5 Great Ways to Put Your Holiday Cash to Use

The holidays are over and hopefully you got some gifts you wanted this year. You probably walked away with some cash too, or else you wouldn't be reading this. I'm sure you have plenty of ideas for how you'd like to spend that money, but let me throw out five ideas of my own for your consideration. 

1. Pay down debt

Those with high-interest debt may want to consider putting holiday cash toward debt repayment. This is pretty simple to do if you only have one balance to worry about, but if you have several debts, you need a strategy.

It's often best to concentrate on the debt with the highest interest rate first. If you're unsure which one this is, check with all your lenders to see what your annual percentage rates (APRs) are. Find the highest one and put all your holiday cash toward that bill. If there's some left over, put it toward the debt with the next-highest APR.

2. Invest it

Investing your money is a great option if you don't have expensive debt and you don't need the money in the near future. You could open a brokerage account or, if you want the greatest tax advantages, you could use a retirement account.

Many retirement accounts, like traditional IRAs and 401(k)s, enable you to defer taxes until you withdraw the money in retirement. Roth accounts give you tax-free retirement withdrawals for paying taxes on your contributions upfront. Just keep in mind that you typically can't access retirement account funds before age 59 1/2 without paying a penalty.

3. Save it in a high-yield savings account

The best high-yield savings accounts are currently offering annual percentage yields (APYs) of 4.30% or higher. This could put $43 in your bank account this year with a $1,000 minimum balance. 

You may not end up with as much money in the long run as you would if you invested your extra cash. But you'll have access to it at all times and you won't have to worry about losing it as long as you keep your account details secure.

4. Put it in a certificate of deposit (CD)

Certificates of deposit (CDs) are a nice middle ground between savings accounts and investing for cash you don't need now but aren't willing to risk in the stock market. These accounts offer an APY that can be higher than high-yield savings account APYs, but in exchange, you agree not to touch your funds for a certain period. This could be anywhere from a few weeks to many years, depending on the CD you choose.

Technically, you can take it out early if you're in a pinch. But if you do this, you'll face a penalty equal to several months of lost interest. If this concerns you, a high-yield savings account is probably a better route.

5. Invest in your education

Put the extra cash you've received toward higher education in your field or a field you're interested in. You don't have to go all out on a new degree if you don't want to. There are plenty of online programs that can give you certificates or just additional knowledge you can use to make you a more valuable employee. This, in turn, could lead to promotions or better-paying jobs in the future.

How you use your holiday money is ultimately your call, and you don't have to stick to just one -- or any -- of the suggestions above. You could spend some of it and save some of it if that feels better than setting it all aside. Just make sure you have a plan so you can squeeze the greatest value for your finances out of it.