Do you have $1,000 burning in your pocket? Good news – you’re in a prime position to put that money to work for you. High interest rates at many banks mean your money can grow faster today than it has in years past. That’s crucial because inflation erodes the value of your money, turning that $1,000 into something less valuable.
Whether you’re paying off credit card debt or saving for the future, here are five ways to invest $1,000.
1. Create an emergency fund
Emergency funds are your life jacket when the going gets tough. Most experts recommend that you set aside between three and six months’ worth of expenses in a safe, accessible account. If you don’t currently have an emergency fund, setting aside your $1,000 in a free savings account would be a smart investment.
You can even put that $1,000 into a high-yield savings account to help it grow faster. The best high-yield savings accounts currently pay over 5.00% APR. While they have some limitations—some banks may limit your monthly withdrawals—they’re more flexible than CDs and stock investments.
2. Pay off debts with high interest rates
Annual percentage rates on credit cards and loans have skyrocketed over the past two years. In fact, between May 2022 and May 2024, the average annual percentage rate on credit cards rose from 15.13% to 21.51%, according to data from the Federal Reserve Bank of St. Louis. The difference between these two rates is about $370 in interest on a $5,000 balance that you pay off over 24 months.
If credit card or loan debt is eating up your income, paying off $1,000 can save you interest. You may also want to look into balance transfer credit cards, as many of them offer an introductory interest-free period on balances you transfer from other cards, making them less expensive to pay off.
3. Get a high-yield CD while you can
Current interest rates on certificates of deposit (CDs) are still at a two-decade high. Although banks have started to lower interest rates, you can find many CDs with an APR above 5.00%.
However, if predictions come true and the Federal Reserve cuts its benchmark interest rate later this year, those high CD rates will start to disappear. If you’ve been on the fence about CDs, now might be the time to lock in a good CD rate before they’re gone.
To give you an idea, if you invest $1,000 in a 12-month CD with a 5.25% APR, you will earn $52.50.
4. Invest in your retirement provision
Retirement plans like 401(k)s and IRAs can help you save for your retirement with tax advantages. Money invested in a traditional 401(k) and IRA grows tax-free, meaning you don’t have to worry about paying taxes on investment gains until you withdraw money in retirement. And if your employer offers a match on 401(k) contributions, don’t hesitate – take the matchYou may be able to convert that $1,000 into a larger investment amount.
5. Invest in the S&P 500 index
The S&P 500 (also known as the Standard & Poor’s 500) is a stock index that tracks the 500 largest companies in the United States. Investing in an S&P 500 index can be a great way to diversify your $1,000 of equity without having to select your own stocks.
Certainly, the stock market is currently experiencing periods of volatility. That’s normal and shouldn’t stop you from investing in your future. However, if you don’t want to risk losing that $1,000, you still have the other options listed here.
The most important thing is to continue investing in your future, because you are more likely to build wealth if you consistently put money aside than if you “hit the jackpot” with a single investment.
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