I Have $1,000 to Invest. Where Should I Put It?

Got $1,000 burning a hole in your pocket? Good news -- you're in a prime spot to make that money work hard for you. High interest rates across numerous banks mean your money can grow faster today than in years past. This is crucial, as inflation is chipping away at your money's value, turning that $1,000 into something less powerful.

Whether you're paying down credit card debt or saving for the future, here are five ways to invest $1,000.

1. Start an emergency fund

Emergency funds are your life vest when the going gets tough. Most experts recommend you have between three and six months' worth of living expenses tuckered away in a safe, accessible account. If you're currently without an emergency fund, putting your $1,000 aside in a free savings account would be a prudent investment.

You can even put that $1,000 in a high-yield savings account to help it grow faster. The best high-yield savings accounts are currently paying out above 5.00% APY. Although they have some restrictions -- some banks may limit your monthly withdrawals -- they're more flexible than CDs and stock investments.

2. Pay off high-interest debt

Credit card and loan APRs have spiked over the last two years. In fact, between May 2022 and May 2024, the average credit card APR went from 15.13% to 21.51%, according to data from the Federal Reserve Bank of St. Louis. The difference between those two rates is about $370 in interest on a $5,000 balance that you pay off over 24 months.

If credit card or loan debt is eating away at your income, paying it down by $1,000 could help you save on lifetime interest. You might even want to look into balance transfer credit cards, as many will give you an introductory period of zero interest on balances you transfer from other cards, making it cheaper to pay them off.

3. Lock into a high-yield CD while you can

Current rates on certificates of deposit (CDs) are still at a two-decade high. Even though banks have started reducing rates, you can find many CDs with APYs above 5.00%.

That said, if predictions come true and the Federal Reserve cuts its federal funds rate later this year, these high CD rates will start to vanish. If you've been on the fence about CDs, now might be the time to seal a great CD rate before they're gone.

To give you some perspective, putting $1,000 in a 12-month CD with a 5.25% APY would yield $52.50.

4. Invest in your retirement plan

Retirement plans, like 401(k)s and IRAs, can help you save for your golden years with tax advantages. Money invested in a traditional 401(k) and IRA will grow tax free, meaning you won't have to worry about paying taxes on investment gains until you withdraw money in retirement. And if your employer offers a match on 401(k) contributions, don't hesitate -- take the match. You can potentially turn that $1,000 into a greater lump sum to invest.

5. Invest in the S&P 500 index

The S&P 500 (otherwise known as the Standard & Poor's 500) is a stock index that tracks the 500 largest companies in the U.S. Investing in an S&P 500 index can be a great way to diversify your $1,000 without requiring you to hand pick your own stocks.

To be sure, the stock market is currently experiencing bouts of volatility. This is normal and shouldn't deter you from investing in your future. However, if you don't want to risk losing this $1,000, you still have the other options listed here.

The most important thing is to keep investing in your future, as you'll build wealth by consistently setting money aside rather than "hitting it big" on one investment.