9 Clever Ways to Invest $10K in 2024

You’ve socked away your first $10,000 — congratulations! Meeting a savings milestone is a huge accomplishment and can solidly set you up for the next leg of your money journey. The next step is the most exciting; it's time to make the money work for you.

I know how overwhelming investing can be, but this guide on ways to invest 10K can point you in the right direction. Knowing how to invest money is the most important thing you can do for your finances. I'll walk you through nine different money options, explain how they’re used, and offer tips to help you determine which investment strategies are right for you and your $10,000.

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How to invest $10K: 9 smart ways to use your money

Now that you’ve done some soul-searching, it’s time to dig in and explore investment opportunities. Check out these nine options to determine which investment strategies can help you meet your goals while also honoring your risk tolerance.

1. Put money in a high-yield savings account

It’s always a good idea to have an emergency fund set aside. You never know when you’ll have to weather an emergency car repair, pay to remove a downed tree after a storm, or make good on bills after an unexpected job loss.

If you’re building a first-time cash cushion right now, aim to sock away somewhere between three and 12 months’ worth of living expenses. The lower end is for those with very secure jobs, where the risk of layoff is extremely low. The higher end can help ease worry for risk-averse workers, those who work for themselves, or people with unstable income situations.

It’s vital that you keep emergency funds somewhere secure, that won’t lose money, but you should balance risk with reward. A high-yield savings account is a great compromise as you can earn above average APYs, helping your money grow. Check out the best savings accounts to get started.

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2. Pay off high-interest debt

I know paying off debt doesn’t sound like an investment, but when you pay off high-interest credit card debt you give yourself an immediate return on your investment.

The average American carries 3.9 credit cards and just about half of active cards carry a balance, with a typical cardholder carrying a balance of about $6,501, and an annual percentage rate (APR) of 22.76%. Pay just the minimum amount due (assuming 2% of the balance) on those cards and you’re looking at more than a 13-year repayment term and over $14,000 in interest.

Instead, consider paying off that high-interest debt. After paying off your credit cards, you can use the money you used to use for payments to invest in income-producing assets.

3. Max out your individual retirement account (IRA)

There are two types of IRAs, the traditional and Roth.

• Traditional IRA: Allows for a tax deduction, which effectively decreases your taxable income for the year you make the contribution.
• Roth IRA: Uses after-tax dollars, but the money grows tax-free so you won’t owe any income tax on Roth distributions when you retire.

The tax benefits of each are limited to those who earn below a certain threshold but the Roth IRA is generally a more flexible account. The Roth allows for tax- and penalty-free withdrawals before retirement under certain circumstances, such as to buy a first home or pay for qualified higher education costs.

The IRA annual contribution limit is $7,000 if you’re under age 50 or $8,000 if you’re age 50 or above. There are income limits too. So if you haven’t put money aside into your IRA yet this year, it might be a smart way to use part of your $10,000.

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4. Fund a Health Savings Account (HSA)

An HSA is a fast and easy way to reduce taxable income while also saving for those often unavoidable health care costs that can crop up when you least expect.

Besides allowing you to pre-plan to pay future health care costs, the HSA has an attractive triple tax advantage if used for qualifying expenses:

1. HSA contributions are made pre-tax if made through your employer, or they can be tax-deductible if made on your own
2. Any earnings accumulate tax-free within the account
3. There is no tax due on withdrawals made for eligible health care-related expenses

To participate, you must have an HSA-eligible, high-deductible health insurance plan. This typically includes plans with a $1,400 minimum annual deductible for individuals and $2,800 for families. HSA maximum contribution limits currently top out at $4,150 for self-only plans and $8,300 for family coverage.

5. Save for education costs with a 529 account

The average student loan debt is $37,853 for recent college grads. That staggering number often drives home the need for many parents to start saving as soon as they can.

Parents, grandparents, family friends, or other loved ones can contribute to a tax-advantaged college savings account known as a 529 up to $500,000 in some states. Most of us won’t be able to come anywhere near that number, but even if you just sock away a few hundred bucks per month, you could wind up with more than $80,000 by the time your child moves into a freshman dorm.

529 plans offer federal tax-free growth and tax-free withdrawals for qualified education expenses. Some states may also offer a full or partial tax credit or deduction to residents who contribute to their state’s plan or, sometimes, to any plan.

It can be tricky to figure out which 529 plan is right for you but there are handy online resources available, or you can sit down with a financial planner or college planning professional.

6. Open a taxable investment account

After filling your tax-advantaged investment buckets — generally your 401(k) and IRA — you can continue to boost your investment savings by opening a taxable account through your investment advisor, a brokerage firm, or an investing app like Robinhood or Stash.

Unlike your retirement plan,you must pony up to Uncle Sam when you sell a taxable investment for a profit, but you can use strategies to minimize the tax burden by working with a financial advisor. When you invest in taxable assets, there are many options including stocks, bonds, exchange-traded funds (ETFs), mutual funds, and even cryptocurrency, depending on the service or brokerage account you use.

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7. Build a CD ladder

A certificate of deposit, or CD, is a type of savings account that restricts access to your funds for a specific period of time (the term). In exchange, it offers a higher interest rate than what you’d get on a regular savings account. However, keep in mind that buying a CD is a one-and-done transaction — you can’t add or withdraw money without triggering a financial penalty.

To build a CD ladder, you buy a series of CDs with sequential maturity dates (in two, four, and six years, for example). This strategy will give you access to a portion of your money whenever a CD matures. Meanwhile, the rest of your funds can keep earning at the higher interest rates offered by your remaining CDs.

Although CDs are among the safest of investments, the interest rates offered often pale in comparison to the potential earnings an investor could realize in the stock market. But buying multiple CDs at varying maturity dates can be a smart money move for risk-averse investors who want to build a calm island of stability amid choppy market waves.

I also like CD ladders for a portion of my portfolio to reduce the risk of total loss. Investing in stocks doesn’t provide any form of security, so knowing a portion of my portfolio is safe gives me peace of mind.

8. Invest in index funds

Ready to start investing but don’t want to take on the risks associated with individual stocks and bonds? Index funds give you a quick and easy way to get into a particular part of the investment universe.

An index fund essentially tracks the movements of a particular investment benchmark, or index. For example, the 500 largest stocks in the U.S., companies from emerging market economies, or investment-grade corporate bonds. As stocks, bonds, or other securities are added or removed from an index, its corresponding fund will automatically buy or sell those securities.

Because index fund portfolios tend to be somewhat large, they’re also associated with greater diversification and less risk than individual stocks and bonds. They are an investment, though, and still subject to the market’s ups and downs. But index funds can be one of the fastest, easiest ways to put $10,000 to work in the broader investment market. I think of it as automatic diversification.

9. Consider real estate investment opportunities

Investing in real estate can help generate a substantial income stream while also creating risk-reducing diversification because tenants typically keep paying rent, even when the stock market hits a slump.

I also like that real estate and the stock market aren’t correlated. When one market hits a slump, it’s likely the other is just hitting its stride. That often inverse relationship makes real estate an excellent complement to stock market securities.

Even if you don’t want to be a landlord or can’t afford to buy an entire building, there are other ways to start real estate investing.

• REITs: Real estate investment trusts (REITs) are companies that may own, manage, or finance a pool of income-producing real estate properties. You get access to real estate investments without the landlord responsibilities, and they often have a much lower minimum investment requirement.
• Crowdfunded real estate: Companies like Fundrise and Crowdstreet give investors the power to pool their money with other investors to buy into private, commercial, or residential deals. Depending on the platform you choose to invest through, you may be able to invest in individual deals, funds, or portfolios.

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Questions to ask yourself before investing

Before deciding where to invest your $10,000, ask yourself these questions:

• What type of investor are you? Are you looking for a more hands-off or hands-on approach?
• What is the timeline for your financial goals?
• Are your financial goals short or long-term?
• Do you have an emergency fund saved?
• Do you have a retirement plan?
• Have you paid off all your credit card debt?

Next, consider your risk tolerance. This can help you decide which investment opportunities may best suit your disposition. High-risk investments are often accompanied by greater potential for a high rate of return, but they will also have a greater likelihood of loss. Some investors are better able to stomach the market’s ups and downs. Others prefer to find ways to smooth out the ride.

The answers to these questions can help you figure out which investment options may be best for you.

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Bottom line

Whether you want to save for retirement, build a college fund, or create an ultra-safe CD ladder, there is an investment option that can put your $10,000 to work for you. A do-it-yourselfer can explore these options through a robo-advisor or an investment app or you can reach out to a financial advisor if you’d rather work with a real live human.

Either way, it’s always a smart money move to identify your goals and gauge your tolerance for risk before moving into an investment opportunity.

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