Have a spare $5,000 sitting in your bank account and wondering what to do with it?
One way would be to weigh up the benefits of using the cash several ways.
Here are several ideas.
Pay off your credit card
Ok, boring and a commonly suggested idea. But with Australians averaging around $4,280 of debt per credit card – and more than $32 billion in total debt – paying off your credit card instantly saves you around $736 a year in interest according to ASIC's MoneySmart website. Paying a higher than average interest rate on $5,000 could see you fork out as much as $1,250 a year.
Start investing in shares
If you don't have a credit card, the next best use of that $5,000 could be investing in a couple of stocks listed on the stock exchange. If you don't already own shares, go for an exchange traded fund (ETF) like the Vanguard Share Index ETF or the V300AEQ ETF UNITS (ASX: VAS) as Google Finance refers to it. You get instant access to 300 stocks and the fund currently pays a yield of around 4.3% in dividends (not including the benefits of franking credits).
Investing it in the stock market could also see it worth more than $1,000,000 if you invested it at high rates of return for 37 years.
Renovate
Spending money on your house can give you better living now, and more money when you sell. Most renovating projects will let you recoup much what you spent by fetching a higher price come sale time.
With around $5,000, you may be able to buy more energy-efficient windows, invest in some solar panels, landscape the garden, get your house painted or update your kitchen. Solar panels also have the benefit of cutting your energy costs – something that seems to be forever rising.
Donate
We're serious. You can do considerable good by strategically donating that $5,000. Even giving away $1,000 of your stash will make a big positive difference.
If you make a gift of listed shares valued at $5,000 or less that you acquired at least 12 months earlier, you could be eligible to claim a deduction. What a perfect reason to dump some of those underperforming Commonwealth Bank of Australia (ASX: CBA) shares.
Educate
You could look at this cash as an opportunity to improve yourself by learning a new skill or even a new profession by going back to school.
Organisations like Open Universities Australia have revolutionised higher education, letting you take courses or earn a degree or professional certificate. These days you can take a course preparing you for anything from a human resources management certification to becoming a forensic nurse.
Travel
The Australian dollar might be only buying around US 75 cents, but international airfares have never been cheaper. Qantas Airways Limited (ASX: QAN) has return flights to Los Angeles for less than $1,200 or $1,492 to London. Travel is reported to be good for us, by opening our eyes to other cultures and traditions, and we would definitely learn something.
Keep it in the bank
If you aren't comfortable with any of those options, there's always the option of keeping it in the bank – preferably in a mortgage offset account – where the cash will cut down the amount of interest you are paying on your mortgage. If not, do a search for a high-interest online account – which might see you get a rate of more than 3%.
