Whether you're planning for retirement or saving for a major purchase, investing can help you turn money into more money. The good news is that you don't need a pile of money to get started.
How to Invest $1,000: 8 Expert Tips
Here are eight of the best ways to invest $1,000 to grow your money over time.
1. Pay off high-interest debt
It's a good idea to tackle your high-interest debt before investing in anything else. After all, the interest you pay on that debt is likely much higher than you would earn by investing in the stock market.
Even if you don't actually make any money, you'll save on monthly interest payments. You can then spend or invest the saved money elsewhere. Paying off debts can also helpimprove your credit score, leading to better prices and offers on loans, credit cards and more.
One way to consolidate high-interest debt is with a balance transfer credit card.
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This card is recommended for everyday use, whether for medical copying or shopping in large stores. It can be a big earner for card members who want to get the most out of their daily spending.
2. Build an emergency fund
Aemergency fundhelps you stay afloat financially if you have unexpected costs or a sudden drop in income due to job loss or fewer hours. Without an emergency fund, you may have to rely on a high-interest credit card or a personal loan to get by.
Experts generally recommend itsave three to six months of living expenses. Instead of keeping that money in a piggy bank, consider keeping it in one piggy banksavings account with high returns. The money is there when you need it and you earn a decent return in the meantime.
Western Alliance Bank High Yield Savings Premier
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APY*
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Mine. balance to earn APY
0,01 USD
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3. Keep your money in a high-yield savings account
Ofbest high yield savings accountsoffer some of the highest returns in years, with many paying an annual percentage rate of 5% (APY) or more. Even if you already have an emergency fund, a high-yield savings account can be a smart place to park your $1,000 while you research and compare your investment options. You'll be less tempted to spend the money if it's safely in a savings account, and you'll earn a better rate than paying into a checking account.
Western Alliance Bank High Yield Savings Premier
Western Alliance Bank High Yield Savings Premier
APY*
5,36%
Mine. deposit
500 USD
Mine. balance to earn APY
0,01 USD
4. Put Your Money in a Certificate of Deposit (CD)
INcertificate of deposit (CD)is a term deposit that pays a fixed interest rate until the CD matures, usually within three to sixty months. You'll owe an early withdrawal penalty if you need your money before the CD expires, so CDs are best for money you don't need right away.
While longer CDs traditionally pay the highest prices, short-term CDs are offering some of these pricesbest prices in 2024– of more than 5% – which means you can lock in a good interest rate without tying up your money for too long. Ultimately, CDs are a low-risk way to earn some interest on your $1,000.
Barclays 1 year CD
Barclays 1 year CD
APY*
5,00 %
Semester
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5. Contribution to an Individual Retirement Account (IRA)
Traditional and Roth Individual Retirement Accounts(IRAs) are tax-advantaged accounts that help you save for retirement. In most cases, there are traditional IRA contributionsdeductible in the year you make them, and you pay taxes when you withdraw money during your retirement.
Roth IRA'swork differently. They don't have the upfront tax credit, butqualified distributionsretirement is tax-free, even on your income. For this reason, Roth IRAs are often the better choice if you think you'll be in a higher tax bracket in retirement than you are now.Financial advisorsoffers can help you develop a withdrawal strategy to minimize taxes in retirement.
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For 2023, you can contribute up to $6,500 to an IRA, or $7,500 if you are age 50 or older. Thatborders riseto $7,000 and $8,000 by 2024. While $1,000 isn't enough to max out an IRA for the year, it's a good start, especially since that money has the potential to grow for decades. Once you fund an IRA, you decide how to invest the money in the account, whether you invest stocks, bonds,index fundsor target date funds, which automatically rebalance as you get closer to retirement.
6. Get your 401(k) employer match
One of the best ways to invest $1,000 is to get yours401(k) matchif your employer offers this benefit. Some employers match contributions dollar-for-dollar, while others offer a partial match, usually up to a certain percentage of your salary. Either way, if you add $1,000 to your 401(k), your employer can match the entire amount, adding free money to your retirement account that can grow tax-free or tax-deferred for years.
7. Invest with a robo-advisor
A robo-advisor uses a computer algorithm to create a diversified portfolio based on your goals, risk tolerance, and time horizon. Many offer features like automatic rebalancing and tax loss harvesting, and some let you connect with human advisors.
A robo-advisor makes sense if you don't have the time, interest, or skills to choose and manage your investments. The good news is that you don't need a lot of money to get started. Robo-advisors likeM1 Financehave a minimum investment of €25 to trade or €500 to open a retirement account.
8. Invest with a securities account
Brokerage accounts such asRobin Hoodlets you invest in stocks, exchange traded funds, bonds, options, mutual funds, cryptocurrencies, commodities, futures and more. Most offer a range of tools and facilities to help you research, trade and manage your investments, often with low minimum deposits. Compare to get startedbest online brokers, pay attention to account minimums and whether the broker offers fractional shares – a plus if you're starting with a small account balance.
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TIMESTAMP: The most important thing about investing is to get started, and you don't need a large amount of money to do it
While $1,000 may not seem like a lot, it's enough money to grow your money and secure your financial future, especially if investing becomes a habit. Don't let small amounts of money keep you from earning bigger amounts later.
Let's e.g. Suppose you invest $1,000 in an IRA when you are 20 years old. If you don't put more money into the account, it will be worth about $88,000 by the time you reach age 65, assuming a 10% annual return, not a very impressive amount for 45 years of savings.
However, imagine starting with a $1,000 contribution but not stopping there. Instead, save the same $1,000 every year. In this case, you contributed $46,000 instead of $1,000 at age 65, and thanks to the power of compounding, your account grew to over $922,000.
Investing can help you turn your money into more money, even if you start small. A $1,000 investment, whether paying off debt, investing in a robo-advisor, or getting your 401(k) match, can help lay the foundation for a prosperous financial trajectory.
Frequently Asked Questions (FAQ)
What is the best way to invest €1,000?
The best way to invest €1,000 depends on your financial situation. If you have high-interest debt, it makes financial sense to spend your $1,000 paying it off, or at least paying it off. Then, focus on building or replenishing an emergency fund (if you don't already have one) for three to six months of living expenses, in case you lose your job or have unexpected expenses like home repairs or medical bills. If you have money left over, consider putting it in an IRA or a 401(k) to build your retirement nest egg.
How do you turn $1,000 into $10,000?
There is no easy way to turn $1,000 into $10,000. According to the report, the average stock market return is about 10% per yearSmartAsset. At that rate, it would take 24 years to accumulate $10,000. You can speed up the process by increasing your initial investment. For example, if you invest an extra $50 every month, you'll reach $10,000 in nine years, not 24 years, assuming the same 10% annual return. Of course, choosing riskier stocks with higher potential returns can help you reach your goal even faster, but you're more likely to lose your entire investment.
Instead of investing in the stock market, consider investing in yourself to increase your earning potential. Self-investment can prepare you for professional growth, whether you take a course, learn a new language, or expand your network at a conference. With an additional skill or certification on your resume, you can ask for a well-deserved raise, qualify for a promotion, or find a better job elsewhere.
How can I double my $1,000?
One of the easiest ways to double $1,000 is to invest it in a 401(k) and get the employer match. For example, if your employer matches your contributions dollar for dollar, you will receive $1,000 on your $1,000 contribution. Matched contributions are essentially free money, so it's always a good idea to save enough in your 401(k) to get the full match.
What should you spend €1,000 on?
If you have an extra $1,000, it can be tempting to spend it on something you don't need. However, a better option is to use the money to improve your financial situation. Paying off your high-interest debt is an excellent place to start because it can eliminate (or at least reduce) the interest charges you pay each month. If you have any money left, consider parking it in an IRA or a 401(k) to build your retirement savings.
The information presented here was prepared independently of TIME's editorial staff. For more information, see ourOverkant.
