My Kids are Back In School and I Have Extra Money in My Checking Account- Now What? by Kim Paul
Can you believe it? Summer is over, school is back in session and once again our checking accounts can breathe because we’re no longer paying for daycare for the kids. Now what? Well, there are 3 very good options as to what to do with those extra funds.
#1. Take that extra money and build up your emergency fund or “rainy day” fund to $1000-$5000, having money sitting in your bank in the event of an emergency is a huge stress reliever and you stop worrying about bad things happening because you can take care of most things at that point.
#2. Pay off debt. This is pretty simple. I prefer the Dave Ramsey method of the Debt Snowball because that is what my husband and I used personally and it seems to be the easiest to understand and do. So list your debts smallest to largest , take the extra money you have and apply it to the smallest one until it is gone. Then move on to the next smallest and so on, until all the debt is gone. This would be cars, student loans, medical bills, credit card bills, etc.
#3. Invest. So let’s see what would happen if you invested your additional money monthly for the next 30 years. We’re going to do a nice round number of $500/mo. We’re going to put it in an aggressive growth mutual fund, now watch what happens:
As you can see, the initial investment was only $500, and then $500 was invested every month for 30 years, and gained 9% interest. Total money saved: $857,690!!!! ***This is based on the investment calculator from BankRate.***
So bottom line is this, take the money you were paying in daycare costs and put it towards your retirement. Don’t spend it. It is a great way to get started without feeling like you’re going broke since you’re used to paying the money monthly anyway.