Clay Halton and Aditi Ganguly
8 min read
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An extra $1,000 might not sound like a life-changing amount of money, but put it in the right place and it could give your finances a meaningful boost. The key is figuring out where it will do the most good.
For someone living paycheck to paycheck, $1,000 in the bank could provide some breathing room the next time an unexpected bill arrives. Meanwhile, if you're carrying a burdensome credit card balance, that same money could help reduce the amount of interest you're paying. And if your short-term finances are already in good shape, investing the money could give it years to grow.
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In other words, there isn't one answer that works for everyone. Your savings, debt, existing investments and even when you expect to need the money can all change what makes sense.
That's why it helps to look at your finances in a certain order before deciding where to put the money.
If you have an extra $1,000 to work with right now, these four questions can help you decide what to do with it.
1. Do you have an emergency fund?
If you don't have money set aside for unexpected expenses, building an emergency fund may be the best place to start with your $1,000. Simply put, having an emergency fund can give you something to fall back on if you're hit with a surprise bill or a sudden loss of income.
"Ideally this should be between six and 12 months of core living expenses," Flavio Landivar, a certified financial planner (CFP) at Evensky & Katz Wealth Management, told MarketWatch (1).
Landivar recommends keeping that money in a high-yield savings or money market account, where it can earn interest while remaining accessible when you need it. That makes a high-yield account a natural place to put your $1,000 as you continue building your emergency savings.
A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money when you need it.
A Wealthfront Cash Account currently offers a base APY of 3.55% through program banks, and new, referred clients can get an extra 1.00% boost with the direct deposit incentive for a total variable APY of 4.55%.