The holidays are here, and with them comes something many of us don't quite know what to do with: extra money. Whether it's a cash gift from grandma, a year-end bonus from work, or leftover money after the gift-buying frenzy, you have a choice to make.
You could blow it on another subscription you'll forget about. Or you could do something smarter: start investing.
Why Holiday Money Is Perfect for Investing
Here's the thing about holiday money - it's "found money." You weren't counting on it for rent or groceries. That makes it psychologically easier to invest rather than spend. And investing even small amounts now can compound into significant wealth over time.
Consider this: $100 invested today at an average 8% annual return becomes:
- $147 in 5 years
- $216 in 10 years
- $466 in 20 years
- $1,006 in 30 years
That's the power of compound interest - your money making money, which then makes more money.
Option 1: Start With Spare Change (Easiest)
If you've never invested before, the hardest part is just getting started. Apps like Acorns make it incredibly simple by automatically investing your spare change.
How it works:
- Connect your debit/credit card
- Every purchase gets rounded up to the nearest dollar
- The difference gets automatically invested in a diversified portfolio
- Plus, you get $5 free just for signing up
It's not going to make you rich overnight, but it builds the habit of investing - which is the hardest part for most people.
Option 2: Open a Roth IRA (Best for Long-Term)
If you're under 50 and have earned income, a Roth IRA is one of the best deals in investing. You contribute after-tax money, and then it grows completely tax-free. When you retire, you pay $0 in taxes on your withdrawals.
2025 Roth IRA limits:
- Under 50: $7,000 maximum contribution
- 50 and over: $8,000 maximum contribution
- Income limits apply (phase-out starts at $150K single / $236K married)
Even if you can only contribute $500 from your holiday money, that's $500 that will grow tax-free for decades.
Option 3: Buy Individual Stocks (Higher Risk, Higher Reward)
If you already have an emergency fund and retirement accounts set up, holiday money can be "play money" for individual stock picks. Our Crypto & Stock Oracle provides algorithmic analysis on trending tickers.
Popular starting points for 2025:
- NVDA (NVIDIA): Leading the AI chip revolution
- AAPL (Apple): Consistent performer with strong fundamentals
- VOO (Vanguard S&P 500 ETF): Own a piece of 500 top companies at once
Remember: individual stocks are volatile. Never invest money you can't afford to lose.
Option 4: Start a Crypto Position (Highest Risk)
Bitcoin hit all-time highs in 2024 and continues to gain institutional adoption. If you're young and can stomach volatility, a small crypto allocation (5-10% of your portfolio) could provide outsized returns.
Conservative crypto approach:
- 80% Bitcoin (BTC) - the "blue chip" of crypto
- 15% Ethereum (ETH) - powers most blockchain applications
- 5% altcoins - higher risk, higher potential reward
Use dollar-cost averaging: invest the same amount regularly rather than all at once.
The Worst Thing You Can Do
The absolute worst thing you can do with holiday money? Nothing.
Money sitting in a checking account earning 0.01% interest is losing value to inflation every single day. Even a high-yield savings account earning 4-5% is better than nothing - but investing in diversified funds historically returns 7-10% annually over the long term.
Our Recommended Order of Operations
- Emergency fund first: Have 3-6 months of expenses saved before investing
- Pay off high-interest debt: Credit cards at 20%+ APR should be priority #1
- Max employer 401(k) match: Free money you shouldn't leave on the table
- Contribute to Roth IRA: Tax-free growth is incredibly powerful
- Then play: Individual stocks, crypto, or alternative investments
Start Today, Thank Yourself Later
The best time to start investing was 20 years ago. The second best time is today. Your holiday money is the perfect excuse to finally get started.
Quick Start: Get $5 free with Acorns and start investing your spare change automatically. It takes 5 minutes to set up.
Disclaimer
This article is for informational and entertainment purposes only. We are not financial advisors, and this is not financial advice. All investments carry risk, including the potential loss of principal. Past performance does not guarantee future results. Do your own research and consider consulting a licensed financial advisor before making investment decisions.