Category: 4. How to invest $ 10,000

It’s a good idea to keep enough cash in your checking account for a month or two of expenses, and additional cash in high-yield savings accounts for emergencies. You can also let it grow with services like Wealthfront’s Cash account, which lets you easily invest into your investing account when you’re ready. But beyond that, you may want to take care to avoid having too much cash.

Most checking accounts and savings accounts pay very little interest. By investing your $10,000, you are taking on a little risk that could potentially lead to big rewards. That’s what investing is all about.

If you want completely safe investments that pay (generally) higher rates than savings accounts and money market accounts, you can look at U.S. Treasury securities. These represent U.S. government debt, and they pay higher interest rates if you’re willing to tie up your money for a while.

U.S. Treasury securities fall into four basic categories:

• Treasury Bills — These are short-term government securities, with maturities ranging from 30 days to one year.
• Treasury Notes — These securities have maturities of two, three, five, seven, and 10 years. They pay interest every six months.
• Treasury Bonds — These securities have terms of 20 and 30 years and pay interest every six months.
• Treasury Inflation-Protected Securities (TIPS) — TIPS pay interest every six months and are issued for maturities of five, 10 and 30 years. The principal is adjusted by changes in the Consumer Price Index, so the value keeps up with inflation.

We’ve presented the yields for 30-year Treasurys but recommend caution with this term. Despite the higher interest rates, it comes with much greater risk. Longer-term securities are subject to swings in market price, due to interest rate changes. For example, when interest rates rise, the market value of a long-term bond falls.

One bonus with U.S. Treasury securities is that interest paid on the securities is generally exempt for state income tax purposes.

You can purchase Treasury securities in denominations as low as $100 at the Treasury’s portal

For those looking for the best way to invest $10,000 that doesn’t have any risk, a CD ladder could be a good fit. A CD ladder is a combination of certificates of deposit (CDs) set to mature over a series of future dates. But if you need your funds early, you may have to pay an interest penalty that can be quite hefty.

CDs usually come with FDIC or NCUA insurance, which means you are guaranteed by the government to get your money back even if the bank goes out of business. These accounts lock in your interest rate until a specific date in the future when you can withdraw or renew your CD for another term.

If you have kids and plan to send them to college at some point in the future, it’s a good idea to start saving early. A 529 college savings plan offers many of the same benefits as a pre-tax retirement plan. But you use the funds for education expenses instead of retirement.

Most states have their own 529 plans. But you don’t have to use your state’s plan. Every plan has different investment options and fees. So, it’s a good idea to do a little shopping around to make sure your 529 account is best for your family’s education plans.

All of the investments listed above provide annual rates of return that are typically higher than what you might get on completely safe, interest-bearing investments. But they also involve a significant degree of risk (except for paying off credit cards). The risk is that you could lose some of your money while investing. In most cases, the returns will be positive if you hold on for several years. But there may be times along the way when your investment value will drop below your initial investment.

If that scares you and you want completely safe investments for your money, you can do that with high-interest savings and money market accounts.

Here are examples of banks currently paying interest rates that are well above average on both savings accounts and money market accounts:

Highlights
Rating	8.5/10	5.5/10	7/10
Accounts	Savings, Checking, Money Market, CDs	Savings, Checking, Money Market, CDs	Savings, Checking, Money Market, CDs
Online Deposits	true	true
Physical Branches	false
FDIC Insurance	true	true
ATM Reimbursement	true	true
	Open AccountCIT Bank Review	BBVA Review	Open AccountLendingClub Bank Review

None of these rates will make you rich. In fact, they probably won’t even keep you ahead of the current rate of inflation, which is running at around 2.2%. But they will keep your money completely safe, as well as pay interest rates that are many times higher than the national average of 0.06% currently being paid on typical savings accounts.

Health savings accounts (HSA) offers the best tax benefits of any investment account available today. With an HSA, you can contribute to the account with pre-tax dollars. And if you use the funds for qualified healthcare expenses, you don’t even pay taxes on withdrawals.

You can use an HSA only if you have a qualifying high-deductible health plan (HDHP). If you do, you may be able to get an HSA through your employer or choose one of our favorite HSA accounts to manage it yourself.

Did you know that 40% of households in the United States can’t afford to pay for a $400 emergency from their savings? This statistic from the Federal Reserve shows just how fragile many Americans’ finances are. If you don’t have enough cash to cover an unexpected car repair, home repair, injury or illness, consider putting some or all of that $10,000 into an emergency fund.

Many experts suggest keeping at least three months of expenses saved for emergencies. After all, unexpected layoffs and job losses can happen at any time. And if your job isn’t stable, consider doubling that goal to at least six months of expenses in savings for emergencies.

Pay Off High-interest Credit Card Debt

While you may not think of credit cards as a part of your investments, paying off high-interest credit card debt could be one of the best long-term investment decisions you ever make. Credit cards often charge well over 20% interest. And this can drain your bank account, keeping you from investing elsewhere.

If you have high-interest debt from credit cards or other loans, consider putting your $10,000 into your debt payoff plan. That could leave you with a lot more money to invest later on.

Many investors just want to put their money somewhere and have it invested on autopilot. If you don’t want to tinker or worry about stocks or funds, you have several options for putting your investments on autopilot.

We already mentioned robo advisors, arguably the best way to invest on autopilot. Other options include hiring a more expensive financial advisor to manage your investments. Or you can put money into a target-date fund, a type of investment fund managed for people looking to retire around a specific date in the future.

401(k) and IRA accounts offer some excellent tax advantages over time. But they also lock your money away until retirement. If you want to retire early or want to tap into your investments before reaching your golden years, a taxable brokerage account is the best place to hold your funds.

Ally Invest, mentioned above, is one company that offers this type of account. Once you open a brokerage account, you can buy and hold stocks, funds, and other assets.