There's one simple reason why putting money into basic savings is a great investment: Rainy days are inevitable. While predicting life's twists and turns -- and when they'll occur -- is impossible, being prepared with some cash on the sidelines will always help to cushion the blow. The goal isn't to get the highest return -- we will get to investments that are designed to do that -- but to avoid putting yourself in a position where you have to take on high-interest debt, such as credit cards, to pay for unexpected or emergency needs.
Keeping some cash in CDs (certificates of deposit) or in Series I savings bonds can also bolster a rainy-day savings stockpile. The interest rates can often be a bit higher than a basic savings account, although the tradeoff is that they aren't as easy to access if you need the money in a pinch.
Start small, building up savings over time. Aim to have at least three to six months' worth of cash stashed, maybe even more if you're a homeowner or have dependents.
2. Invest in a 401(k)
Who doesn't want a pay raise? If you're not taking advantage of it, you may be overlooking an extra pay perk that your employer offers: a matching contribution to your 401(k) or similar company-sponsored retirement plan.
The mechanics are simple. If your employer offers a match, it will deposit the amount, usually up to a certain percentage of your gross salary, in your account. For example, if a company offers a 3% match, it will contribute $3 for every $100 you earn.
There's usually a caveat: Most companies will only match your contributions up to that limit. In other words, if you put 2% of your pay into your 401(k) or similar retirement account, they'll match it, but that means you won't get the full amount they would match if the benefit is up to 3% (or more).
If your employer offers a match, it's a quick and easy way to get free money -- not to mention a great way to lower your income taxes since contributions are generally pre-tax.
But don't stop at the matching contribution. Contribution limits for 2025 allow for $23,500 in total employee contributions (and an additional $7,500 if you're older than 50). If you have $1,000 to invest, check with your HR department or benefits specialist about how to set that money aside for retirement.
3. Invest in an IRA (including Roth)
If you don't have access to a work-sponsored retirement plan or your plan won't allow you to add extra money, you aren't out of luck. That's where individual retirement accounts (IRAs) come in.
There is no company match with an IRA, but if you have earned income (through a job or self-employment), this option is worth considering. There are two basic types of IRAs: Traditional and Roth.
A personal contribution to a traditional IRA may be tax-deductible, and earnings are tax-deferred until they're withdrawn. A Roth IRA is an after-tax contribution, so it gets no deduction (although a tax credit is available for traditional and Roth IRA contributions).
However, Roth contributions can be withdrawn penalty-free, earnings are tax-free, and you -- or even your heirs -- will never pay taxes on any withdrawals taken after you turn 59 1/2, as long as the account was established at least five years earlier.
If you have $1,000, starting an IRA at an online brokerage is a great way to start working toward long-term wealth generation. For 2025, investors can contribute as much as $7,000 into a traditional IRA -- and another $1,000 if they're older than 50. It's a little more complicated with a Roth, with the contributions limited based on your taxable income, but the general limits are the same.
