Whether you’ve recently gotten lucky or scrimped and saved for a few years, knowing what to do with 50k is essential. Having money in the bank is a unique opportunity. It means you can grow it and have an even larger safety net.
So, how can you get started, and what are the smartest options? Allow us to take you through what to do with 50k in savings!
How much is $50k and how can you get it?
You may have a significant payout from a previous job or even receive an inheritance from a loved one.
In addition, when you start to cut back, use effective money-saving tips, and use high-interest accounts, you may find that the cents start to turn into dollars fast and you find that you are able to save 50k.
At first glance, $50,000 may sound like a huge chunk of money. If you’re working a minimum-wage job or don’t have a gigantic salary, you could feel it’s out of reach. Or it could be that you are wondering how much 50k a year breaks down to in hours.
What ever your thought process is, the truth is that saving $50,000 is viable for many of us. At the very least, it’s a good goal to have.
And no matter how you have come to have $50,000 in your bank, you need to know how to use it.
What to do with $50k before you invest it!
If you’re lucky enough to have 50k in cash, the obvious move is to invest it.
However, before you look into your options for what to do with the money, getting yourself into a solid financial position is the first step. With that in mind, here are a couple of the admin tasks you should take care of first:
Pay off your debts
It’s much easier to land yourself in debt than it is to get out of it. If you owe money, now is the time to settle things once and for all.
That means learning how to pay off credit card debt fast or repaying outstanding loans.
If you haven’t already got a debt reduction plan, now is a good time to start.
For example, one of the popular strategies to pay off debt is to start by paying off high-interest debt, like credit cards.
Sometimes, you can wipe out the debt completely with one large payment. You need to check the small print of any loans you have taken out.
Paying off debts is rarely a fast process. However, armed with the 50k in cash, you are in a better position than most people.
Figure out a payment plan that works for you—and your other investment plans—and take things from there.
Create an emergency fund
Unless you have a crystal ball, chances are, you can’t see into the future. Since you don’t know what will happen in the months or years to come, you need an emergency fund.
Putting cash aside in case you ever need it will give you a sense of security. Having this pot in place can help you should you face sudden costs, such as:
Ensuring the fund is ready and waiting for you will give you the peace of mind you need. When the unexpected happens, you will be in the best position to deal with it.
18 Smart ways to grow $50k in cash
When it comes to what to do with $50k in savings, the important thing is not to let it go to waste. That said, if you are wondering how you can make your money work for you, below are some ideas to get you started. You can also find a wealth of tips in the Clever Girl Finance book, Learn How Investing Works, Grow Your Money!
1. Invest in index funds
If you want to build a successful financial future, you may want to make investing with index funds a part of your long-term strategy.
Index funds are types of stock market investments that follow and track stock market indexes, like the S&P 500, and are typically low cost.
For example, if you invest in an index that tracks the S&P 500, you will be invested in the 500 companies that make up the S&P 500.
When you buy into an index fund, you are essentially investing in every single stock within that fund—without buying individual stocks. It doesn’t end there.
You could also invest in a total market index fund, which splits your money equally across the entire stock market.
The great news about index funds is that because they are not actively managed like mutual funds, the expenses ratios are much lowers which means more of your money can grow!
2. Buy a rental property
$50,000 makes a nice down payment if you want to invest in the property market. One of the most effective ways to capitalize on the market is buying a house to rent out.
While there are additional costs associated with this investment, it could make you a good income.
Before you get started with this venture, consider the logistics of it.
Will you use a management agency to let the property out for you? How “hands-on” do you expect to be? What extra money will you need to maintain the property to a high standard?
If you can answer these questions, you may be in a good position to invest in a rental home.
3. Start a business
Did you know that you could start a business with $50K? If you’ve been thinking about starting a side hustle or business, you can use this money to get things off the ground.
A massive 99.9% of US businesses are small businesses. Read our guide on how to start a business from scratch before you begin planning out your next business venture.
Of course, there’s a whole world of business opportunities out there. You may want to start a business with 50k by setting up a hospitality venture, such as a cafe or a bar.
On the other hand, there’s always the option to start an online store selling bespoke products to a broader audience.
Consider your personal interests and how you can translate them into a startup business.
4. Flip a house
House flipping means buying an old property that desperately needs work, making it over, and then selling it for a profit. Average gross profits on home flips can be quite good.
When considering whether this option works for you, you will need to consider how much the renovations will cost, any tradesmen fees, and the price of the property. You will need a surveyor to take a look at the property before you go ahead and buy it.
Understanding the extent of the work that needs to be done is essential to the investment.
5. Invest in saving bonds
Next, let’s talk about a traditional way to boost your capital: saving bonds. When you’re deciding what to do with 50K, this is one of the most straightforward options.
Put simply, you buy a bond at face value, wait for it to mature, and then reap the rewards.
If you’re unsure where to start when it comes to investing your money, a saving bond is an ideal option. These are low-risk investments, which means that you aren’t going to lose all of your $50,000 in one unfortunate move. You can rest assured that won’t happen.
One of the biggest advantages of saving bonds is that they are backed by the full faith credit of the American government.
In layperson’s terms, you are not loaning money to a commercial entity but to the government. For that reason, these bonds are considered some of the safest investments for your money. Also, check out more of the best compound interest investments.
6. Boost your retirement savings
Now that you have excess money in the bank, it may be a smart time to increase your retirement savings.
Unfortunately, the truth is that many people out there lack a proper plan. One in four Americans don’t have any retirement savings whatsoever, explains Yahoo Money. If you fall into that category, now is an ideal opportunity to rectify things by creating a sustainable savings strategy.
How many IRAs can you have in your retirement strategy? Believe it or not, you can have more than one, like a Roth IRA or a traditional IRA. Both of these accounts offer tax advantages to help you grow your money over time so you can best protect yourself in retirement.
Take the time to learn the difference between the different types of retirement accounts. Then, look up your contribution limits. Check the yearly allowance for IRA contributions guidelines before you start topping it up.
Other more unique ways to grow $50k in cash!
While real estate, bonds, and retirement investing are all good options for your $50k, there are other ways to use the money. Here are a few ideas:
7. Buy artwork that appreciates
Are you a creative person or just someone who appreciates art? If the answer is yes, you can use your 50k to invest in some masterpieces.
There are many ways to invest in this sector. You can check out the U.S. News guide to buying art as a first port of call.
Consider whether you want to invest in individual pieces, look into fractional share agreements, or even throw your money into an art fund. The more research you do about the art world, the better position you will be in when buying some.
8. Invest in a startup
A startup is a new business that often needs investors to help it grow. You can be part of this!
It can be somewhat risky, but you can increase your chances of success by researching and understanding the startup before investing money.
You can be paid in a few ways, including shares and interest.
Help crowdfund a startup by checking out sites like Wefunder or StartEngine.
9. Invest in farmland
Owning farmland can be a lucrative investment. You can make money from rent as well as appreciation.
In addition to simply purchasing farmland, you may also choose REITs or crowdfunding to start your investing.
10. Consider cryptocurrency
Cryptocurrency is an alternative method of making money, but it can be profitable.
However, investing in cryptocurrency is not without risk and should be considered carefully.
Cryptocurrency is a new type of digital currency that you can buy. It may not immediately yield a profit, but it may benefit you in the long term. If the prices of crypto increase, you can sell what you own for a profit.
There are a variety of cryptocurrency options. Check out Coinbase to purchase this currency. Popular currency options include Bitcoin, Ethereum and Litecoin.
11. Invest for your children’s education
A great way to invest your money is to start saving for your children’s future with college savings plans.
A college 529b plan is one option for storing money for college because it lets you withdraw the earnings tax-free if they’re used for qualified education purposes.
You might also consider investing in another way, such as opening custodial accounts or even a regular investing option like index funds that you can use later for their education.
12. Buy ETFs
While they seem similar, there is actually a difference between index funds and ETFs, that has to do with the time that they are traded. Exchange-traded funds (ETFs) are an aggregation of stocks, bonds, and other securities.
For this reason, investing in ETFs makes it easier to create a portfolio with diversification than investing in individual stocks.
Another main benefit of ETFs is their very low minimum requirements to get started. It makes them a great option for beginner investors wondering what to do with 50k.
13. Consider real estate investments
Don’t want to buy a house? No problem—you can still try real estate investing for beginners via a real estate investment trust (REIT).
REITs own and/or operate properties like hospitals, warehouses, shopping centers, etc. REITs are publicly traded on stock exchanges, so they’re a great way to get into real estate investing without having to plunk down a down payment on a house—and then maintain that house.
14. Buy certificates of deposit
What is a Certificate of Deposit? Certificates of Deposit (CDs) are savings accounts offered by banks or credit unions.
Basically, you agree to keep your money in that financial institution for a specific amount of time—and they reward you with an agreed-upon APY (annual percentage yield).
CDs can be a solid portion of your investment portfolio especially for short term savings. But there are both advantages and disadvantages of CDs to consider before investing.
For instance, an advantage is you are guaranteed a specific interest rate and your money is FDIC insured. up to $250,000 A disadvantage if that if you withdraw the funds before the time elapses you may be charged a fee.
15. Open a money market account
There are many different types of bank accounts. To safeguard and grow your $50k, you can also consider opening a money market account.
A money market account offers higher interest rates than a typical savings account.
However, like a checking account, it allows you to write checks.
16. Put money in a high-yield savings account
Investing in the stock market is a great way to help your assets grow. But when figuring out what to do with $50k, don’t forget to maintain an emergency fund!
A great place to store your emergency fund is in high-yield savings accounts, which offer higher interest rates than typical savings accounts. These account types are also FDIC insured up to $250,000.
17. Invest in dividend stocks
Basically, a dividend stock is any stock that pays out dividends to its shareholders.
Investing in dividend stocks gives you two opportunities to grow your $50k. First, dividend stocks give you the chance to earn income through dividends.
Secondly, dividend stocks can also help you build your overall net worth over time if the stock’s value increases.
18. Contribute to an HSA
An HSA is also know as a Health Savings Account. Importantly, it is a great way to help save for future medical expenses.
With an HSA, you can both contribute and let your money grow tax-free until you withdraw it to pay for qualified medical expenses.
Pretty much everyone can benefit from an HSA, so if you’re wondering what to do with 50k, it’s well worth learning more about how a health savings account works!
Expert tip: Diversify your $50k to avoid volatility
One of the best investing tips is to diversify your portfolio. In other words, don’t put all your money in the same place. So if you’re trying to decide what to do with 50k, consider coming up with a few options, instead of just one.
For example, you can keep some money in a high-yield savings account as your emergency fund, invest some money in REITs, and use the rest to buy ETFs.
3 Mistakes to avoid with 50k in cash
If it’s the first time you’ve had this much money or wondered what to do with 50k in savings, you may be excited and want to start using it.
That is completely natural, but you need to slow down. Here are some critical mistakes to avoid:
1. Failing to invest
Having your entire $50,000 sitting in your bank account won’t do you any favors. While it may seem like the obvious move when you don’t know where to start, you are wasting an opportunity here.
You need to be sure that you are making a reasonable return on this money by learning to invest smart. Take a look at our list of ideas or seek independent advice on the issue.
2. Splurging it all on vacations
Fancy heading off to Barbados? What about jet-setting to Dubai?
While we all deserve a treat now and then, spending all your money on a luxury vacation is a mistake. When it’s over, your bank account will be empty, and you won’t have anything to show for it.
That doesn’t mean you have to invest all your money. Splurging a little on yourself can help you get it out of your system.
If there is something that you have always wanted, see if you can afford it. Set aside some cash for vacations and extravagances.
But just because you have $50k doesn’t mean you have to increase your expenses. Instead, remind yourself to avoid lifestyle inflation.
3. Giving the money away recklessly
Be sure to keep your 50K in cash safe! Whether you fall foul to an online scam or are pressured to give your money away to someone you know, there’s no doubt that you will regret doing so.
It’s a sad fact, but when people know you have money, they may try to extract it from you.
While there’s nothing wrong with helping out someone who is genuinely in need—such as a close friend or family member—be aware that people may try to take advantage of you.
Ensure you are practicing how to be smart about money and doing things for the right reason—not because you feel you have no other choice.
How much interest will $50,000 earn in a year?
The amount of interest you can earn on $50,000 in a year depends on what the annual interest rate is. For example, if your annual interest rate is 4%, you could earn $2,000 in interest on $50,000 in a year.
Keep in mind that this number can vary depending on where you invest your money.
Is $50k a lot of savings?
$50k is a lot of savings and definitely an important milestone to celebrate. However, 50k will not be enough to sustain you in retirement, so it’s important to find ways to invest and continue to grow that 50k.
What is the best investment for $50k?
There is no one best investment for $50k for everyone. But there is one golden rule regarding investing: diversify, diversify, diversify!
So when researching the best investment for 50k, remember to consider a breadth of options, like ETFs, REITs, dividend stocks, etc.
Is $50k too much in savings?
Deciding whether $50k in savings is too much depends on your lifestyle. Generally, it’s recommended to have an emergency fund that equals 3 to 6 months of living expenses. For some people, this may be 50k.
That said, if your living expenses are relatively low, $50k may exceed your emergency fund needs, making it a good idea to invest at least some of that 50k.
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You can create great opportunities by being smart with your $50k!
Knowing what to do with 50k doesn’t have to be challenging. The truth is that this is an opportunity, and you can easily grow your money. You might choose to start a business with 50k, invest, or do something else.
In this guide, we’ve covered some of the most effective strategies you can use to make a good return on the lump sum of money.
Use it as inspiration when deciding what to do with your newfound wealth. You might also want to consider, “Do I need a financial advisor?”, think about using robo-advisors, or get independent advice on what the next steps could be for your savings.