So you have £100 sitting in your bank account and you want to know some of the ways you could invest it right?
Of course you do, you wouldn’t be reading this otherwise! And leaving it in your bank account is actually going to cost you money due to inflation and the basically non-existent interest rates on cash savings here in the UK, so lets look at what you can do with your money.
Quick Disclaimer, I’m not a finance professional and this isn’t financial advice, I’m just listing some of the ways you could invest your money. If you want professional advice, seek out a financial planner or advisor.
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1. Pay Off High Interest Debt
Don’t roll your eyes just yet! Paying off high interest debt such as Credit Cards, Personal Loans or Car Loans can be the best way to ‘invest’ your £100.
Now it does vary from ‘expert’ to ‘expert’ as to what is classified as high interest debt but a general consensus is any interest above 3-6% can be classed as high interest debt.
And as most credit cards available today charge around 20% interest, this is most definitely high interest and you are most likely not going to get those kind of returns from other investments.
Now while you won’t be getting any return on your investment, you can think of it that you are saving yourself that interest, which means that you will have more money to invest in other things in the future.
2. Create a Rainy Day Fund
This may seem boring as well but you may need to that money available to you in the near future and most financial planners recommend having a rainy day fund of between 3 and 12 months of your monthly living expenses.
This is so that in the unfortunate event of you losing your job or not having any income, you have some money behind you so that you can carry on living until you find a new job.
When it comes to where to create your rainy day fund, there are a couple of options:
- High Interest Savings Account – I use the term high interest loosely! But there are some savings accounts that pay around 0.5% interest currently and while this will still lose against inflation, it is better than earning 0% in your standard current account
- Cash ISA – this is very similar to a high interest savings account but you will never pay any tax on any savings in an ISA but currently the best Cash ISA’s are only paying around 0.5% interest
- Premium Bonds – these don’t earn interest but there is a monthly prize draw and the prizes range from £25 up to £1 million and best of all are tax free. You aren’t guaranteed to win a prize but even if you won £25, it would beat the other two in terms of returns. Premium bonds can also be sold at any time, meaning you have quick access to your cash.
There are some others options such as Bonds via a Stocks and Shares ISA but these carry slightly more risk and you aren’t guaranteed to get back your investment.
3. Invest in an Index Fund
Now we are actually going to get into some investing! But we aren’t talking about Wall Street, Hedge Fund type of investing.
Instead, this is almost the Steady Eddie approach to investing and the best way to start investing in stocks and shares.
This is because when you are buying index fund, you are buying a small amount of a lot of companies with things like:
- The Vanguard S&P 500 UCITS ETF (VUSA) – the top 500 publicly traded companies in the USA
- The Vanguard FTSE 100 UCITS ETF (VUKE) – the top 100 publicly traded companies in the UK
This takes all the headache out of trying to find the perfect stock and instead just basically buying a chunk of the whole market.
There are a couple of different ways to buy an Index Fund but the most tax efficient way for most people in the UK is going to be via a Stocks and Shares ISA, this is because you won’t pay any tax on dividends or capital gains.
The only issue with Stocks and Shares ISA are that many come with requirements or fees, such as the £100 a month or £500 lump sum requirement from Vanguard or the £3 a month fee from Freetrade. There may also be an annual charge for maintaining the account with the broker.
So if you just have £100 to invest as a lump sum, rather than a recurring amount, then a General Investment Account with someone like Freetrade might be the better option.
Another thing you need to be aware of with Index Funds, is that they have an ongoing charge such as the 0.09% on the Vanguard FTSE 100 UCITS ETF (VUKE).
All these charges might seem scary but they will only cost a few pennies a year on a £100 investment and many funds average a 5-10% annual return.
4. Buy Some Crypto
If the options up until now have been a bit too boring for you and you want some risk with your investing, then buying some Crypto might be for you!
Called investing by some and gambling by others, buying Crypto is definitely not for the faint hearted as popular Cryptocurrencies such as Bitcoin and Ethereum seeing over a 50% drop in price at more than one point in their relatively short histories.
On the flipside though, Bitcoin was the best performing asset of the past decade (2011-2021), with the value of coins increasing by sometimes by over 100% a year.
But as it is a relatively new asset (there is even debate about whether it is an asset!), it is incredibly volatile and you need to understand the risks before putting your money into it.
How do you buy Crypto though?
To buy a Cryptocurrency, you need to sign up to an exchange and arguably the easiest to use for a beginner is Coinbase, which has a good range of coins that you can buy but the fees are higher than some other exchanges.
Other popular Crypto exchanges include Binance, Gemini and Etoro but these all have a steeper learning curve than the standard Coinbase.
Have to do the plug here, if you want to earn £7 in free Bitcoin, simply sign up to Coinbase by clicking on the following link (https://www.themoneysmith.co.uk/coinbase) and purchase £80+ of crypto.
Just so you know, if you sell your crypto and make a profit, you may need to pay Capital Gains Tax.
5. Start a Business
This list just keeps getting riskier doesn’t it!
Starting a business is by far the biggest risk but also could produce the biggest rewards. This is because starting a small business or side hustle could go from providing you with a little bit of extra cash every month to a full time income (or more).
But can you rally start a business for £100? Yes, of course you can and there are surprisingly quite a few options out there.
You could start an online business such as creating a blog or starting a YouTube channel, both of which can be started for less than £100. This website for example, cost me about £6 for the domain name and £6/m for hosting and it makes me more than that in recurring income every month.
For a YouTube channel, you only need a camera and your phone will probably be more than enough (I started with an iPhone 5s), a cheap mic for better audio and a couple of cheap LED light panels off Amazon.
Obviously, for both of these, you will need something to talk/type about but I have done a full guide on Starting a Blog in the UK, which might be helpful.
You could also start a small local business, such as:
Just a couple of ideas and you will only need basic equipment to get started and you may already have some of it (a lawnmower or pressure washer for example).
You would be wise to get yourself some public liability insurance for these types of businesses as it just gives you some protection should anything bad happen and it can be had for less than £10 a month.
So there are 5 ways you could use that £100 you have sitting in your bank account and it is down to you as to which option is the most appealing and your appetite for risk will definitely play a factor as they range from very simple and low risk to high risk, where you could lose your money but could also make a lot more.
I have personally done all of the options on this list and being totally honest, most of the money I invest goes into Index Funds as for me this is the best risk vs reward option. But the best returns I have had have come from setting up businesses, with both my website and YouTube channel providing me with regular monthly income.
But as I said, it all comes down to your personal circumstances as to which is the best option to go for.