You don’t need hundreds of euros of spare cash to start investing. Even so, many people delay putting money aside for the future. They wait for their next pay rise or until their children have left home. But even small amounts are enough to get started. What matters is having a realistic goal, investing for a suitable period and choosing an amount that fits your budget.
Before you invest over the long term, make sure you have some savings set aside for emergencies. An emergency fund can help cover unexpected expenses, such as car repairs or a broken washing machine, so you don’t have to dip into your investments.
Small amounts can add up over time
€25 or €50 a month may not seem like much at first. Over time, however, regular contributions can make a real difference. For example, if you put aside €50 a month, you will have saved a total of €3,000 in five years. After ten years, that amount rises to €6,000, and after twenty years to €12,000.
By reinvesting your returns instead of withdrawing them, your savings will grow even faster. This is because your returns can, in turn, generate further returns. This is known as the compound interest effect and it can significantly increase the growth of your investments over the long term. Even a modest monthly contribution can have a considerable impact when invested over a long period.
For example: If you invest €50 a month and earn average returns, you will generally end up with considerably more than the total amount you paid in over the years. Investing €50 a month for ten years at an interest rate of 3% would result in savings of €6,990.10 by the end of the period, thanks to the compound interest effect. €6,000 of this amount comes from contributions and €990.10 from interest. So, if you start with a small amount today, you can always increase your monthly contribution later, for example, when you get a pay rise.
A limited budget is no reason to delay investing
Of course, a longer investment period cannot fully make up for a lower monthly contribution. At the same rate of return, someone investing €25 a month will generally end up with less than someone investing €100 a month.
That said, it's often better to start with an amount that fits your budget today than to keep waiting until you can afford more. Many people wait for what seems like the perfect moment or for their financial situation to improve. In practice, it can be a good idea to start with a modest monthly contribution and increase it over time. For example, a monthly contribution of €25 today could later become €50 or €100.
What matters is when you need the money
There is one other important question to consider before investing: When will you need the money? If you need the money within a few years or by a specific date, safety should be your priority.
For example, if you are saving for a holiday, your children’s driving lessons or a major purchase in around five years’ time, investments that are subject to larger market fluctuations could lose value just when you need the money. For short to medium-term goals, options such as instant-access savings accounts or fixed-term deposits may be worth considering. If you choose a fixed-term deposit, make sure the term matches the date you’ll need access to the money. If you don’t anticipate needing the money for another 15 or 20 years, you have more time to ride out temporary market fluctuations. This means investments with higher levels of volatility may also be an option, such as funds that invest in shares or ETFs. In return, they may offer higher potential returns.
And remember: Higher potential returns usually come with higher risks. The value of share-based funds and ETFs can rise and fall over time. That means, if you need to sell when markets are down, you may get back less than you invested.
Inflation is another factor to consider. Over time, rising prices reduce the amount you can buy with the same amount of money. That means it's not just about how much you save. What matters is how much your money grows after taking inflation into account.
Keep an eye on costs, even when investing small amounts
A small monthly contribution doesn’t automatically mean that every investment product is a good fit for you. When you're investing smaller amounts, fees can take a noticeable bite out of your returns.
Many banks now offer savings plans with low minimum monthly contributions, making it easier to get started even if your investment budget is limited. Before making a decision, take a close look at the costs: Is there a fee for setting up or managing the savings plan? What does it cost to buy or sell investments? Are there any ongoing product charges? The best option is not always the cheapest one. What matters is finding the right balance between costs, risk, investment horizon and your personal goals.
Take advantage of government support for retirement provision
From 2027, even people with a limited budget may benefit from government incentives for private retirement savings, for example through a retirement savings account (Altersvorsorgedepot). Contributions from as little as €10 a month may qualify for support and help you build up savings for retirement.
If you want to take advantage of the new incentives from next year, it pays to think long term. The retirement savings account is designed for retirement saving. If you withdraw subsidised funds early, you’ll generally have to repay any support you have received. For that reason, you should only invest money that you are unlikely to need before retirement.
Like other investments, the retirement savings account allows you to benefit from the opportunities offered by the capital markets. This means there is potential for higher returns. However, investment values can also fall, and there is no guarantee that you will get back the full amount you invested. Past experience shows that market fluctuations can even out over the long term and that higher returns may be possible than with products that offer capital protection. Before making a decision, look beyond the incentives on offer and consider how long you want to invest for and what you are investing for.
Save regularly instead of waiting for the perfect moment
Make saving as simple as possible. If you put aside a small amount on a regular basis, you don’t have to keep wondering when the right time to invest might be.
A savings plan can help turn saving into a habit and stop you putting it off time and again. If your financial situation improves later on, you can always increase your monthly contribution, for example after a pay rise or an unexpected windfall.
What matters is understanding your own financial situation, having a clear goal and choosing an investment that matches your timeframe and your attitude to risk.
If you have any questions, your bank can provide the right advice for your personal situation.
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Kathleen Altmann
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