Feb 7, 2025
It seems as if it’s getting more difficult for the average American to know how much to invest after covering their costs of living.
However, it’s still possible to invest even if it’s just a few hundred dollars per month.
Advertisement
Imagine a 31-year-old named Ariel, for example, who has an annual salary of $48,000 and allocates $120 to investing into the S&P 500 per month.
Ariel doubts that her contributions will be effective in building long lasting wealth, but she’s noticed that more money is accumulating without her doing anything other than consistently investing $120 per month.
She plans to keep up with this plan for the next 10 years without changing the initial amount.
How much does the average American invest per month?
The 2022 Survey of Consumer Finances conducted by the Federal Reserve showed those younger than 35 years old have $68,650 invested in stocks on average, but the median stock holdings was much lower at $12,000.
The average and median stock holdings balance increases with age:
- 35 to 44 years old: $195,400 average; $30,000 median
- 45 to 54 years old: $374,810 average; $68,650 median
- 55 to 64 years old: $740,110 average; $111,000 median
- 65 to 74 years old: $838,470 average; $160,000 median
- 75 years old or older: $1,005,160 average; $119,500 median
This tells us that the national average of $68,650 for people under 35 years old is likely skewed higher by a small percentage of people who have more money to invest while they’re younger or are in higher-paying jobs later on in their careers.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
How to catch up if you’re behind on investing
If Ariel keeps up with her investment plan of $120 per month, or $1,440 a year, until she’s 41 years old, she will have invested $14,400 without accounting for any returns.
If Ariel continues to keep up the habit of consistently investing every month but decides to increase the amount to $200 per month for the next 10 years, then she will have invested $24,000 – which is $10,000 more simply by investing an additional $80 per month.
Advertisement
However, there are alternative methods for Ariel or anyone else looking to build wealth if it’s impossible to increase the initial investment amount or cut back on other living expenses.
Regardless of how much is invested per month, the most important aspect is to be consistent enough to collect interest because compound interest earns money without an individual even touching it. Here are some tips on where and how to best invest $120 per month:
Decide how much risk to take. Although Ariel decided to invest in an exchange-traded fund, there are bonds, treasury bills, mutual funds, and treasury notes – all of these have varying interest rates, but there’s a higher chance of losing money when there’s a higher expectation on returns, as with investing in stocks.
Decide where to invest. To make the most of investing $120 per month over a longer period of time, Ariel can choose different avenues, like putting a quarter into bonds and the rest in the S&P 500.
Automate investments. Apps and banks such as have specific functions that automatically transfers funds and on a predetermined schedule. This helps to reduce thinking and increases accountability because a certain amount every month has to be invested.
The Federal Reserve Bank of Dallas also has a list of educational resources people can refer to when determining where they want to put their investments.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Roveena Chand Jassal is a journalist and author who's passionate about how words impact all aspects of who we are and how we lead our lives. Roveena had a pen in her hand as soon as she could walk, inspiring her to be one of the youngest reporters for established outlets like Toronto Star, InStyle, Women's Health Magazine, Narcity, Chatelaine, and Now Toronto. Being a writer is part of her identity, but she also loves nerding out over anime and Webtoons, debating on buying more graphic tees, and thinking about which ice cream flavor she should try next.
