The reluctant investor’s guide to smart, low-effort investing

A calf taught Laura Kuntz the power of investing.

Growing up on a Wisconsin dairy farm, she and her eight siblings each received a heifer when they reached sixth grade. They’d work to reimburse their parents for the price of the animal and to cover costs like lodging and feed, then build up savings from the milk revenue.

“The idea was that when we started college, that money was available for our college costs,” said Kuntz, senior wealth manager and founder at Laurel Wealth Planning. “What I learned from that is money can make money.”

For those who didn’t have an early start investing — or who aren’t in the market for a cow — there are plenty of tools, tips and tricks to make your money work for you, depending on your lifestyle, risk tolerance and what you’re hoping to achieve.

Here’s how to start making the most out of your money.

Before diving into investing, you need to build a reserve. Start putting away money regularly for unexpected expenses, whether it’s a car repair or a friends' trip to Mexico you don’t want to miss.

“Savings is kind of an expense: You get used to it,” said Alex Gonzalez, a financial adviser at Thrivent.

To earn more interest, stow your cash in a savings account rather than letting it sit in your checking account. Your bank or credit union will offer a traditional savings account option. If you’re OK with an online-only bank without physical locations, try a high-yield savings account for higher rates.

The Federal Deposit Insurance Corporation summarizes the average annual percentage yields (APY) for various options each month. As of December, regular savings accounts had an APY of 0.42%. High-yield accounts can offer rates around 5%.

Another option is a money market fund, which channels contributions into low-risk, short-term investments while keeping money liquid. But be aware, the higher rate of return typically comes with a minimum balance requirement or fees.

How much you save is up to you. Kuntz recommended starting with $10,000, which in a money market account with a 4% interest rate would produce $400 a year.

“If somebody is making $30 an hour, that’s like 15 hours worth of work they don’t have to do,” she said. “It’s valuable.”

Depending on your cost of living and current situation, you might choose to save more or less, said Kevin Mahoney, founder and CEO of Illumint, which provides financial planning to millennials.

“It’s less about a dollar amount than how that savings figure ties back to your lifestyle and your expenses,” he said. “For some people, $20,000 could be a lot, and for some people, $20,000 could be not nearly enough.”

Once you’ve built up some savings to experiment with, take advantage of what your workplace offers.

Make sure you’re contributing enough to your 401(k) to, at a minimum, earn your employer’s full match. Then fund your Health Savings Account (HSA), where invested contributions earn interest tax-free.

After age 65, you can withdraw HSA funds without penalties. Before that, you can use your HSA for medical expenses, though it’s worth trying to leave the money untouched until later in life, Mahoney said.

“The power of that account comes from putting [money] in there and getting that tax break, but then investing those dollars and letting those dollars sit there and compound for years and years so that the growth is tax-free,” he said. “And then when you pull it out for medical expenses much later on, everything that you withdraw is tax-free as well.”

For self-employed people, the advice is essentially the same, said Anna Dosen, U.S. Bank’s branch banking market leader for Minnesota and North Dakota.

“What I would tell somebody, whether it’s a self-employed person, whether it’s somebody that’s getting into the workforce for the first time or even if it’s somebody that’s moving up to that next level: Put away money,” she said. “If you never see it, you will never miss it.”

The investment tools you use will depend on what you’re trying to achieve and when.

For short-term goals — maybe you want to buy a car in the next two years or a house in the next five — stick with a low-risk option like a savings account or certificate of deposit (CD), Dosen said. You can buy CDs from your bank or credit union, and short-term options mature in less than a year.

For long-term goals, there’s space for more risk-taking. Kuntz recommended a target-date fund, a set-it-and-forget it option for a big goal like retirement or college. These accounts, which you pay an investment manager to oversee, hinge on a future date and adjust risk level downward as that date nears. Early on, when there’s more time to recover from a loss, that often means investing more heavily in stocks; later, the asset mix shifts toward lower-risk investments, such as bonds.

If you have time to let your money percolate but would prefer a lower-risk option, federal government savings bonds pay an inflation-adjusted interest rate and are exempt from state and local taxes.

“I like layering different savings strategies, depending upon what you’re trying to do,” Dosen said. “Not only do you have different access to accounts; you’ve got different rates of return.”

If you want to try your hand at tracking the markets and picking your own investments, think of it as a hobby, not a retirement plan. Remember: There’s a reason people do this for a living.

“When people try to do stocks on their own, really, they’re trying to sew a dress, but they’re not a seamstress,” Kuntz said.

Mahoney recommended treating stock trading as entertainment and allocating the money you spend on it accordingly.

“I would just view those dollars differently than the money you’re putting toward important parts of your life, like retirement or college or housing, and so make it a much smaller percentage of your overall investments and savings,” he said. “And for people who have no interest in that stuff, they hopefully don’t need to feel like they have to do that to get ahead.”

While there’s plenty of good, free financial advice out there — including at your bank or credit union, where you can ask someone to walk you through in-house investment products — you might want to pony up for a more in-depth roadmap.

Financial advisors make money in different ways, including flat fees, hourly rates or a percentage of assets under management (AUM). A one-time financial plan will run you between $1,000 and $3,000, according to NerdWallet, while AUM fees typically range from 0.25% to 2% a year.