If you make regular deposits into your savings account, you’ve likely made progress toward protecting yourself with an emergency fund or preparing for a big purchase. But it can be tempting to spend your savings or leave too much cash in a low-rate savings account. A recent YouTube video from the financial expert Jaspreet Singh suggested five financial moves to make once you have $5,000.
Read More: How Much Does the Average Middle-Class Person Have in Savings?
Find Out: 5 Genius Things All Wealthy People Do With Their Money
1. Use Savings for Emergencies, Not Wealth
Singh said, “You cannot save your way to wealth anymore the way you could in previous generations because the value of our savings are being diluted by inflation.”
Rather than making you rich, your savings provide protection for emergencies. Singh recommended having a minimum $2,000 initial emergency fund and then saving three to 12 months of essential living expenses. Only save more for future major purchases, such as investments and homes.
Use an online savings account for these funds so you can earn a higher rate.
2. Pay Off Debt
The interest rates you pay on your debts probably exceed your savings account’s rate. As long as you have a sufficient emergency fund, Singh recommended putting cash toward high-interest debt since, unlike with the stock market, you’ll enjoy a guaranteed return.
Commit to making more responsible money decisions moving forward. Singh warned against financing things, especially those that lead to no return, since debt can easily make you broke.
3. Invest Your Extra Money
Singh discussed the unsustainability of getting rich off a job and the need to use leftover income for investments that generate money. Along with building wealth and beating inflation, this move can offer freedom so you won’t have to rely on a job as much for earnings.
Singh recommended getting an investment account and consistently investing cash from each paycheck in what appeals to you. Just educate yourself on investments and hold them for the long term to enjoy compounding growth. You should also accept that some losses will happen.
4. Protect Your Assets With a Will and Insurance
Since asset protection is essential for wealth goals, Singh recommended having a trust or will so that you can specify who gets your assets after your death. Whether you do this yourself or get an attorney, you’ll benefit from not worrying about whether the state distributes your assets in a way you wouldn’t have liked.
Next, Singh advised having insurance policies on your assets, such as your home and car, to reduce risk while alive. Plus, take out a sufficient life insurance policy that fits your family’s needs. Singh advised, “Typically, when we talk about how much life insurance you need, you want to have a minimum of ten times what your salary is.”
5. Invest in Educating Yourself
Singh emphasized the importance of continuously educating yourself on finance and other subjects that interest you and can help you grow. You can seek out classes, videos, books and other materials. Just be careful that the information comes from a trusted professional and that you only invest in education that you’ll commit to and apply.
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This article originally appeared on GOBankingRates.com: Jaspreet Singh Says There Are 5 Things You Need To Do If You Have $5,000
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