12 Ways to Turn Cash Into Growing Wealth

What's standing between you and long-term wealth? It could be your cash savings.

Cash is essential for managing through emergencies. Unexpected illnesses or layoffs from work are tough to survive unless you have cash on hand to cover your bills temporarily.

Cash can be a negative, though, when you have too much of it. In that case, you're probably missing out on other, more profitable investments. The fix is easy. Move some of your cash into higher-growth opportunities. Doing so could be the start of a new, richer you.

For your inspiration, here are 12 ways to turn your cash into growing wealth for your future.

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According to the Federal Deposit Insurance Corp., the national average earnings rate on savings deposits is 0.06%. That works out to interest earnings of $0.60 for every $1,000 you have on deposit. Said another way, an emergency fund with a $15,000 balance would earn $9 annually .

You need to keep your emergency fund in cash. But you don't have to accept "average" interest rates on that cash deposit. There are online banks paying 10 times that national average. With the same $15,000 deposit, you'd pull in $90 a year -- which is so much better than $9. Plus, some banks will also give you a cash bonus for opening an account and making your first deposit.

ALSO READ: This May Be the Worst Place to Put Your Money Right Now

Once your emergency account is fully funded, you can look at higher-growth investment opportunities. The first place to look is the stock market.

If you're new to stocks, you might start with exchange-traded funds (ETFs) that invest in large, established companies. Bigger companies with long track records tend to be more reliable than smaller, newer businesses.

ETFs are an appropriate starting point because the buy-in cost is low, considering you get ownership of many companies. If you wanted to start small, you could buy a single ETF share. By comparison, some mutual funds have minimum starting investments in the thousands.

In 2022, you can make a tax-deductible IRA contribution of up to $6,000, or $7,000 if you're 50 or older. If you're in the 22% tax bracket, a $6,000 tax deduction is worth $1,320. Plus, you can then invest those funds and make even more. Many IRAs provide access to the full range of exchange-traded securities. That means stocks, bonds, mutual funds, and ETFs.

Since you normally can't withdraw your IRA funds until age 59 and a half, it makes sense to use these funds to invest for retirement. Target date funds are designed for this very purpose. These hold a mix of stocks and bonds in a combination that's optimized for your age and your retirement timeline.

ALSO READ: Here's When the IRS Can Take Your IRA Tax Deduction Away

Sometimes, you are the investment option with the most growth potential.

Here are a few salary averages to spark your interest. The U.S. Bureau of Labor Statistics reports median annual earnings of $67,860 for employees with bachelor's degrees. Master's degree graduates earn even more, $80,340 annually. Trade school salaries can range from the mid-$40,000s at the low end to more than six figures, according to SimplyHired.

These numbers can vary greatly depending on your field of interest and the work experience you already have. So you'll need more research to understand your income potential, now and after additional training. Start by reviewing open job postings and talking to experts in your field.

Dream of being your own boss? You could use your money to launch a side hustle.

Some side hustles require almost no start-up funding. These are often service-based businesses, like ridesharing or doing graphic design on the side. You can earn extra money this way, but the growth potential is limited by your time.

You might prefer a business that can start out small and eventually grow into your sole source of income. This type of business often requires a differentiated product or service idea. It may require more start-up capital, too. But then you stand to make a lot more money in return.

The point is, think about your endgame before you jump into something. That way, you have a better shot at starting a business you can stick to over time.

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Maybe you're not the entrepreneur type but you have friends who are. You could invest in a friend's new business idea or business expansion. Your investment would give you a slice of ownership in that business. The value of that ownership position would grow as the value of the overall business grows.

Note that investing in a friend is risky, even if that friend has a history of building successful businesses. Make sure you research and understand all aspects of the business model and exit plan. Once you're comfortable that you're buying into a winning idea, bring in a lawyer to document the arrangement.

ALSO READ: How to Invest in a Friend's Business

If you have enough cash to fund a down payment, a real estate investment could be in your future.

Real property has a few attractive investment characteristics. Investment property generates rents, which ideally cover all your costs. That means the property pays for itself, as it is increasing in value. Plus, the property value won't rise and fall in lockstep with the stock market. You'll appreciate that diversification during stock market crashes and corrections.

Alternatively, you could buy a home and live in it. In that case, you'd replace your rent with a fixed mortgage payment. As you pay down that mortgage and your property appreciates, the value of your home equity rises. Later, you can use your home equity as collateral for low-rate debt or hold onto it as a store of value.

REIT stands for real estate investment trust. This is a company that owns and manages rent-producing commercial properties. REITs are legally required to pay out 90% or more of their taxable income to shareholders.

Publicly traded REITs are cheaper, more liquid, and easier to own than real property. You only need to buy one share at a time. And if you need your cash back, you can usually sell your shares quickly. Even better, you can enjoy a nice income stream from a REIT without managing property or renters.

The downside is that REITs are more closely correlated to the stock market than real property. Returns can also be affected by rising interest rates.

ALSO READ: 3 Top REIT Sectors to Follow in 2022

You can use your extra cash to make unsecured personal loans, a practice called peer-to-peer lending (P2P). You'd work through a P2P marketplace, which connects people who need money with people who have money.

P2P loans do generate higher returns than cash deposits, but the risks are higher, too. Prosper, a popular P2P platform, advertises average historical returns of 5.7%.

The usual practice is to manage the risk through diversification -- that is, funding a portion of many loans versus just one or two. You can choose from more qualified borrowers who pay lower rates and riskier borrowers who pay higher rates.

Gold is known as a safe haven asset -- meaning investors buy it, and drive up its value, during troubled economic times. In these times, gold can outperform stocks. That behavior doesn't hold up consistently over long time frames, though.

Still, gold is a popular investment. Investors use it for diversification and to hedge against an uncertain economic future.

One of the simpler ways to invest in gold to buy shares of a gold ETF. SPDR Gold Shares (NYSEMKT: GLD), for example, is a fund that's backed by actual gold reserves. This is a more convenient choice versus owning and storing actual gold bars.

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Presented by Motley Fool Stock Advisor
We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

Cryptocurrency is digital money that is managed by technology rather than a bank or government. These currencies were invented to make financial transactions around the world easier, cheaper, and faster.

Some invest in crypto because they believe it's the future of money. Others invest in crypto because the underlying technology -- blockchain -- could spawn its own massive economy, like the internet did 20 years ago.

It's important to know that crypto is incredibly volatile. There are many currencies, and not all of them will stand the test of time. That's why it's smart to start with a small investment and diversify. Lean into the more established currencies like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH).

ALSO READ: 2 Cryptos That Can Double Your Money

Wine? Yes, you can invest in wine. A 2014 report from the University of Cambridge calculates wine's long-term average annual returns at 4.1%.

If you know what you're doing and have the right contacts, you could build a fine wine portfolio, and store it, independently. But you might prefer expert help from an investing platform like Vinovest or Vint.

With Vinovest, a sommelier builds your portfolio, and you own the wines outright. You can keep them for as long as you want. Vint works more like a fund. The fund owns the wines; your investment makes you a part owner. When the wines are sold, you earn a share of the proceeds.