7 Best Ways To Invest $5,000 Depending on Your Money Goals

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How you invest your money will depend on your goals and stage in life. You won’t be investing the same way in your 30s as you did when you landed your first job out of college. Your investment strategy will also change when you have a family and begin considering retirement.

The way you invest $5,000 will depend on what level you’re at currently. This is why we spoke with a financial expert to assist with perspective on the best ways to invest $5,000, depending on your money goals. Taylor Kovar, CFP and CEO of Kovar Wealth Management, shared insights on the best ways to invest.

Create an Emergency Fund If You’re New to Saving

“If you don’t have an emergency fund, consider a high-yield savings or money market account,” Kovar told us. “These options provide liquidity and safety for quick access in case of unexpected expenses.”

When you first get into personal finance, it’s essential that you get into the habit of saving money. Most financial experts suggest creating an emergency fund so you have up to six months’ worth of living expenses set aside in case of a job loss or any other unexpected scenario.  

Invest in Yourself To Increase Your Income

If your goal is to increase your income, you will want to invest in yourself to make more in the future. Every dollar that you invest in yourself today could benefit you greatly. You don’t have to invest the $5,000 into one option, but you have various choices. Consider these:

  1. Learn a skill. If you have the time, you can spend some funds on learning something new that will help you make more. 
  2. Invest in a mentorship. If you’re unsure how to advance in your career, you can spend the money on a mentorship program or an accountability group. 
  3. Attend industry events. You could learn from attending conferences and other events related to your industry that could help you expand your network. 
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The goal is to use your savings to help you reach the next level.

Leave Your Funds in a High-Yield Savings Account If You’re Just Starting

“For short-term goals, like buying a car or taking a vacation within the next 1-2 years, a short-term CD or a conservative bond fund can offer a balance between growth and capital preservation,” said Kovar. If you just started saving money and aren’t sure of your next financial move, your best option is to leave your money in a savings account that earns a notable interest rate.

These accounts offer a decent return on your money and liquidity, so you don’t have to worry about not having access to your money. You could then use the funds for your other financial goals.

Fund Your Retirement Accounts If You’re Concerned About the Future

“If you’re looking to boost your retirement savings, contributing to an IRA or a Roth IRA can be a wise choice,” remarked Kovar. “Investing in a diversified mix of stocks and bonds through low-cost index funds or ETFs within these accounts can offer growth potential over the long term.”

It’s never too early to get serious about your retirement planning. The sooner you start investing in your golden years, the sooner you’ll have compound interest. 

Pay Down Debt If You Want To Invest

If you’re looking to get serious about investing your money, you may want to start by working on paying down your debt first. You could pay down the lowest balance first to gain some momentum or focus on the debt with the highest interest rate to save more in the long run. Either way, the goal is to eliminate your debt so that you can invest in other instruments.

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Invest in the Stock Market

“For those with a higher risk tolerance aiming to build wealth, investing in individual stocks or peer-to-peer lending can offer higher returns,” Kovar shared. He did offer a bit of a warning, though. “However, these come with increased risk, so they may not be suitable for everyone.”

Learning about the stock market or putting your money in an index fund can be an ideal way to invest $5,000. As you save more money, you can increase your investment in the stock market. 

Look Into Real Estate Options

While $5,000 isn’t enough to purchase a home in most locations, it’s enough to start thinking about real estate. You can invest in Real Estate Investment Trusts (REITs) or crowdfunded real estate projects. You can invest in REITs without owning any actual land. You can also pool your money together with other investors to get into the real estate market through crowdfunded projects.

Both of these options would be solid ways to dabble in real estate with $5K.

Closing Thoughts

As always, we recommend that you take the time to look into your investment options and seek out advice from multiple sources before making a decision. You’ve worked hard to save this money and don’t want to see it disappear or to lose value.

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