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What Should I Do With $100,000 (Smartest Investment Ideas for Money Sitting in the Bank)

I’ve heard from a few people lately…they’re wondering what to do with 100k right now. The stock market is at its all-time high, Bitcoin is super volatile, and real estate is simply out of control! And, as if that weren’t enough of a challenge, now we’re starting to see inflation spike up! What in the world should you do with $100k in savings right now if you’ve got it?

What to Do With 100k – Our Personal Dilemma

Remember when we were going to build a bedroom over the garage? We planned to do this back in the spring of 2020…and then Covid happened of course, so we postponed it to the fall of 2020. Once fall rolled around, Covid was still very much a thing and not only that, the prices of material started jumping up!

What to do with 100k for either the short term or the long termSo…we postponed the build yet again. 

Here we are in mid-2021 and we still haven’t even started the addition above the garage. Since we’re such great planners and conservative spenders, we have had a wad of cash (not quite $100k, but close) sitting in the bank waiting for this build to happen.

Guess how much our $100k is earning? 

A whopping 0.40%.

So over the course of a year, our $100,000 is earning just $400… That’s simply terrible…especially when you consider that the inflation rate is now over 4%. So, inflation is costing us $4,000 a year and I’m earning $400.

Ummm…that’s not good! Time to make a change!

What Shouldn’t You Do With 100k Right Now?

You’re wondering what to do with a hundred grand right now. Based on the current economy, it’s probably easier to tell you what you shouldn’t do with your $100k…

Below is a list of places where I personally wouldn’t put my money, along with my quick notes for why I’m steering clear of these investments.

1) Real Estate

Housing prices jumped by 11% in 2020 alone, and 2021 doesn’t appear much different. Prices are still on the rise and they’re all still very much in demand.

If you thought you were going to pick up a single family home for cheap and make boo koo bucks on rents, think again. Prices have spiked, rents haven’t, and there’s just way too many people in the market to pick up a deal.

Perhaps you’re thinking, “What about Fundrise?” Maybe that’s a better place for my money. Building is still expensive, even when you make the transactions through an app. The materials and projects are still real. PLUS, the Fundrise developers are taking a cut of every deal. I’m not a big fan (never was). I’d steer clear of it. 

Investing in real estate just isn’t a great option right now.

Related: What is Fundrise? And Should You Invest Your Money Here?

2) Cryptocurrencies

Have a hundred grand? Want to put it into cryptocurrencies like Bitcoin? Well…you could, but I’m still not sold on this form of currency. Sure, it may go up in value over the long term, but it is SUPER volatile. A couple years ago, the coin spiked at $20k. Then it went down to $8k. Then it climbed the straight up to Mount Kilimanjaro and went up over $60k per coin. Now it’s down to $35k.

Tomorrow it could be at $50k again. Or maybe it will be down to $10k. It all depends on fear, greed, and speculation, and has nothing to do with economic growth and profits (which is why it’s not an investment for me).

Maybe I’ll be kicking myself later for not investing, but I’m just not going there with my $100,000. Sorry.

Related: Keep Investing Simple. The Secret to Wealth.

Cost to add a bedroom over the garage - and the blueprints!3) Build Project

I mentioned our build project (you can read all about it here).

In short, it’s just not going to happen right now. At this moment, lumber is up over 200% from a year ago and other building material costs aren’t that much better. 

So…if you were thinking about redoing your kitchen or adding a bedroom or something, think again. You’ll invest $100k and you’ll only end up adding about $60k in value…it you’re lucky!

Don’t stick your money into a build project right now. It just doesn’t make any sense.

4) Money Market Account

Our hundred grand is sitting in a money market account. It’s earning 0.4%, which as I stated before…is terrible!

Don’t follow our example. I’ll be moving this money soon.

5) Depreciating Assets

Since it’s not not wise to buy real estate, add on to your house, buy crypto, or invest in a money market account, you might just throw up your hands and say “Whatever! I’ll just buy something fun!”

If that something fun is a new car…Just. Don’t. Do. It!

That new car might cost you $70,000. In about 7 years, it will be worth about $20,000…a $50,000 loss.

If you would have instead invested your money into something that earns 10%, you would have instead turned that $70,000 into $140,000 in 7 years. 

That’s a $120,000 swing vs. if you bought a new car!

Depreciating assets – they’re just for clueless people and the ultra-wealthy. Don’t let yourself get caught up in them.

Related: How Many Retirement Years Is That New Car Costing You?

What to Do With 100k in the Short Term

What to do with 100k…Well, we just went through all the areas where you shouldn’t put your hundred grand. Now let’s start to look at different areas where you should put your 100k.

If you have your money slated for something in the near-future like us (with our master bedroom addition), then you’re not going to want to put it into an investment that’s volatile. After all, you don’t want to invest $100k this year, have your investment tank, and then you’re forced to withdraw it when it’s at its all-time low.

So, don’t invest in the stock market, certainly not bitcoin, and for sure not real estate either since it ties it up for too long.

What should you do with 100k for the short term? Here are the options we’re looking into.

1) High Yield Savings Account

High yield savings accounts aren’t much better than the 0.4% money market account that we’re in currently, but at 0.57%, it technically is better. And, with $100k, it would earn an extra $170 a year. So, not awesome, but better.

Want the full list of top high-yield savings banks? I found a great list with Bankrate (for May 2021 rates).

2) Short Term Government Bonds

Today, one of the easiest ways to invest in short term government bonds is via an ETF through Vanguard. The ticker symbol is VGSH. On average, the short term bond will produce earning of approximately 1%. 

It typically earns more than a high yield savings account, and you can still access the dollars whenever you want. While it’s not a huge money-maker, it is a decent option if you want to earn something while keeping your money liquid.

3) Short Term Corporate Bonds

Still wondering what to do with 100k? The options aren’t over yet! 

Another area to invest your money is in short term corporate bonds – or rather, in index funds that invest in short term corporate bonds. According to the recent list of the 5 best corporate bond funds by Investopedia, the typical earnings of these index funds are between 2% and 3% annually.

4) Certificate of Deposits (CDs)

If you aren’t loving the bond options are still aren’t quite certain what you should do with 100k, maybe you’ll like the Certificate of Deposit option. The rates aren’t quite as good as bonds, but it’s probably the safer route.

If you’re certain that you don’t need your money for 9-months, then you can invest your money into a CD with Marcus bank. They’re currently offering a 0.65% rate on their CDs. 

Want to see all the other top rates by Bankrate? Here’s their list!

What to Do With $100k For the Long Term

Perhaps you’ve got some time before you want to use your money, what should you do with $100k in this case?

Increase your risk and increase your reward! Thankfully, over long stretches of time, the risk of all the investments below are far less than they might be from one year to the next.

1) Invest in Index Funds

Over the years, I have been huge fan of Vanguard index funds. They’re cheap, there are many options to choose from, and you can find many that have great track records of long-term growth.

My personal favorite = VFIAX. Plain and simple, it models the S&P 500 index and the expense ratio is something like 0.04%. Practically nothing. The bulk of what this fund earns me, I keep. It’s a great way to go!

Want to see other great index options? Here’s a great list by Kiplinger.

2) Invest with Wealthsimple – a simple robo-investor

You may be wondering what to do with 100k (which means you certainly know how to save money), but perhaps you’re not the most investment-savvy. This is where I love Wealthsimple (one of my affiliate partners).

You sign up, they ask for your risk tolerance, and then they basically invest your money for you into one of three simple options. 

It’s super simple, safe, and they can actually earn you a decent chunk of change (I’ve invested with them in the past and they were great!)!

3) Beef Up Your Retirement Contributions

If you have $100k and you don’t need it for many years to come (ie. retirement), then consider investing either in your 401k or Roth 401k (via your work income). You won’t be able to load in the entire hundred grand into the Roth in one year, but you could do it over the course of roughly five years.

Then, once you’ve got it into your 401k, you could invest it in Index Funds!

Related: The Truth About the Roth 401k and the Traditional 401k

4) Invest for Your Kids’ College via a 529

Have young kids? 

College isn’t getting any cheaper these days. You might want to consider investing a chunk of money into a 529 account. Again, if you use after-tax dollars and invest in the 529 (and use the money for college related costs), then you’ll never have to pay tax on any of the growth!

Not sure how much to invest in the 529? Here’s a great tool that can help: College Investment Calculator

5) Get Free Advice From Personal Capital!

You’re wondering what to do with $100k right now. While it is kind of annoying because you feel so limited with what you can do with it, it really is a great problem to have (I can think of plenty worse problems to have in this world)!

Plus, if you’ve got $100k of liquid assets, you can get a free call with one of the top wealth advisors in the business – with Personal Capital, another one of my affiliate partners.

They provide great insight for how to invest based on the events in the world and also for your needs/wants. Heck, it’s worth having a free call, right?

6) Start Your Own Business

The business world is ripe with opportunity right now.

With Covid, many have been forced to close their doors. Maybe it’s time to fill a gap in the market!

See an opportunity that could grow your $100k into a million or more? You may just want to go for it!

Related: How to Start a Storage Rental Business (For Easy Passive Income!)

7) Pay Off Your Kids’ Mortgages

I’ve heard of this a few times just recently. Parents are becoming wealthy and are wondering what to do with their excess cash, and kids have mortgages with say, a 3.5% interest rate from a few years back. 

What these parents have done is actually pay off the kids’ mortgages and then have those kids pay them back with an interest rate of just 2% or something – a lower rate than they had been paying before, and the parents get a much better interest rate than they would from the bank. 

It’s a pretty decent win/win, but there are a few wrinkles to think about with this plan. 

First, if you’re the parent that’s essentially “gifting” your kids with $100k by paying off their mortgage, you might owe the government some gift tax at the end of the year. I’m no tax expert, so check with your tax professional on this one. Better safe than sorry!

Second, you might want to think twice about becoming your child’s master. I mean really, they just left your house and started a life on their own, and now you’re swooping in and owning them all over again. It may not be quite like that in your situation, but it’s worth thinking about the emotional side of this transaction, and not just the financial side. 

Finally, think about the downsides of this plan. What if your child defaults on their payment to you? Are you going to be upset? Will it cause a divide in your family? And…is it really worth taking this risk for a 2% return? For me it wouldn’t, but ultimately it’s your call!

What to Do With 100k – What’s Your Call?

Based on where we are with our dollars, we’re forced to invest in the short-term scenarios. I imagine we’ll keep quite a lot of it in savings and then maybe dabble in the corporate bond funds that yields 2-3% per year.

How about you?

You’re wondering what you should do with 100k now.

Which of the following options will you choose?

  • Savings account
  • Government bonds
  • Corporate bonds
  • Certificate of deposit
  • Invest in index funds
  • Robo-investing
  • Put more toward retirement
  • Invest for your kids’ college
  • Ask the pros at Personal Capital
  • Start your own business
  • Pay off your kids’ mortgages

What will you do with your 100k?

Let us know if the comments below, especially if you’re doing something that’s not noted above!

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My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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