I Have $10,000 to Invest. Where Should I Put It?

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If you have $10,000 in cash, today’s high interest rate environment gives you plenty of options. Here are four to consider. 

In the year my dad was born (1950!), $10,000 would have been more than enough to buy a house in his home state of Ohio, then flaunting a median home value of $8,304. Imagine that for a moment. Then shake your head back into reality, because $10,000 is hardly enough for a down payment on a home today — despite that most of us feel it takes about as much work to earn and save it.

Nonetheless, $10,000 is still a pretty big chunk of change. I don’t know if people still hide money under mattresses — did they ever? — but ruling that out as the absolute worst place to put money, you still have plenty of bank accounts to choose from. Nearly all are safe and FDIC insured. But quite a few are paying at such high interest rates, even the firmest skeptic of capitalism couldn’t help but think, “you know, that’s not a bad idea.”

Here are four great places to park $10,000 right now.

1. High-yield savings account

High-yield savings accounts top the list of my favorite bank accounts in 2023.

FDIC insured? Check.

Easy access to cash? Check.

High annual percentage yield? You bet.

Indeed, with a $10,000 deposit, you could earn between $475 and $525 annually on today’s top-paying savings accounts. That’s money making money risk free. Better still if you can find an account that has no monthly maintenance fees, no opening minimum deposits, and an ATM card that lets you withdraw cash.

One caveat: These accounts have variable rates. It could be the case that your account’s APY is reduced within a 12-month period, which would make your actual APY lower than the one advertised. This might happen if the Federal Reserve decided to cut the federal funds rate. No one can predict what the Fed will do next, but it’s something to consider.

2. Certificate of deposit (CD)

For those who have savings they won’t need for the near term, perhaps no savings product presents more opportunity than today’s top-paying CDs. These days, it’s not uncommon to find banks and credit unions offering short-term CDs with rates at 5.50% — though the real gems of these are starting to peak above that.

I’d consider this option over a high-yield savings account only if you’re certain you won’t need your CD deposit for however long your term lasts, as you’ll be penalized for removing your funds early. CD rates are fixed for the length of your term. Even if interest rates in general started to decline, your CD provider would be contractually obligated to pay at the agreed-upon APY.

3. Money market account (MMA)

Money market accounts are a fun alternative to other bank accounts, like checking and savings. Like the ones mentioned so far, the best money market accounts are paying depositors at APYs above 5%.

Most money market accounts make it easy to withdraw cash directly with check writing or debit cards. This makes them more attractive than online savings accounts, which don’t frequently offer these withdrawal options.

4. IRA account

The accounts mentioned above are great for short-term savings goals, like building an emergency fund or savings for a down payment. They’re not, however, perfect solutions for long-term goals, like saving for retirement.

If saving for retirement is important to you, you could open an IRA. These accounts have contribution limits ($6,500 for individuals under 50 or $7,500 if you’re older than 50 in 2023), but also come with major tax advantages. For example, a traditional IRA gives you a tax break now by letting you defer paying taxes on contributions, ideally when you’re in a lower tax bracket. Meanwhile, Roth IRAs let you grow money tax free and won’t require you to pay taxes when you withdraw it.

Depending on your bank, you might be able to open the accounts mentioned above under the tax shelter of an IRA. But you can also invest in stocks and funds. Better yet, you won’t owe taxes on capital gains or interest.

Of course, you could play around with some combination of the four accounts mentioned above. The point, however, is to invest $10,000 in a way that helps you grow your money. Be mindful of the terms on each account, but don’t hesitate to take advantage of high APYs while they last.

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