a habit."

"Some people will say, 'It's not worth it until I have this or that,''' Nardone explains, "but you're not going to have this or that if you don't start."

This article was originally published in August 2021.