I was an investing newbie once — here's what people like me should consider before investing their first $5K

Sat, Aug 30, 2025, 8:00 AM 7 min read

If you’ve managed to save up $5,000, kudos are in order. Whether you built up that cash from grinding away at your job or reining in your spending, you’re well ahead of the average American, who doesn’t even have $1,000 set aside for an emergency.

You don’t want to blow it. You want to grow it. Stashing $5,000 in a bank account may feel like the safest option, but over time, its value will shrink with inflation. There are other ways to make that money work for you.

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As a finance writer, I’ve picked up many of those strategies from financial experts and applied them as a DIY investor. I’ve had to. Managing money responsibly is a necessity, not an option, for freelancers like me. It means I can also relate to people who are new to investing.

Now I want to use my personal experience to help you along the way to your best financial future — and hey, $5,000 is a great start.

The best strategy for you will be highly dependent on your personal situation. Let’s look at a few hypothetical scenarios to help you start thinking about how best to balance growth and risk with a pile of cash this big.

Imagine someone beginning her career, like Rachel, 25, who’s single and who just started an entry-level marketing job. The idea of investing excites her — but it also stresses her out because $5,000 is all she has saved.

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Common wisdom is to keep at least three months’ worth of money stashed away in an emergency fund — and that’s good advice.

If I were in Rachel’s situation, I might consider putting $4,000 in a high-yield savings account so I have a solid start and access to fast funds, especially for an emergency.

I might put the other $1,000 into a broad-based ETF with a beginner-friendly brokerage with low fees — a safer alternative for beginner investors than daytrading or picking their own stocks.

Or I could start investing in my retirement really early, investing that $1,000 in a Roth IRA account, and take advantage of the tax-free benefits.