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If you have a grand in cash right now, you're in luck. With interest rates still elevated at a large swath of banks, you have plenty of opportunities to grow $1,000. At the same time, the stock market is coming back to life, as new developments in AI have given investors something to rally over. With $1,000 in cash, here are five great ways to invest $1,000 for your future.
1. Get a high-yield CD while you can
Current rates on certificates of deposit (CDs) are still relatively high. Even though some banks have started bringing down rates, you can find many short-term CDs with APYs above 5.00%.
That said, if predictions come true and the Federal Reserve cuts its federal fund rate later this year, these high CD rates will start to vanish. If you've been on the fence about CDs, now might be the time to seal a great CD rate before they're gone.
To give you some perspective, putting $1,000 in a 12-month CD with a 5.25% APY would yield slightly more than $50.
2. Deposit $1,000 in a high-yield savings account
If locking $1,000 in a CD is too restrictive for you, you might be better served by a high-yield savings account. The best high-yield savings accounts are currently paying out at APYs above 5.00%. Although they have some restrictions -- some banks may limit your monthly withdrawals -- they're more flexible than CDs.
3. Pay off high-interest debt
High interest rates may have elevated savings rates on CDs and savings accounts. But they've also caused credit card and loan APRs to spike. Between February 2022 and February 2024, APRs went from 14.56% to 21.59%, according to data from the Federal Reserve Bank of St. Louis. The difference between those two rates is about $40 in interest on a $1,000 balance that you pay off over 12 months.
If credit card or loan debt is dragging down your income, putting $1,000 toward what you borrowed could help you save on interest. Although this might not seem like the most exciting use of your money, it could help you become debt-free, thus freeing up your money for other financial goals.
4. Invest in the S&P 500 index
CDs and savings accounts are relatively risk-free. But for those with more risk tolerance, the stock market could offer you more growth potential. The S&P 500, which tracks the 500 largest companies in the U.S., has averaged an annual return of 10% over the last 50 years. At that rate, you could grow $1,000 into more than $145,000 over 50 years.
If you have the time horizon to balance losses with gains, you might be better off depositing your $1,000 in a top brokerage account and investing in stocks.
5. Invest in your retirement plan
Retirement plans, like 401(k)s and IRAs, can help you save for your golden years with generous tax advantages. Money invested in a 401(k) or IRA will grow tax free, meaning you won'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, then you could potentially turn that $1,000 into a greater lump sum to invest.
Paying down debt, saving, or investing $1,000 in any of these five options could have life-changing consequences for your financial future. Bear in mind, however, that stocks, ETFs, and index funds may have short-term market risks, so it's important to select these wisely and for the long run. More importantly, keep investing in your future, as you'll likely build wealth by consistently setting money aside rather than "hitting it big" on one investment.
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