What if I Can Only Afford to Save $50 Per Month?

Many Americans hope to save more. But saving can feel impossible if you have minimal extra cash left in the bank after paying your bills. Even if you only have $50 a month to save, it can make a difference and improve your future. Don't let your current financial situation keep you from saving at all. Here are two options to consider if you want to save $50 each month.

Start building an emergency fund

Costly life events can happen when you least expect them. Suddenly, out of the blue, you may need to pay for car repairs or an emergency vet bill. But the good news is you can prepare for unplanned expenses with an emergency fund. You may think it's not worth it to start saving if you can only afford to set aside $50 monthly. But that's not true.

Give yourself grace, and remember that we all start somewhere. It's okay to start with $50. If you set aside $50 a month for one year, you'll have $600 saved. That's better than $0. As you continue to contribute more money, your account balance will grow.

By keeping your extra cash in a high-yield savings account, you can earn interest while your money sits in the bank. Many of the best high-yield savings accounts offer APYs of 4.5% or more. How much interest can you earn while your cash sits in the bank?

If you keep $600 in a high-yield savings account with a 4.5% APY for one year, you'll earn around $27, depending on how frequently the interest is compounded. That's much better than making $0 in interest by keeping it stashed in your checking account or under your mattress.

Begin investing for long-term growth

Investing is another way to put $50 a month to good use. It's important to know there's no guaranteed return when investing your money. Your returns can fluctuate significantly over the years, so you should feel comfortable taking risks.

Historical data shows that investing can be beneficial to your financial future. Over the last 30 years, the stock market has had an average annual return of around 10%, as measured by the S&P 500. If you already have an emergency fund established, you may want to consider starting to invest -- especially if you're looking for a long-term growth strategy.

If you want to invest, consider opening a traditional IRA account. With this type of account, your contributions may be tax deductible. Plus, your earnings aren't taxed until you take a distribution. You can open a traditional IRA with a brokerage firm.

How much could your money grow? Let's imagine you decide to invest $50 per month for the next 30 years. Here's a look at the potential account growth after 10, 20, and 30 years with an 8.5% annual rate of return using the compound interest calculator from Investor.gov.

Don't wait to begin saving

If you've been meaning to work on your savings goals, now is the perfect time to begin. It's worthwhile to start, even if you can only afford to save $50 per month. Whether you choose to start building an emergency fund or focus on long-term growth by investing for your later years, your future self will be glad that you made your personal finances a priority.