While investing is one of the most reliable methods to grow wealth, many Nigerians believe it is meant for the rich and successful. It’s no news that Nigeria’s new minimum wage is N70,000, which is not so much, considering the current inflation in the country.

For example, Femi, a fresh graduate who has just finished his NYSC and got a job paying N80,000, slightly above the national minimum wage. After his monthly expenses, Femi manages to save N20,000 every month.

Can he start investing with this amount? What kind of investment can he start with, as little as N20,000?

Many Nigerians, particularly the youth, believe investing is only for those who have accumulated millions. Some also feel that investments should only be considered once someone starts earning a substantial income.

However, the truth is quite the opposite, the less you earn, the more important it is to invest. This is because investing can offer an additional income stream known as passive income.

 

Here are a few investment options for low-income earners and how to start investing and grow:

·         Exchange-traded Funds (ETFs)

·         Index Funds

·         Mutual Funds

·         Money Market (Federal Gov’t Savings Bond)

·         Tailored Stocks

However, to be able to participate in these investment options, you will need to follow a few preparatory rules to build the right attitude towards investment.

 

Start Saving

If you are like Femi, who earns a lower income, saving is typically the first step before considering investment of any form. Even if your earnings are modest, allocating at least 10% or more of your income to savings before spending on other things is crucial. This strategy is called paying yourself first; doing this ensures that saving remains a priority, rather than keeping it for last, as expenses could hinder your saving capability.

 

Pay Off High-interest Debt

List all your debts—writing down the interest rate, outstanding balance, monthly payment, and if available, the current payoff amount (you will need a calculator for this). Identify which debts carry the highest interest rates. Instead of letting interest build up, paying off these debts should be a priority. Reducing or eliminating your debt is your next crucial step in the financial journey.

Start by tackling the debt with the highest cost, then gradually pay off the smaller ones. It’s important to avoid taking on additional debt, as this will allow you to save rather than continuously pay off debts.

 

Create an Emergency Fund

An emergency fund is the savings you set aside to help cover unexpected expenses, such as losing a job, reduced income, health emergencies, or major car repairs. Relying on investments or dividends to handle emergencies is not advised and can hinder your long-term investment and portfolio-building efforts. An emergency fund ensures you’re prepared for unplanned expenses without disrupting your budget or investment plans.

How much should you save in your emergency fund? A good starting point could be N500,000 or the equivalent of 3 - 6 months’ worth of living expenses or even up to a full year’s worth of costs.

 

Research on Low-Income Investments

Research investment opportunities to expand your knowledge and update your financial goals. Understanding the options available to you will help you plan better as your financial situation improves.

Are you looking for ways to start investing with the small amount you’ve saved? Don’t worry even if you don’t have a large amount to invest, there are still options that can offer good returns and help your money grow! CSL Stockbrokers experts can help you with valuable information to help you grow your funds.

You can consider placing your savings in a High Yield Savings Account or a Federal Government Savings Bond. While these options may offer lower returns, they are among the safest and most accessible ways to start putting your money to work for you.

 

Have a Budget

A budget allows you to spend according to your income, helping you manage your expenses more effectively. By sticking to what you’ve planned, a budget simplifies your financial decisions and makes it easier to reach your financial goals. This, in turn, makes investing more manageable once you’ve achieved your savings targets.

 

Start investing

After reducing expenses, saving, and researching investment opportunities, the next step is to start investing as soon as possible.

In our case, Femi is looking for a secure investment that protects his money while offering him better returns than a regular savings bank account. He can start investing with as little as N20,000 in options like the CSL Stockbrokers Money Market Fund or the Federal Government Savings Bond. The mutual fund is open-ended, so Femi can continuously add more money whenever he wants. He’ll also benefit from liquidity, which means he can access his funds when needed. With CSL Stockbrokers, you can save and invest simultaneously, just like Femi.

 

Diversify and Build Multiple Streams of Income

One of the most crucial steps in investing is creating multiple income streams. By earning more than what is required to meet your immediate needs, you’ll have extra funds to invest, allowing you to grow your wealth. Additionally, diversification is an essential strategy for building wealth and managing risk. Instead of putting all your money in one investment, it’s wise to spread it across different types of investments, such as stocks, bonds, ETFs, and mutual funds. A diversified portfolio helps minimize the impact of any single investment’s poor performance on your overall financial health.

 

Conclusion

Investing is not reserved for the wealthy—it is an essential tool for everyone, including low-income earners, to build financial security and long-term wealth. By following a structured approach of saving, paying off high-interest debt, creating an emergency fund, budgeting, and researching low-risk investment opportunities, individuals like Femi can start their investment journey with even small amounts. Diversification and developing multiple income streams further enhance the chances of growing wealth while managing risks effectively. With options like CSL Stockbrokers’ Money Market Fund or the Federal Government Savings Bond, low-income earners can begin to make their money work for them, no matter how small the starting amount.

Investing early and wisely is the path to financial freedom, and CSL Stockbrokers is here to support that journey every step of the way.

 

 

 

 

 

Important Risk Warnings and Disclaimers

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