Yahoo Finance 6 Strategic Ways To Use Money From Your Savings
Everyone tells you to save as much as you can — but rather than just put money away for a rainy day, why not use it more strategically? Experts say you can use money from your savings to help grow your wealth.
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Here are the top ways they suggest to set you up for future success:
Invest in Low-Cost Index Funds
One of the most effective ways to utilize your savings is to invest in low-cost index funds.
“These funds offer broad market exposure and typically have lower fees compared to actively managed funds, which can significantly eat into your returns over time,” said Dennis Shirshikov, head of growth at GoSummer and a finance professor at the City University of New York. “For instance, the S&P 500 index fund has historically provided an average annual return of about 10%, making it a reliable vehicle for long-term growth.”
By investing in index funds, you can benefit from the overall growth of the market without needing to pick individual stocks.
Ben Klesinger. co-founder and CEO of Reliant Insurance Group and Helping Hand Financial, equally agreed.
“Consider investing your money in the stock market. Although the potential for loss exists, the stock market has historically provided the highest returns over the long run.”
He suggested starting with broad market index funds before picking individual stocks.
“Over 30-40 years, $5,000 invested annually at a 7% return can grow to over $1 million.”
Allocate Funds to Real Estate
According to experts, real estate investment is another strategic use of savings that can provide both income and capital appreciation.
“Whether it’s purchasing rental properties, investing in Real Estate Investment Trusts (REITs), or even using platforms like real estate crowdfunding, there are multiple ways to gain exposure to this asset class,” Shirshikov said.
Real estate can act as a hedge against inflation and offer a steady cash flow through rental income.
Klesinger similarly recommended buying and holding assets that appreciate like real estate.
“Property values historically rise over time with inflation. Using a buy-and-hold real estate investment strategy, you can purchase residential or commercial property and generate monthly rental income and significant capital gains upon sale. Over 30 years, property values often double or triple.” Shirshikov said.
Fund Personal Development and Education
Investing in personal development and education is a non-traditional yet highly impactful way to use your savings.
“By acquiring new skills or furthering your education, you can enhance your earning potential and career opportunities,” Shirshikov added.
This could mean enrolling in specialized courses, obtaining professional certifications or even pursuing advanced degrees.
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Start or Invest in a Business
“Using your savings to start or invest in a business can be a high-risk, high-reward strategy,” Shirshikov said.
This approach allows you to leverage your skills and interests to generate potentially significant returns.
Whether a small side hustle or a full-scale startup, the entrepreneurial path can lead to substantial wealth creation.
“For example, many successful entrepreneurs started with modest savings and grew their businesses into multi-million dollar enterprises,” Shirshikov said.
Pay Off High-Interest Debt
Klesinger recommended paying off high-interest debt like credit cards to avoid unnecessary interest charges.
“The average credit card charges over 15% APR, so paying this debt off provides an instant return on your money.”
Once paid off, he says to take that payment amount and automatically transfer it back to your savings account each month.
Nischay Rawal, certified public accountant and founder of NR Tax & Consulting, said this was a wise money move.
“Paying off high-interest debt like credit cards provides an immediate gain. Once paid off, take that payment amount and automatically transfer it to savings each month. This forces you to ‘pay yourself first’ and builds wealth through compound interest.” Rawal said.
Consider Municipal Bonds
For investable funds, Rawal recommends municipal bonds.
“Munis are tax-free at the federal and sometimes state level, so after-tax yield is often higher than comparable taxable bonds.”
He added that a muni fund can generate tax-efficient income in the long run.
“Munis are ideal for higher tax brackets seeking maximum after-tax returns.”
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This article originally appeared on GOBankingRates.com: 6 Strategic Ways To Use Money From Your Savings
