It happens from time to time. You get a performance bonus at work. You find a buyer for that antique furniture piece you've been trying to sell. You get an unexpected check in the mail from your great-grandmother along with a note to buy yourself something nice. Coming into extra money is a great feeling, especially if you're talking about a sizable sum. But before you blow that money on something fun but frivolous, consider these important financial moves you can make with $1,000.


1. Create an emergency fund

You never know when you might find yourself in a financial emergency -- one that requires you to have some savings to tap into. A study just revealed that 62% of Americans have less than $1,000 in savings. If you're one of them, you should take that $1,000 immediately to the bank and use it to build your emergency fund. Ideally, you should always have enough savings on hand to cover three months' worth of living expenses, and if you have dependents or own a home, you'd be wise to aim even higher.

2. Pay off bad debt

Carrying a credit card balance means wasting money on interest payments -- money you can use for more important things. So if you suddenly find yourself $1,000 richer, take the opportunity to knock out some of the bad debt you've been lugging around. Imagine you owe $1,000 at 12% interest. If you take two years to pay it off, you'll wind up losing about $130 in interest fees. Talk about a royal waste. On the other hand, if you use that money to pay off your debt, you'll save yourself those interest charges and quite possibly improve your credit score at the same time. And the better your credit, the less it will cost you to borrow money when you need it down the line.

3. Save for retirement

If retirement isn't yet on your radar, you're not alone. About one-third of Americans have no retirement savings whatsoever, and that includes the 55-and-over set. The problem with waiting to start saving is that the longer you delay, the less time you're giving your money to grow. If you're behind on retirement savings, adding $1,000 to your 401(k) or IRA is a much-needed step in the right direction, and the sooner you do so, the better. If you're 30 years old and invest that $1,000 in stocks, you stand a pretty good chance at generating an average annual return of 8% over the course of 35 years. Even if you don't add a penny more to your savings, you could grow that $1,000 into $15,000 by the time you reach 65. On the other hand, giving $1,000 only 10 years to grow will leave you with just $2,150, even with that same 8% average annual return.

4. Invest in your kids' education

With college costs continuing to rise, many parents are struggling to save enough to finance their children's education. And while student loans are often an option, the less debt your kids take on, the better positioned they'll be to start adulthood on financially solid ground. As long as you're on track for retirement, have adequate emergency savings, and aren't carrying bad debt, you'd be doing your kids a pretty significant favor by putting that money into a college fund, be it a traditional brokerage account, a 529, or some other type of savings plan.

5. Invest in yourself

If a degree or certification is standing between you and a better-paying job, spending that $1,000 to further your own education could be your best move yet. Imagine you use that money to take a course that leads to a promotion and a $5,000 salary increase to go along with it. Talk about scoring a major return on investment. Even if you don't see an instant boost in salary, building up your credentials is a good way to protect yourself from job loss in a poor economy.

Of course, resisting the urge to spend $1,000 on the things you want is easier said than done. And while you shouldn't blow all of your newfound money on gadgets, clothing, or a much-deserved vacation, there's nothing wrong with using a small portion of it for something enjoyable. Think of it as a modest reward for being responsible with the rest of your windfall.