You saved 30k and you don’t know what to do with it? First of all, congratulations! Most of the country still lives paycheck to paycheck; so being able to save such an amount of money is a big deal. That is why deciding what to do with this money is an extremely important decision.
Many people believe they need to have a lot of money to be able to start investing. Investments such as private equity and real estate can demand higher capital. However, there are many options available that have lower barriers to entry. When you reach 30k in savings, you should start considering investing it in certain types of assets. Instead of leaving your money sitting in a bank account, various investment opportunities can offer you a second stream of often passive income. Thus, if you have about 30k in savings and you are looking for investment opportunities, here are the best ways to invest this money in .
Factors To Take Into Consideration Before Investing
Before you put your money into an investment in , there are some aspects you should reflect on. These will not only evaluate if you are ready to invest this 30k but also help you understand what type of investment best fits your needs. For this reason, here are the important factors to take into consideration before investing around
High Interest Debt
If you have a high-interest debt to pay off, this is probably the best way to use this money. It is likely that any investment will pay you a lower interest rate than the debt will charge you. That is why, before locking this money in any type of investment, paying off high-interest debt is the wisest move.
If you don’t have any high-interest debt to pay off, opening an emergency fund should be your next priority. Being financially prepared for rainy days can help you avoid getting into debt in the future. Avoiding a high-interest loan is the best financial strategy for your 30k. For this type of fund, you can use savings accounts, or other liquid types of investments.
Let's say you have no high-interest debt and already own an emergency fund. You are now ready to place this money somewhere it can grow. The next step, as obvious as it sounds, is determining what you intend to do with this $30,000 you managed to save. Do you want to put this money towards your retirement? A new house? Your kid’s university? The answer to that question will likely result in a different option of investment, so think well about what this money will be used for in the future.
Define for how long you can afford to have this money aside. If you need the 30k in the short term (from 3 weeks to 3 years from now), be careful with the investment you choose. Even investments with high liquidity, such as stocks, can be an issue because you don’t want to have to withdraw your investment when the market is down. But, if you can wait a long time, you can take advantage of higher interest rates. Thus, establish a realistic time frame for your investment.
Your age, health, income, savings, relationships, family are all factors that should be taken into consideration before investing your 30k. Understanding your circumstances means covering how much money you have now and how much you forecast to be making - and spending - in the future.
Based on the above factors, you may already have an idea of how many risks you can - and are willing to - take with these 30k. Investments have different levels of risks and you should know very well how much chance you can take with these savings. If you can’t afford to lose the money, don’t go for risky investments. If losing part of it won’t affect your life that much, you might want to take advantage of the higher yield offered by riskier options.
Best Ways to Invest 30k
Now that you evaluated the previous factors, you can choose how to invest the $30,000 you managed to save. As mentioned, there are many options of investments for this amount of money. Some have high stakes, and interest rates, while others are more stable with lower-yielding. Thus, here are some of the best ways to invest 30k near that you can choose from, more or less in lower to higher risk order.
Savings and Money Market Accounts
Are very safe investments insured by the FDIC with often no to low minimum deposit? Brick and mortar options don’t offer very appealing interest rates. However, with online savings accounts, you can have access to better yielding. Just pay attention if they are higher than the inflation rate, otherwise, it is not worth it. Both of these investments have very high liquidity, which is a positive trait.
Certificates of Deposits (CDs)
Are also very safe, accessible, and insured by the FDIC. The issue with CDs is their interest rates. At one point, they used to be very good for how low-risk CDs are, but lately, they have been slashed to between 0% and 0.25%. This means right now CDs are not returning the inflation rate. Yet, this is something that can change in the future, so it is interesting to know this is an option. The liquidity of CDs will depend on the maturity period of your investment and can vary from a few months to many years.
Can potentially grow a lot from your initial 30k investment. But as usual, with high returns comes high levels of risk. Depending on which stocks you choose, it can be a risky investment. There are many different ways to invest in stocks, from a 401k to a brokerage account. If you want to tap into the stock market, but don’t want to take too many chances, you should go for low-fee, highly diversified stock funds.
A Real Estate Investment Trust (REIT)
An alternative that allows you to invest in real estate with a smaller capital. REITs are companies that own, operate, or finance income-producing real estate. This very passive option of investment pays higher dividends than stocks. However, it often lacks transparency and liquidity.
Real Estate Crowdfunding
is another option to tap into real estate with only 30k. The minimum investment of this alternative can be as low as $1,000. Real estate crowdfunding consists of online platforms that allow you to invest in real estate debt and equity. It can offer attractive returns from 7% to 20% depending on the type of deal. Just like common real estate investing, this option can be risky, especially because you won’t be the one dealing with the assets.
Peer-to-Peer (P2P) Lending
is another interesting place to invest your 30k. At P2P platforms, investors lend money together to people needing to borrow capital. Then, the investors make money from the interest rate of the loan. This option can offer good returns, from 6% to 10%, but it comes with high risks. P2P loans are usually not collateralized, so if the borrower doesn’t pay, you can lose the money. But, usually, the money you invested will be separated and inserted into many different loans, to protect your assets better. The liquidity of P2P lending is poor due to the 3-5 year holds.
Such as Bitcoin and Ethereum, don’t have barriers of entry in terms of minimum investment. However, the risk involved in crypto is quite high since it is an extremely volatile and speculative market. Cryptocurrencies are also very new and experimental, so the future of this industry is still unclear. On the bright side, the potential returns can be very high. The advancements of decentralized finance also provide new services based on cryptos with lower risks. The returns are not as high but are still quite good. For example, crypto-saving accounts can pay interest rates as high as 12%.
Once you choose a specific investment for your 30k, there are a few other important steps to take. These steps are not only vital for this particular investment but all your future investments.
- Keep in mind that maintaining a diverse portfolio is always a good way to keep your money safer.
- Do your own research and due diligence so you invest safely and wisely.
- Compare all the providers of the chosen investment to avoid unnecessary fees or lower-than-average interest rates.
- If you don’t know what you are doing, consider looking for a professional financial advisor or using online platforms that can assist you with your investments.
The Bottom Line
There is no right choice when it comes to everything finance near. What you can do is to take into consideration the main factors that influence your financial life, analyze the best investment options available in the market and then make a well-thought decision. If you were able to save 30k, you can make an informed decision of where to place this money to keep it growing for your future. What you should not do is leave it sitting in a bank account, losing value to inflation. With so many ways to invest lower capital available, there is no reason why you shouldn't find the ideal one for you.