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If you’ve just gotten your first $1,000 that’s free to invest, you might be freaking out a little bit. What are you going to do with that money? And how will you keep it growing so that you can continue to invest more for your future?
Well, $1,000 is a great start, but it’s not a ton of money. That means you can’t spread it out into too many different options. But you can prioritize the best ways to invest that thousand bucks. Here are some of the best ways to invest your first $1,000.
Overview: How and Where to Invest $1000
| Investment Type | Best For |
|---|---|
| Paying off debt | Those with high-interest debt |
| High-yield savings account | Emergency fund |
| Tax-advantaged account | Beginner investing |
| Stocks | Having control over where your money goes |
| Real estate | Alternative investment |
| Art | Alternative, long-term investment |
| Peer-to-peer lending | High-risk/high-reward |
| CD | Those who don’t need the money right away |
| Treasury security | Safe investment to balance risk |
| Use a Micro-Savings app to both save and invest | Those who want to invest while shopping |
1. Pay Off Debt
First, if you have high-interest debt, you’re likely best off putting your money towards that. If you’re paying 15% or more interest, you won’t likely be able to put your money towards an investment that out-earns that. So it’s best to pay off that debt.
The general rule of thumb here is that you first put enough money into an employer-sponsored account to get any matching option. Then, you put your money towards high-interest debt until that’s paid off. Once that’s done, you can move on to these other options.
2. Use a High-Yield Savings Account
If you don’t have any money saved for an emergency, put your $1,000 into a high-yield savings account for emergencies. This keeps you from going into more debt if an emergency does arise, so it’s a good idea. Look for a savings account with little to no ongoing fees and as high an APY as possible.
Here are a few of our favorite high-yield savings accounts:
Featured Savings Accounts
Bank/Credit Union
Min. Deposit
APY
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5.26%
4.50%
4.65%
3. Put It Into a Tax-Advantaged Account
If you don’t have an employer-sponsored retirement plan, or if you can’t put this $1,000 in there, you should consider making your investment through an IRA. Tax-advantaged investment accounts can boost that amount and grow your money over time. Luckily, some of the options below, including some robo advisors, allow you to invest through an IRA, so you can get both good returns on your investment and tax advantages.
4. Try Your Hand At Investing In Stocks
You don’t want to invest your whole portfolio over time in stocks. But if you’re interested in trying your hand at stock investing, try it through a solid platform like E*TRADE, TD Ameritrade, or Ally Invest. These platforms let you make trades on your own, so you can see what it’s like to build your custom investment portfolio. You can also opt for a semi-robo advisor like M1. This one is free to use and lets you put together your portfolio of ETFs, which tend to be more stable than individual stocks but still give you the feel for putting together your investments.
But if you don’t know what you’re doing or just don’t want to deal with the time and energy it takes to pick good stocks, fear not. One of the best ways to have your money managed for you is by working with a Certified Financial Planner. The problem is, they’re hard to find (good ones, at least).
5. Start a Robo Advisor Account
If you want more handholding or to be hands-off with this starter investment, consider using a robo advisor like Betterment. With a dollar amount on the small side like this, Betterment is probably your best bet. It’ll let you set your investment preferences and forget about managing your account daily.
6. Use a CD For Mid-Term Savings
What if you want to put that $1,000 towards the start of some larger savings goal for the medium-term? Like buying a house or a car? In this case, you might consider putting it into a CD. If you know you won’t need it to be liquid for a set period of time, a CD can get you a good return on your investment without risking your capital as you will with many investing opportunities.
Read more: Best CD Rates
7. Buy a Treasury Security
If you have a higher income tax rate, you might get a better deal from a Treasury security versus a CD. They do tend to have slightly lower rates, but their earnings are exempt from state and local taxes. Before you decide to lock your money up in either option, be sure you do the math to get the best bang for your buck.
8. Put it in your kid’s 529 account
What if you’re already maxing out your retirement accounts or saving as much as you feel like you should? In this case, consider adding that $1,000 to a 529 college savings account for your kid. These accounts act as an IRA for education spending, so they’re a valuable way to save up now for those hefty college expenses you’ll see in the future.
9. Use a Micro-Savings App to Both Save and Invest
Did you know that you don’t even need to wait to accumulate $1,000 to begin investing? Naturally, there’s more you can do with your portfolio if you have that kind of money. But if you have been having difficulty accumulating it, or you have at least $1,000 and want an automated system to increase it, Stash Invest needs to be on your radar.
Stash Invest provides you with a debit card. You can set the card to use round-ups to make regular contributions to your investment account. For example, if you make a purchase for $9.15, your account will be charged the full $10, with $.85 going into your investment account. Multiply that by dozens of transactions per month, and you can easily see $20, $30, $40, or even $50 going into your investment account each month.
Stash Invest even makes investment recommendations for you. You’ll have the option to choose from more than 400 individual stocks and exchange-traded funds. They provide a portfolio model based on your risk tolerance, time horizon, and investment goals. They won’t manage the portfolio for you but will guide you toward creating one that works for you. As much as anything else, Stash Invest is an excellent introduction to self-directed investing, both helping you to accumulate funds for investment and then gradually helping you get your feet wet with managing your portfolio.
Read our full review on Stash Invest.
Start Keeping Track
Whatever you decide to do with that $1,000, be sure you keep the cycle going by keeping track of both your budget and your investments. One way to do this is with Empower, a platform that lets you pull all of your investing and spending data together into a single place. With it, you can watch your original investment grow, but you can also manage your budget to live on less than you earn and invest the rest.
FAQ
How much interest will I earn on $1k?
To determine the interest you’ll earn on $1k, multiply 1,000 by the rate of return you expect. So, for example, if you expect a 6% rate of return, you’d earn $60 in interest by the end of the year (1,000 x .06 = 60).
How should I invest $1k to make 100k?
To turn $1k into $100k, you expect to 100x your investment. The best way to do this is to start with $1k and continue to invest at regular intervals over time. For example, if you started with $1,000 and invested $200 per month, every month, for 20 years and earned a modest rate of return of 6.5% (compounded monthly), you’d end up with just over $100k.
How can I invest $1k wisely?
To invest $1k wisely, you should open an account with a robo advisor and let them do the work for you. $1k isn’t enough to invest in most mutual funds or even some index funds, but it is enough to start investing with a robo advisor. This way, your investment will be broadly diversified and actively managed on your behalf.
What’s the best way to invest $1k short term?
The best way to invest $1k in the short term is to put it into an ETF or index fund that captures a wide scope of the total stock market (like VTI, for instance). Most brokers will allow you to open an account with $1k, but you might have to search for a fund that will let you buy in for $1k (many require a minimum investment of $2,500, for example). Alternatively, you can put the $1k in a robo-advisor account and let them manage it.
Bottom Line
Having $1k to invest is more than many people have. Most Americans don’t have $1,000 to cover an emergency without going into debt. So consider yourself lucky in that sense. That’s why you want to make sure it lasts, and it’s invested wisely.
Related: Savings by Age: How Much to Save in Your 20s, 30s, 40s, and Beyond
Review our advice above, choose a safe, short-term investment, and keep a close eye on it. Your $1,000 investment isn’t going to get you to retirement by itself, but it can serve as a wonderful safety fund and a foundation for a larger portfolio.
Resources:
Read More:
- How to Start Investing
- How to Invest with Little Money
- How to Invest $10
- How to Invest $100
- How to Invest $10k
- How to Invest $20k
- How to Invest $100k
- How to Invest $1m
- Best Short-Term Investments
- How to Invest Like Mark Cuban
