How much Money do I need to start investing?

This is one of the most commonly asked questions from readers. Many people want to become the next Warren Buffett, but they don't know where to begin investing or even how much money they need to make the first purchase.

Short answer: $5.

Better answer: $500, and only AFTER you have built up your emergency savings.

"We really encourage people to have six months of savings first," says Yvette Butler, president of Capital One Investing. Once you have a few thousand in savings, then you can start investing.

The goal of investing is to make your money grow faster than it would in a typical bank account (especially since savings accounts barely spit out a little more than 0%interest now). But investing is risky. You can lose money, especially in the "short run."

How to invest: Once you have the cash, an explosion of trading apps has made it easy to get going.

"We wanted to make our service accessible" to anyone, says Vlad Tenev, co-founder of the app Robinhood that allows you to buy and sell stocks for free. You just have to have enough money to buy the stock you want (e.g. $56 for Starbucks (SBUX)).

Robinhood launched in March 2015. It already has about a million users. Tenev says many begin by investing just a few hundred dollars as a way to dip their toes in and learn. Over time, they add more to their portfolio.

How to get going with just $5: If you really want to start small you can use an app like Stash or Acorns. Both allow you to begin investing with just $5. Stash offers you a choice of several funds to invest in. You basically end up owning part of a stock -- similar to sharing your apartment with roommates. Acorns allows you to deposit "spare change" from say, your coffee purchase. When you get to $5, the app invests that money for you into a diversified portfolio (basically, a mix of stocks and bonds).

How to get great advice: Feeling too intimidated to pick your first stock or fund? There are a lot of great -- and cheap -- services that will do it for you. Betterment and Wealthfront are good examples. They use computer models to figure out the best portfolio mix for you based on your age, income, goals and tax situation and they will invest your money for you.

"The way people invest is changing dramatically," says Jon Stein, founder and CEO of Betterment. "We optimize your gains, net of fees."

Betterment doesn't have a minimum balance requirement, so you can start with just a few dollars. Wealthfront requires $500 to get going.

More established players like Fidelity, Charles Schwab and Vanguard are lowering their prices and offering more options to cater to "new investors," especially Millennials. You can call them up or stop by an office in your town to discuss what to do.

Just remember: Always check the fees. If you only want to buy $500 in Apple stock, you don't want to get charged a $7.99 fee when you can buy the stock on an app for free.

What to buy: Figuring out what to buy is tough. There are roughly 2,400 stocks traded on the New York Stock Exchange alone.

The easiest option is to buy what's known as an ETF (an exchange-traded fund) like SPY (SPY). It trades like a stock, but it means you own a basket of stocks. In the case of SPY, the basket is made up of 500 of America's largest companies. Sure, a few might struggle, but all 500 probably aren't going to tank at the same time, so it helps lower the risk.

Another common option is to buy the ETF of a sector of the economy such as QQQ (QQQ) for tech stocks or EEM (EEM) for emerging markets.

Buying individual stocks is riskier. If the stock falls, you can lose a lot of money. Of course, you also gain a lot of money if it goes up. The most popular stock by far is Apple. Other widely held ones are Facebook (FB, Tech30), GE (GE) and Disney (DIS).

Keep in mind: About half of Americans have money in the stock market, but only 14% own individual stocks.

How Youths Of Today Can Build A Financial Fortune With Just $90 A Month

Sidney Pearce doesn’t buy into the hype that Millennials are financial flakes who would rather buy a Venti latte than invest in a retirement fund.

“Yes, some of my friends have credit card debt and they’re not saving a dime, but that’s not me,” says Pearce, a 22-year-old publicist in Phoenix. “I learned the value of investing from my grandfather. He grew up in a time where ‘saving for a rainy day’ was the go-to mantra.”

For his part, Pearce is laser-focused on shoring up his financial future, despite only earning $36,000 a year. He has $3,500 stashed for emergencies, and contributes $90 a month to his company’s 401(k) plan.

Investing less than $100 a month may not sound like much, but Bankrate’s compound interest calculator tells a different story. For instance, if Pearce continues to invest $90 a month in his 401(k) with a 7% rate of return, the money will grow to nearly $280,000 by the time he reaches age 65.

Unlike some of his peers, he’s bucking the trend that younger Millennials tend to steer clear of the stock market.

The reason, according to 46% of Millennials who responded to a 2016 Bankrate Money Pulse survey, is that they don’t have the money.

Still, Pearce is undaunted.

“I’m focusing on paying off all of my bills, including a $15,000 car balance,” he says. For now, investing in an IRA is not financially feasible, “but I have a friend who is a broker and we talk about trends on a regular basis.”

With Pearce making progress on two financial goals, the publicist is eyeing a third —getting hitched in the next year or two.

Pearce and his fiancée, Mira Richey, age 21, want to foot the majority of the bill for their wedding and honeymoon. “Yet, we don’t have the luxury of paying for an expensive wedding and an over-the-top honeymoon,” he says. They're considering getting married by a justice of the peace and hosting a reception, and then honeymooning in Mexico.

It makes sense given his careful budgeting. In 2016, the average cost of a wedding day rose to $35,329 nationally, up from $27,021 in 2011, according to a survey by The Knot .

While her parents are going to pitch in, the plan is to save $10,000 for their nuptials. “I use a free app called “Albert” and it helps me save more and manage my budget,” says Pearce. It connects all the financial accounts, makes real-life suggestions, and tracks every dollar spent. The goal is to emerge from the experience debt-free.

His advice for young investors: “Don’t buy into the ‘party now, save later’ philosophy. Start today.” 

The Expert Advice

Rianka R. Dorsainvil, CFP, president of Your Greatest Contribution, a financial planning firm in Washington, D.C., says Pearce has done quite a bit to start investing in his future. Below are tips for young investors, whether single or a pair, on how to grow and protect your money.

Don’t leave money on the table. Pearce is saving 3% of his salary to his 401(k). If your company offers matching contributions, take them. "Young investors need to understand the power of compounding interest," Dorsainvil says. "People assume it's just a difference of losing 2%-3% in matching funds, but that amount could equal thousands in additional retirement funds," she says. So, contribute up to the match

Invest in disability insurance. A young worker’s most valuable asset is his or her ability to earn income. “Protect your income with disability insurance, which can replace 50% to 60% of your income should you become unable to work for a period of time,” she explains. Many employers offer group disability plans which may be less expensive than an individual plan.

Start a side business. Like many Millennials, Pearce has a good eye as photography enthusiast. "He should do photography as a side gig," Dorsainvil says. "He could create a site on Square Space that costs little to nothing and start snapping photos this summer." There's money to be made that can go toward achieving some of his financial goals, she says.

Have money talks. “Pearce understands his money script and the history of where his money mind-set came from," Dorsainvil says. "I encourage him to have the same conversation with his fiancée." Before marriage, couples should not only have the big picture talk about saving and investing habits, they should also delve into how their money style came to fruition. Failing to talk about money can lead to financial strain and miscommunication.

Create S.M.A.R.T. financial goals. Pearce and his fiancée have to develop S.M.A.R.T. goals that are specific, measurable, achievable, relevant and time bound."First, they need to set a wedding date," says Dorsainvil. "That will tell them how long they have to save and how much they need to set aside each month to accumulate $10,000." Another tip: Every single dollar you earn needs a home, whether you are getting married or saving for a home, she says.