If you’ve managed to build up a little extra in your bank account, that’s a positive step. It can be tempting to spend it right away, but you may also see it as a chance to save or put it to work over time.
Letting money sit in a standard checking account often provides little benefit (unless it’s a high-yield checking account). Below are three options people sometimes consider when deciding how to use extra funds, depending on eligibility, availability, and personal circumstances.
Invest in Real Estate
Real estate investing is often associated with buying and managing property, which isn’t feasible for everyone. Some platforms aim to make real estate exposure more accessible.
For example, Fundrise allows individuals to invest in diversified real estate portfolios with a relatively low minimum investment. Through these platforms, investors may be able to view the types of properties included and select options that align with their stated risk preferences.
Returns are not guaranteed. Any income, such as distributions or dividends, depends on property performance, market conditions, fees, and other factors. Investments in real estate are typically illiquid and involve risk, including the potential loss of principal.
Invest in Other People
Peer-to-peer lending platforms allow individuals to lend money to others, potentially earning interest if borrowers repay their loans.
Platforms like Prosper enable users to start with small amounts and spread funds across multiple loans to diversify risk. Loan performance varies, and borrowers may default, which can reduce or eliminate returns.
Interest earnings are not guaranteed and depend on borrower behavior, economic conditions, and platform fees. Diversification can help manage risk, but losses are still possible.
Invest in Companies
You don’t necessarily need a traditional broker to begin investing in the stock market. Many online platforms allow individuals to open brokerage accounts and invest directly.
Apps like Stash and Acorns are designed to help beginners get started by asking questions about goals and risk tolerance, then suggesting investment options. These platforms often focus on Exchange-Traded Funds (ETFs), which can offer diversification and relatively low fees.
As with all market investments, returns are not guaranteed. Investment value can fluctuate, and it’s possible to lose money, especially in the short term.
Before investing, it’s generally helpful to consider factors such as your emergency savings, time horizon, and comfort with risk. Exploring different options can help you decide how to best use extra funds in a way that fits your overall financial plan.