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Not Sure What To Do With $10,000 in Savings? Let These 6 Smart People Help You

Ridofranz / Getty Images/iStockphoto
Ridofranz / Getty Images/iStockphoto

You’ve finally achieved it — you’ve reached that long-awaited financial benchmark of saving up $10,000. Only now, you have no idea what to do with it.

Learn: 7 Key Signs You’ve Reached Financial Freedom
See: 6 Genius Things All Wealthy People Do With Their Money

Do you buy that new car you’ve been longing for? Use it to celebrate a big event? Invest it somehow? So many questions and every option now seems feasible.

Thankfully, you don’t have to navigate this murky situation alone. According to experts, having $10,000 in savings is an excellent position to be in, and there are several smart moves you can make to optimize your financial situation.

“If you have $10,000 in savings, the best way to use it depends on your current financial situation,” said Jake Hill, CEO of DebtHammer Consolidation. “For example, if you have a mortgage or other kinds of interest-bearing debt, I absolutely suggest using some of your $10,000 to reduce this debt. However, I wouldn’t use all of it for this purpose! Putting some of your $10,000 into your 401(k) or IRA, for example, is a great way to boost your retirement savings. You could also put some of it in a high-yield savings account to serve as an emergency fund.”

Below are more expert-backed money moves you can use to make the most of your money.

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Set Up an Emergency Fund

“Starting with the foundation, it’s crucial to have a clear emergency fund in place,” said Mike Kojonen, financial advisor and owner of Principal Preservation Services. “Based on experience, I recommend ensuring this $10,000 goes into creating or bolstering an emergency fund if you don’t already have one.”

Ideally, he said this should cover three to six months of living expenses and be kept in a high-yield savings account for easy accessibility.

“The importance of an emergency fund cannot be overstated; it’s your financial safety net that guards against the need to dip into investments or retirement savings unexpectedly.”

Check Out: The 5 Levels of Wealth and How To Get There

Reduce Your Debt

Once an emergency fund is securely in place, Kojonen said the next step is to consider debt reduction.

“If you’re carrying high-interest debt, particularly from credit cards, using this money to pay down that balance can provide a guaranteed return on investment equivalent to the interest rate you’re being charged.”

He said this action can save you hundreds, if not thousands, in interest payments over time and improve your overall financial health.

David Rafalovsky, CEO of Oxygen, equally noted that this is one of your most prudent options: tackling high-interest debt.

“If you have loans with interest rates that outweigh potential investment gains, directing some of your savings towards paying off these debts can be a smart move. This not only reduces financial stress but also sets you on a path to financial freedom.”

Consider Strategic Investments

For those who already have a solid emergency fund and minimal to no high-interest debt, investing the $10,000 in a diversified portfolio can be a wise move, experts say.

“This could mean contributing to an existing retirement account like an IRA or a 401(k) if you’re not already maxing out your annual contributions,” Kojonen said.

Alternatively, he said exploring other investment options such as index funds or ETFs (exchange-traded funds) aligned with your risk tolerance and financial goals can help your savings grow over time.

According to Rafalovsky, diversifying your portfolio is key to managing risk and maximizing potential returns.

“Historical data consistently shows that a mix of stocks, bonds, and possibly index funds offers a well-rounded approach to wealth building.”

However, he said to always remember that past performance is not a guarantee of future results.

“Throughout my career, I’ve seen how personalized financial strategies significantly impact one’s ability to reach goals,” Rafalovsky said. “Whether it’s securing an emergency fund, reducing debt, or investing for the future, the right approach depends greatly on individual circumstances and objectives. That’s why I always emphasize the importance of a tailored plan, ensuring that any financial decisions, including how to utilize $10,000 in savings, align with one’s broader financial picture and retirement aspirations.”

Keep Growing Your Savings

“$10,000 in a savings account isn’t truly that much money in the scheme of things,” said David Kemmerer, CEO of CoinLedger, “especially with rising expenses for many people meaning that amount of money won’t go as far anymore. So, the first thing I would recommend when you have this amount in savings is to leave it there!”

He said this can be your baseline for the minimum amount you keep in savings at all times.

“I would also recommend placing this money in a high-yield savings account to earn compound interest on since that can help grow your savings better than a traditional savings account will.”

Carter Seuthe, CEO of Credit Summit Debt Consolidation, agreed.

“Your goal when you have $10,000 in savings should be to grow that amount however you can,” he explained. “This could be through placing this money in a high-interest savings account, or a money market account, so you can earn money through interest. It could also be through regular contributions to grow this number monthly. I typically advise keeping about two or three months’ expenses in your savings at all times, so while $10,000 is a good amount to have, it can certainly always be higher.”

Put Money Aside for Retirement

“Based on my experiences, one of the first recommendations I make is considering an investment in a diversified portfolio within a Roth IRA or a traditional IRA,” said David Brillant, tax, trust and estate lawyer at Brillant Law Firm

He said these retirement accounts not only offer a structured way to save for the future but also provide tax advantages that can maximize the growth of your $10,000.

“For instance, a Roth IRA contribution, while made with after-tax dollars, allows for tax-free growth and withdrawal in retirement, which can significantly benefit long-term financial planning.”

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This article originally appeared on Not Sure What To Do With $10,000 in Savings? Let These 6 Smart People Help You