A fresh round of stimulus payments should be hitting recipients' bank accounts right about now. And if you're in line for a check in the mail, sit tight -- it could arrive in a matter of weeks.
Of course, $1,400 may seem like a pretty generous payday. But what if you could turn that $1,400 into an even larger sum?
Thankfully, you can. All you need to do is invest that money, and in time, it could grow exponentially.
Now to be clear, if you're struggling financially in any way, you should not go out and invest your stimulus cash. Rather, you should use that money to catch up on bills, cover incoming essentials, or pay off some high-interest debt you may have incurred in the course of the pandemic. But if your finances haven't taken a hit over the past 12 months, here are some options to consider for your stimulus.
1. Pad your IRA or 401(k)
Contributing to a dedicated retirement plan is a good way to set yourself up for a more secure future. It's also a good way to grow your money. IRAs and 401(k)s let you invest your contributions so your plan balance increases over time. If you stick that $1,400 into an IRA or 401(k) today and leave it alone for 30 years, it'll turn into about $10,650 if your retirement plan generates an average annual 7% return, which is a reasonable assumption if you go heavy on stocks.
2. Buy exchange-traded funds
Exchange-traded funds, or ETFs, are a good way to invest in the broad market. When you buy ETFs, you effectively scoop up a whole bunch of stocks with a single investment. And if you buy a bunch of ETFs that deliver a 7% average annual return, you'll practically double your $1,400 stimulus in just 10 years' time -- without having to do anything else.
3. Load up on dividend stocks
Dividend stocks don't just grow in value -- they also pay you quarterly, at which point you can use that money as you please or reinvest it to grow your wealth even more. There are a host of stocks that pay dividends, but you may want to focus on dividend aristocrats, which is an elite list of companies that have increased their dividends year after year for the past 25 years.
Make the most of that stimulus
If you don't need your stimulus to pay for immediate essentials, you may be tempted to use that money to splurge. And while it's easy to argue that pumping that cash back into the economy is helpful in its own right, you'll be doing yourself a greater service by investing your money instead. We don't know if this third round of stimulus checks will be the final one in the course of the pandemic, so it pays to use your money wisely. And while you might think that $1,400 is a nice pile of cash, if you're willing to invest your stimulus and sit tight, you may be amazed at how impressive a sum it ultimately becomes.