If you’re looking to improve your finances, saving money is a great place to start. Many financial experts recommend creating an emergency savings fund with at least six months’ worth of living expenses. And it’s wise to save money toward other financial goals, such as college or retirement, as well.
If you can’t afford to sock away thousands of dollars right now, that doesn’t mean you should ignore the need to put away money for the future. Even $1,000 could make a meaningful difference in your financial well-being.
Here are eight smart ways you can put $1,000 in savings to work for you.
1. Start an emergency fund
Although your ultimate plan for an emergency fund might be to tuck away six months’ or more worth of living expenses, it’s OK to aim smaller at first. Many financial experts agree that saving $1,000 is an excellent initial goal when you first begin your journey to build an emergency fund.
If you’re trying to kickstart your first emergency fund, consider participating in a $1,000 savings challenge. This idea could be a great way to build momentum if you’re facing a tight budget or even if you just need to get back in the habit of saving money each month.
2. Open a high-yield savings account
Whether you decide to save $1,000 for emergencies or some other purpose, it’s wise to make sure your money earns as much interest as possible. So, instead of merely depositing your $1,000 into a regular checking account or a traditional savings account, consider opening a high-yield savings account (HYSA) instead.
The best high-yield savings accounts often come from online banks that tend to offer higher annual percentage yields (APYs) compared to traditional banks, which could help you grow your savings at a faster rate. Plus, keeping your savings in a separate account might reduce the temptation to spend it.
3. Open a certificate of deposit
A certificate of deposit (CD) is another type of deposit account you can use to store your $1,000 in savings — especially if you prefer to avoid risk when it comes to your cash. CDs aren’t a perfect fit for everyone, but they might work for you depending on your savings goals.
With CDs, you agree not to withdraw the money you deposit for a specified period, known as the CD’s term. If you take money out of your account early, you’ll have to pay a penalty. However, in exchange for this arrangement, the best CD rates tend to be competitive and remain fixed (aka they don’t change) until your CD matures. That can be particularly helpful when deposit rates are falling.
You might want to consider a CD if you’re looking for a safe place to save your money for short-term or medium-term goals. But if you want access to your cash sooner rather than later, a high-yield savings account or money market account might be a better fit.
4. Try to earn a bank bonus
Some financial institutions may offer a bank account bonus to customers who open a new checking account, savings account, or other type of eligible deposit account. So, if you have an extra $1,000 to save, you might be able to use those funds to open a new bank account and qualify for a one-time cash bonus of a few hundred dollars.
Of course, it’s important to read the fine print of any bank account bonus offer to make sure you qualify. To receive a bonus, you might need to maintain a minimum balance in your new account for a certain number of days. Other offers might require you to make a specific number of qualifying transactions before you become eligible for your bonus.
You should also review the details of the bank account you’re opening to make sure it meets your financial needs. Some accounts that offer new customer bonuses may come with bank fees as well, though there may be ways to get certain fees waived. It’s important to confirm you’re comfortable with any monthly costs a financial institution will charge you, or at least be sure you understand how to close an account without jeopardizing your new customer bonus.
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