It's common for people to wonder where they should put their money now. We're often told to save and plan for the future, but not how to get there. Deciding where to put your money depends on your age, income and future plans.
Regardless of your age, you should always have some cash available in the bank. If you have this, you'll have some cash available for short term emergencies. This is the most critical step.
After that you should put enough money into your 401(k) at work, if you have one, to get the company match. Most employers match 50% or more of the first few percentages of your salary. If you're fortunate enough to have one of these plans, go for it! You're not going to beat the tax advantages and the potential doubling of the money from the employer match.
But maybe you’re still wondering where to put your money now because you’ve already followed these first two steps. After this you have to access what point you’re at in your life and how comfortable you are with risk. If the past few years have taught us anything, it’s that the stock market is hardly a safe place to earn a steady return. It can still be a great investment; you just have to decide if you can stomach the often bumpy ride.
There are many options available depending on your tolerance for risk. Savings accounts and CD are some of the lowest risk investments. They are not without risk because the banks can fail, as we’ve seen over the last few years. Savings accounts often earn a bit less, but you have the advantage of access to the money at any time. CDs can force you to save your money by charging early withdrawal penalties, which is useful if you’re often tempted to dig into your savings.
For more savvy investors, there are a wide variety of mutual funds, ETF, bond funds, and individual securities. Each of these are worth exploring and you’ll often end up with a diversified portfolio that’s a combination of several different types of securities.
So if you’re wondering where to put your money now, the first thing you need to do is figure out where you’re at and where you’d like to be.