Thursday, 2 April 2015

How to invest £10 a month and make money

If you have minimal spare cash but want to grow your money you can still get in on the act with as little as a £10 investment per month. Sure £10 a month will not make you as rich as someone who invests £1000 a month but it is better than nothing and will motivate you to make savings on your daily expenditure to free up more cash for investments.

So how can you invest £10 a month and make something? There are several options, one of which I have just found recently myself.

The investment with the least risk is of course a savings account. You can put as little as £1 in a month and make some money. However the interest rates on current savings accounts are dire so I prefer something with a little risk and a higher rate of return. You would be looking at interest rates of no higher than 1.5%, not to mention the fact some accounts like Santander 123 current account require you to have £1000 to earn 1% per annum as well as a minimal monthly deposit of £500.

I prefer peer to peer lending sites like RateSetter which give me the option of lending £10 a month. The interest rate varies but I have seen it as high as 2.9%. I guess it depends on supply and demand. If there is a shortage of funds available then the interest rate will be higher. I will demonstrate with some figures in the table below which initially may make it seem as if it is not worth your while but I will show you how it all adds up. For the below calculations I am assuming the monthly interest rate to be 2.9% per annum.

Month Total Investment (£) Interest Gained Monthly (pence)
1 10 2.4
2 20 4.8
3 30 7.2
4 40 9.6
5 50 12
12 120 28.8
100 1000 240
240 2400 576

At the end of the first month the initial £10 is invested with the next monthly deposit of £10 making a total investment of £20 and so forth. Obviously the returns are very low but after 20 years you can expect to gain £5.76 a month in interest just by reinvesting all your money from month 1. It is important to note that you would get greater gains if you also reinvested your money interest. £10 a month will not be missed but after 20 years you will have £2400 in your account plus interest. Imagine if you were able to invest £20 a month or even £100 a month, the gains would be greater. Find out more about this site in my RateSetter review post.

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