When you reach $75,000 in savings, you likely have enough of an emergency fund to cover essentials like housing and food for a few months, said Todd Stearn, founder and CEO of The Money Manual. “So go make your money work for you. If you don’t, inflation will act as a tax that reduces your nest egg each month.”
How? You might be surprised to learn that the best investments to make when your savings near the six-figure mark don’t include the latest hot stock or crypto coin. Here are three solid ways to invest your money once you have $75,000 in savings.
For short-term savings — money you plan to use within the next few years — it’s important to keep your funds fairly liquid and protected from loss while earning the best return possible. Stearn recommends putting some of your savings into an FDIC-insured high-yield savings account, money market account or certificate of deposit (CD).
In the past decade or so, these types of accounts paid next to nothing in interest. But since the Federal Reserve started raising its target rate in March 2022, interest rates have been on the rise. Now, you can find deposit accounts that pay 5% APY and up. If you were to put your $75,000 into a one-year CD at 5%, for example, you’d earn $3,750 in interest by the time the CD matures.
If you have outstanding debt, it’s a good idea to focus on paying that off once you have a solid amount of savings. When you have debt, especially high-interest debt, the interest accumulates over time. Every dollar of interest you pay is essentially a dollar lost. By paying off debt more quickly, you gain that money back.
It’s not exactly an investment in the traditional sense, but eliminating debt provides a return on your money. Take this example: Say you have a $20,000 car loan at 8% APR with five years left to repay it. Over the course of those five years, you’d spend about $4,332 in interest. Now say you focused on making extra payments toward your loan and paid it off in two years instead. You’d save $2,623 in interest charges, which would not only be money back in your pocket, but funds available to save or invest instead.
Stearn notes that another valuable side effect of getting rid of your debt is that your credit score will improve. This makes it easier to borrow money at affordable rates, as well as rent an apartment, open utility accounts and even get certain jobs.
Since you have your short-term savings needs taken care of, you can focus on saving for long-term goals. For many people, retirement is a big one. And it’s nearly impossible to save enough money to live off of in your golden years without investing it in the market.
If you have access to an employer-sponsored retirement account, such as a 401(k) or IRA, that’s the best place to start. “These retirement investment products have huge tax advantages,” Stearn said. “The money will multiply over the years.”
Additionally, if your employer matches your contributions, that’s free money. So you should contribute at least the minimum amount required to receive your full employer match.
But it’s important to understand that these accounts are just a place to hold your investments; they’re not the investment itself. You’ll still need to choose the specific stocks, bonds, mutual funds, etc. that you want to invest in, and the options available will depend on your particular plan. Most, however, should give you the option to invest in target-date funds and index funds, which tend to be reliable choices. Still, it can be a good idea to speak with a professional advisor about the best investments that match your risk tolerance and savings goals.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Have you ever wondered what you could do if you suddenly had $75,000? Maybe you received an inheritance, got a generous bonus, or spent years saving up this amount Whatever the case, $75k is a significant sum that opens up many possibilities I’m gonna share some practical and potentially profitable ways to put this money to work for you.
Making Your $75K Earn Interest
One of the first things many people consider is how to make their money grow. According to data from SmartAsset, there are several options for earning interest on $75,000, each with different potential returns.
Savings Accounts
Putting your $75k in a savings account is one of the safest options available. However, the interest you’ll earn varies dramatically depending on where you bank:
- Traditional brick-and-mortar banks: With rates as low as 0.20% APY, your $75,000 would earn just about $150.15 per year (with daily compounding).
- Online banks: These typically offer much higher yields. At 2.00% APY, that same $75,000 could generate around $1,515.06 annually (with daily compounding).
The difference is striking! By simply choosing an online high-yield savings account over a traditional bank, you could earn about 10 times more interest each year without taking on any additional risk.
Certificate of Deposit (CD) Accounts
CDs are time-deposit accounts where you agree to leave your money untouched for a set period in exchange for a guaranteed interest rate Here’s what $75,000 might earn in different CD terms
| CD Term | Interest Rate | Interest Earned |
|---|---|---|
| 1 Year | 1% | $753.75 |
| 2 Years | 1.25% | $1,898.60 |
| 3 Years | 1.35% | $3,099.79 |
| 4 Years | 1.45% | $4,478.53 |
| 5 Years | 2.25% | $8,930.13 |
The longer you commit your money, the higher the interest rate you can typically secure. Just remember that withdrawing money before the CD matures usually incurs penalties.
Investment Options
If you’re looking for potentially higher returns and can tolerate some risk, investing might be the way to go. Here’s how $75,000 might grow in a year with different investment types:
- Stocks: At a 7% annualized rate of return would produce $5,250
- Bonds: At a 2.5% annualized rate of return would produce $1,875
- Real estate: At a 10% annualized rate of return would produce $7,500
It’s important to understand that these investment returns aren’t guaranteed like savings account interest. There’s always risk involved, which is why the potential returns are higher.
Beyond Interest: Other Smart Uses for $75K
While earning interest is great there are other valuable ways to use $75000 that might better align with your personal goals.
Pay Off High-Interest Debt
If you’re carrying credit card debt with interest rates of 15-25%, using your $75k to pay it off could give you an immediate “return” higher than almost any investment option. Think about it – if you’re paying 20% interest on $75,000 of credit card debt, eliminating that debt saves you $15,000 in interest payments in just one year!
Buy or Upgrade Your Home
In many markets, $75,000 makes a substantial down payment on a home. With a 20% down payment, you could potentially purchase a $375,000 property. This could:
- Help you avoid private mortgage insurance (PMI)
- Secure better interest rates
- Lower your monthly mortgage payments
Alternatively, if you already own a home, strategic renovations could increase your property value far beyond the $75k investment.
Start a Business
For many entrepreneurs, $75,000 is enough capital to launch a small business. Whether it’s opening a boutique, starting an online store, or launching a consulting practice, this amount can cover initial expenses like:
- Equipment and inventory
- Website development and marketing
- Office or retail space deposits
- Initial operating costs
Fund Your Education
Investing in yourself often yields the highest returns. Consider:
- Pursuing a degree that could boost your earning potential
- Taking specialized courses or certifications
- Attending professional development programs
With $75k, you could potentially fund an entire degree program without taking on student loans.
Create a Diversified Financial Plan
Many financial advisors recommend splitting your money across different types of accounts based on your goals. For example:
- $15,000 in a high-yield savings account as an emergency fund
- $30,000 in moderate-risk investments for mid-term goals
- $30,000 in higher-risk investments for long-term growth
This approach balances safety, liquidity, and growth potential.
Maximizing Your $75K Return: Tips from Experts
To get the most out of your $75,000, consider these strategies:
Know Your Time Horizon
How soon you’ll need the money should dictate where you put it:
- Need it within 1-2 years? Stick with high-yield savings or short-term CDs
- Won’t need it for 3-7 years? Consider a mix of bonds and conservative stock investments
- Can leave it untouched for 8+ years? You might allocate more toward stocks for growth potential
Understand Risk vs. Reward
Generally, the higher the potential return, the higher the risk. Before investing your $75k, honestly assess your risk tolerance. If market fluctuations will keep you up at night, stick with more conservative options even if they offer lower returns.
Consider Tax Implications
Different accounts and investments have different tax treatments:
- Roth IRA: Tax-free growth and withdrawals in retirement
- Traditional IRA/401(k): Tax-deferred growth with taxable withdrawals
- Taxable investment accounts: You’ll pay taxes on dividends and capital gains
Placing your $75,000 in tax-advantaged accounts where appropriate can significantly impact your long-term returns.
Don’t Overlook Dividend Stocks
If generating income is important to you, dividend stocks can provide regular payments while potentially appreciating in value over time. A $75,000 investment in stocks with an average dividend yield of 3% could generate about $2,250 in annual dividend income.
Personal Considerations for Your $75K
Everyone’s situation is unique, and there’s no one-size-fits-all answer for what to do with $75,000. Before making decisions, ask yourself:
- What are my short-term and long-term financial goals?
- Do I have adequate emergency savings already?
- Am I on track for retirement?
- What financial concerns keep me up at night?
- Would this money be better used for experiences rather than just financial growth?
Sometimes, the smartest use of money isn’t the one that generates the highest return. Maybe you’ve always dreamed of traveling the world, funding a family member’s education, or donating to causes you care about. These uses might bring more satisfaction than watching a number grow in an account.
The Bottom Line
Having $75,000 to work with opens up numerous possibilities, from earning interest in safe accounts to investing for higher potential returns or using the funds to improve your life in other ways.
We’d recommend talking to a financial advisor who can help you create a personalized plan based on your specific situation and goals. SmartAsset even offers a free tool that matches you with up to three financial advisors in your area, making it easy to find professional guidance.
Whatever you choose to do with your $75k, make sure it aligns with your values and long-term objectives. Money is ultimately a tool to help you create the life you want – so use it wisely!
Have you ever had to decide what to do with a large sum of money? What did you choose, and would you make the same decision today? Share your thoughts in the comments below!
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FAQ
Is 75k a lot of money in savings?
When you reach $75,000 in savings, you likely have enough of an emergency fund to cover essentials like housing and food for a few months, said Todd Stearn, founder and CEO of The Money Manual. “So go make your money work for you. If you don’t, inflation will act as a tax that reduces your nest egg each month.”
Can you live comfortably on $75,000 a year?
Is $75,000 a year a good salary for an individual in 2024? How about as an entry-level salary? In general, yes. A $75k salary is more than what half of U.S. workers earn, and depending on where you live and your expenses, may be more than enough to live comfortably.
What is 4% interest on $75000?
If you want to invest $75,000 over 2 years, and you expect it will earn 4.00% in annual interest, your investment will have grown to become $81,120.00.
Is $75000 middle class?
At the national level, the median U.S. household income is around $75,000 (U.S. Census Bureau, 2023). That means, under Pew’s the middle class nationally = $50,000–$150,000 (two-thirds to double). But the range shifts dramatically depending on state-specific medians.