What to do with £1000 (5 things)
In this brief blog, we are going to answer the question “what to do with £1000”. We provide a list of 5 things.
If you have just had £1,000 gifted to you by your parents, grandparents, friends or any family member then you may be wondering what to do with your £1,000.
What to do with £1000?
There are a lot of things you can do with £1,000. We list a few of them below:
Save towards your mortgage deposit with a lifetime ISA or help to buy ISA.
Save in a cash ISA with £1,000
Pay off your credit card debts or other debts
Invest in an index fund with £1,000
Invest in peer to peer lending with an innovative ISA
Build your emergency fund with £1,000
Pay into your retirement fund
Save up for Christmas
Save towards your mortgage deposit with £1000
Property prices have been constantly rising and don’t seem to be showing any possible sign of a decline.
You may want to start saving up for your mortgage deposit with any disposable income you may have and the government has some schemes such as the help to buy ISA and the lifetime ISA which can help you utilize your savings as they are tax-free ISAs which means you don’t get taxed on any returns you make.
The government will also pay you a bonus which means that your £1000 may be incredibly higher after you have received the government bonus.
With the Lifetime ISA you can save a maximum of £4,000 per annum and receive a bonus of £1,000 per annum if you save the maximum of £4,000 per annum.
With the help to buy ISA you can save an initial £1200 in your first month and then a maximum of £200 per month.
You are paid a government bonus of 25% on whatever your help to buy ISA closing letter states as your closing balance. The maximum closing balance you can receive with the help to buy ISA bonus on is £12,000. This means you can only earn £3,000 with the help to buy ISA bonus.
Saving towards your mortgage deposit is, therefore, something worthwhile to do with £1000.
Save £1,000 in a cash ISA
Another thing you may want to do with £1000 is to save it in a cash ISA.
There are a host of cash ISA providers out there who are offering competitive rates.
You may want to find the provider offering the best rate and then save with them.
Cash ISAs are tax-free saving vehicles which don’t charge you any tax on the interest earned.
You have a maximum annual ISA allowance of £20,000 for the current tax year and this may change for the next tax year.
This annual ISA allowance means that you can only contribute £20,000 into ISA products within the tax year.
You cannot contribute in more than one type of ISA in each tax year.
Saving in a cash ISA is, therefore, something worthwhile to do with £1000.
Pay off your credit card debts or other debts
Another thing you can do with £1,000 is to pay off any existing credit card and loan debts you may have.
Credit card debts compound and this means that interest charged on the outstanding debt plus any previous interest charges.
This means the debt can increase very fast. Paying off all or as much as possible with your £1,000 may, therefore, be a very worthwhile thing to do.
Invest in an index fund with £1,000
Some of the index funds out here have returned incredible returns over the past decade and your £1,000 may end up being substantially more if you left it to compound over a time frame such as 10 years.
If you are not sure how to invest or you have no idea where to go then there are managed platforms such as Nutmeg which take care of the investments for you.
Your £1,000 and subsequent investments could also be wrapped up in a stocks and shares ISA which allows you to earn tax-free returns.
Investing in a suitable index fund such as the S&P 500 or the DOW JONES may be a worthwhile thing to do with £1,000.
Invest £1,000 in peer to peer lending
Investing £1,000 in peer to peer lending may also be another good way to utilise £1,000.
Peer to peer lending platforms in the UK are not covered by the financial services compensation scheme which means that if anything goes wrong with your investments you will not be able to claim any compensation.
You may be able to invest in a peer to peer lending platform which packages your investments in an innovative ISA.
These means any returns you make will be exempt from tax but you will have to follow ISA rules such as sticking to the maximum annual ISA contribution limits.
Investing in a peer to peer lending platform may carry greater risk and hence greater reward(in some cases) and this may be a worthwhile thing to do with your £1000.
Build your emergency fund with £1,000
Another great thing you can do with £1,000 is to build your rainy day or emergency fund. Most experts recommend that you save at least 6 months worth of salary as an emergency or rainy day fund.
This means if you ever lose your job or have any difficult financial emergency you will have enough money to help yourself without needing to result in payday loans or other short term expensive forms of credit.
To build your emergency fund you should look for a savings account which offers you a competitive rate but does not charge you for withdrawals or does not require a notice period before you can make withdrawals.
This will ensure that you can access your money quickly if you need to.
Building your emergency fund can, therefore, be a worthwhile thing to do with £1,000.
Pay £1,000 into your retirement fund
You may have a pension fund or retirement fund. An extra £1,000 could go a long way to improving and increasing your potential returns on your retirement fund.
Save up for Christmas
Saving up funds for Christmas seems to be something that a lot of people struggle to do.
By putting your £1,000 away in a 12-month savings account which matures at Christmas or just before, you will have enough money to take advantage of the black Friday deals and other Christmas shopping.
What can I do with 1000$?
A study conducted on Americans found out that this was what most of them would do with an extra $1,000.
Children’s expenses- 37%
Save/put into savings- 9%
Automotive needs/buy a car- 9%
School needs/pay for school- 9%
Bills/pay bills/pay expenses- 8%
Spend it/go shopping/buy things – 6%
Consumer electronics/buy a computer/smartphone- 6%
Share with friends-family- 5%
Clothing/buy clothes- 5%
Vacation/travel- 5%
Food/buy groceries- 4%
Invest/invest it in something- 3%
Pay debts/pay what I owe- 3%
Donate to charity- 3%
Children’s expenses-3%
With an extra $1,000 you can do any of the below:
Payoff your credit card debt
Invest in your IRA
Invest in your retirement fund
Invest in the stock market
Fix up your car
Start an emergency fund
Invest in healthy eating
What is the best way to invest $1000?
Some of the best ways to invest $1,000 include:
Robo investing
ETFs
Paying off any debts you have
529 plan
Peer to peer lending platforms
Stock trading
Saving accounts
Invest in your kid’s college education
In this brief blog, we explored what to do with £1,000. If you have any further questions or comments please let us know in the comments below.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.