Saving money can be difficult for everyone. Between student loans, buying a home, or starting a family, it’s an accomplishment to save a sizable amount of money at all. Once you have some cash saved up, you may wonder what the next step is. Many financial professionals would recommend investing your spare money to help you reach your goals.

If you’re not sure where to get started investing your $5,000, take a look at some of your options below. Although we’re not presenting every single investment option on the market, many of these are a good place for investors to get started.

Best ways to invest $5,000

When you decide to start investing, remember that there are many options. The best option for you will vary based on your particular financial situation. If you’re not sure which investment path is right for you, then consider talking to a financial advisor before taking the first step.

1. Use a robo-advisor

A robo-advisor is an automated investment platform that operates online. Instead of choosing where each and every dollar is allocated, you just need to answer a few questions from the robo-advisor. Once you enter your information, the platform will automatically build a portfolio that matches your investment style and goals. For example, if you’re a young person interested in saving for retirement, your portfolio may be more aggressive than an older investor who will need to access their money sooner.

The biggest benefits of using a robo-advisor are that they typically offer lower fees than other brokerage accounts and instant portfolio diversification with even a small amount of investment capital.

Some drawbacks to consider about robo-advisors include a lack of personalized services that a human advisor might offer. In some cases, you may not have any access to a human advisor, which might be a problem when you have specific investing questions.

When you are just starting to invest, a robo-advisor may be a good choice. If you are comfortable with growing your investments slowly over time, then a robo-advisor is capable of handling this for you. As your investment portfolio grows, you may want to look into an investment advisor to help create a more personalized plan to meet your goals.

To get started with a robo-advisor, compare the fees of several options before you choose one. Consider your options carefully and choose a robo-advisor that seems best suited to your investment needs.

2. Consider micro-investing

Micro-investing is a way to start investing without having to save up to a minimum account balance. Some brokerage accounts require several hundred dollars as a minimum investment, but that isn’t realistic for everyone. Instead, you can use micro-investing to get started.

Micro-investing apps such as Acorns allow you to invest your spare change. Typically, you link up your debit and credit cards to the app. Each time you make a purchase, the app will round up your purchase to the next dollar and invest the change.

For instance, if you bought dinner for $20.25, the micro-investing app would round up your purchase to $21 and invest 75 cents. Although that seems like an incredibly small amount, your investments can add up over time. The best part is that your budget will barely feel the squeeze of this investment method.

3. Save for your retirement

Retirement is an expensive part of life that will be here sooner than you think. If you plan to stop working in your later years, then you need to start planning as early as possible in order to capitalize on the benefits of compounding interest.

The first place to start your retirement investment is through your employer’s 401(k) plan. Check to see if your employer offers a plan that’s worth maximizing; some employers even offer matching funds, which is essentially free money for your golden years.

Other types of retirement accounts that you may want to consider are traditional IRAs and Roth IRAs. Both of these accounts have annual contribution limits set by the Internal Revenue Service (IRS). Although each of these accounts have different rules, both are very commonly used retirement accounts that are suitable for new investors.

4. Open a high-interest savings account

Many investment accounts can leave your money inaccessible for a certain period of time. A high-interest savings account could help solve that problem. Your money will grow slowly, but you would have access to the cash at any time.

If you’re concerned about not having quick access to your cash, then this is a good option. The interest rates on these accounts are typically lower than investing your money in the market. However, there is significantly less risk involved as well. You will need to determine what kind of investment risks you are willing to take before choosing this route.

A high-interest savings account is an especially good option for anyone that has not built an emergency fund. Life happens, and you may need quick access to cash. Before opening a high-interest savings account, take a look at all of your available options to ensure you are getting the best rate possible.

5. Put your money into a CD

A certificate of deposit (CD) is a savings account that will allow you to earn interest on the money you deposit into it. Although CDs typically pay more interest than your average bank account, there is a trade-off. You will need to leave your money in the account for a specified amount of time.

For example, if you put your money into a two-year CD, you will be expected to leave that money alone for two years. If you take your money out too soon, then you will have to pay an early withdrawal fee.

Typically, the longer you agree to leave your money in the account, the more interest you earn. Think carefully before locking your money into a CD — it’s a good way to earn interest but it can backfire if you are forced to make an early withdrawal.

To get started with a CD, find the best rate for your money before signing up.

Bottom line

You have many great options when it comes to getting started with investing. It can be difficult to take the first step, but many agree that it is an important component of a better financial future.

One reason why investing can seem difficult to beginners is that they aren’t sure where they want to go with it. Consider your short- and long-term goals and be realistic about the amount of risk you are willing to take with your investments before your portfolio starts to grow.

Want more investment ideas? See some top options for investing $10,000.

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Throughout your life, there will be moments when it’s tempting to tap into those funds, though it may be better for your long-term financial success to avoid tapping into your Roth IRA. Keeping your retirement funding goals on track is critical to successfully retiring on time with sufficient funds. Each time you tap into your Roth IRA, you may be pushing your retirement date further away.

That being said, you may not have a choice. If you truly need access to cash and have no other options, tapping into your Roth IRA may become a necessity. But before you head down this path, understand that choosing to take out a Roth IRA “loan” is not like other traditional loans. When you withdraw the money from your IRA you may have to pay taxes and fees, but you don’t have to repay the amount with interest like a traditional loan.

Maybe you need to fund a medical emergency or need the cash to recover from a natural disaster. Whatever event happens, it’s important to be aware of your Roth IRA withdrawal options.

Can I withdraw from my Roth IRA without a penalty?

Yes, it is possible to take money out of your Roth IRA without a penalty. However, there are rules that need to be followed.

For example, you can take out the contributions you made to your Roth IRA at any time without a penalty. Remember, you already paid taxes on these contributions, which is why you are able to withdraw this portion penalty-free.

After you have withdrawn an amount equal to your original contributions, you will be left with the earnings made by your investments in your account. If you choose to take out the investment gains, then you may have to pay a 10% penalty in order to gain access to the money.

However, in some situations, you may be able to waive the penalty. For instance, first-time homebuyers or those who survive a natural disaster might be able to withdraw penalty-free funds. (More on that below.)

A final way to withdraw money from your Roth IRA is to stay within the confines of the 60-day rollover rule. You have the option to take money out of your Roth IRA without penalty if you deposit the funds into another qualified retirement account within 60 days.

If your financial emergency will be short-lived, then this option might make sense. However, if you don’t redeposit the cash within the 60-day deadline, the withdrawal could be subject to penalties. It’s a risky move if you are unsure if the funds can be replenished within 60 days, so think carefully before using this option.

When does a Roth IRA withdrawal make sense?

Life events and emergencies that require money will pop up from time to time. However, not every emergency is a good reason to take money out of your Roth IRA.

“The Roth IRA should be your last go-to source for emergency funds,” said Adam Beaty, a certified financial planner at Bullogic Wealth Management. “You can take out a loan for an emergency, you cannot take out a loan for retirement.”

But there are some scenarios where tapping into your Roth IRA could be useful. Here are some situations to consider:

• • First-time home buyer. If you’ve decided to make your first home purchase, you are able to take out up to $10,000 of your Roth IRA without paying the 10% penalty. You can withdraw both your contributions and your earnings, though you may be required to pay taxes on your earnings if the account is less than five years old.
  • You have a permanent disability. If you become disabled, you’re able to take any distribution from your account without the 10% penalty. This includes both your contributions and your earnings, though you may be required to pay taxes on your earnings if your account is less than five years old.
  • You’ve experienced a natural disaster. If you encounter a natural disaster and need the funds to rebuild your life, then tapping into your Roth IRA could be an effective solution to your immediate problems. The IRS may allow you to take out a “qualified disaster distribution” without imposing the 10% penalty, but you could be required to pay taxes on the distribution.

Before you decide to withdraw money from your Roth IRA for disaster-related expenses, make sure that the reason is qualified as defined by the Internal Revenue Service (IRS). Typically, the IRS will announce whether or not a particular natural disaster qualifies for this kind of distribution within a few weeks of the event. You can find this information on the IRS tax relief page.

• You need to fund educational expenses. Investing in yourself through education may be your next step towards the future. However, paying for that education can be expensive. You may be able to take money out of your Roth IRA for qualifying higher education expenses without having to pay the 10% penalty, though you may be required to pay taxes.
• You are over the age of 59 and a half and the account has been open for more than 5 years. If you fall into this category, then you are able to take your earnings out of a Roth IRA at any time. You will not have to pay taxes or penalties on the withdrawal. Waiting until this age gives you more flexibility in how you use the money.

Bottom line

Using your Roth IRA to fund certain life events could be a good option for some. However, you will be affecting your retirement account in a negative way each time you make a withdrawal. Think carefully about your reasoning before you decide to make a withdrawal or not.