What To Do If You’ve Got 5k In The Bank
While it may seem crazy to some (ahem, shopaholics…), some of us really do end up with cash sitting in the bank without any real purpose. Maybe you don’t have a real saving goal, but you know you should be putting some money away each week. Maybe you got an awesome tax return, a bonus or a big commission. Maybe your holiday got cancelled because your stupid ex ruined everything. Whatever the reason, it’s definitely something to be proud of.
While there’s no end to temptations, there are ways to spend money, and then there are smart ways to spend money. We spoke to three Gen Y financial experts about how to make your savings work harder for you.
Cara Brett, Bounce Financial
If you have $5,000 there are two main things I would tell anyone to do:
First, if you have credit card debt, pay it off! There is no point in having money sitting there when you are paying high interest rates.
If you don’t have a credit card debt, then keep the money as an emergency fund. Typically I would recommend you should put this in a high interest, online bank account that isn’t linked to your debit card. Take away the temptation, and keep it aside for the stuff that inevitably happens, like your fridge breaking down or a medical emergency. Once you have a nice, healthy emergency fund, then you can build upon it and start doing the fun stuff like investing.
Sarah Riegelhuth, Wealth Enhancers
If you’ve got $5K in the bank I’m going to assume that you’ve saved it up, so first up – way to go! I know there’s temptation to spend that money on something epic (I can think of plenty of things) but trust me when I say, if you leave that money right where it is, and start redirecting your on going weekly savings into shares, you’ll be setting yourself up for a pretty sweet future. There are so many online options these days to get started investing with even tiny ongoing contributions.
When it comes to investing, starting small but starting now is the key. This way you’ll learn as you go, and won’t have that fear of ‘losing everything’ that’s so common among first time investors.
Oh, and make sure the $5K you have in cash is in a high-interest online savings account!
Ben Nash, Pivot Wealth
If you have some cash savings and want to do something smart with the money, there is no one-size-fits-all approach. But, there are some options you can think about to make this money work harder for you.
Invest in yourself
If you’re trying to get ahead with your money, one of the best ways to do this is increase your income. Think about study and/or short courses you could do to increase your earning potential and get that overdue pay rise. An investment in yourself will pay returns for years to come.
Start an investment account
With $5K in the bank you could think about starting a small, regular investment plan.This will allow you to invest the money in something smart and should mean you get a better return over the longer term.
The important consideration if you go down this path is that you don’t need access to the money in the short term, because any money invested is subject to the share market, which can go up or down quickly. If your money is invested and you’re forced to get it out when the market is down, you will make a loss and your savings will suffer. But, if your money is just sitting there and you don’t need it, investing could potentially be one way to help it grow faster for the future.
Take a trip
Let’s face it, money is just a tool to create lifestyle options. So it’s not the best financial decision to spend your savings, but travel is a great for personal growth. Think about taking a trip to broaden your perspective and renew your energy to come back and get stuck into your career. Do this right and you’ll make the money back before you know it, and be all the wiser for the experience.
Phoebe Tully is an unapologetic advice giver, formidable Trivial Pursuit opponent and brand new homeowner. While she would rather live in a world with faster internet, this one will do nicely.