Five In

How to invest $5,000

If you’ve been putting in the work and have saved a nice chunk of change, it’s time to consider investing. Let’s say you’ve accumulated $5,000 — quite a sizable amount. Below are some smart ways to invest it.

  • A 529 Plan. If you have kids (and have taken care of your retirement, more on that momentarily) putting at least some of the money into a 529 plan is a good idea. The college savings plan allows for tax-free withdrawals as long as they’re for educational purposes and provides a solid foundation for paying tuition and other fees.
  • A retirement plan. As US News notes, there’s no time like the present to think about your golden years. Use your money to invest in a 401(k) or IRA retirement plan. The earlier you invest that $5,000, the more time it’ll have to grow.
  • A health account. A Health Savings Account (HSA) is a good way to invest that $5,000. You can save money tax-free for out-of-pocket medical costs now, or invest the money to be used like a supplemental retirement account down the road. Note: HSA funds are yours forever, not use-it-or-lose-it like those in a Flexible Spending Account.
  • A robo-advisor. You can open an account with a robo-advisor to take care of your money. Some robo-advisors charge a management fee, but some are free up to a certain dollar amount.
  • Exchange-traded funds. Use your $5,000 to buy some exchange-traded funds (ETFs) through an online brokerage account. ETFs are a collection of securities that trade throughout the day. They typically have low or zero-commission fees and low expense ratios.
  • Chris O'Shea

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