5 ways to manage money you've saved during the coronavirus pandemic

The coronavirus has upended countless jobs, schools and bank accounts. But while undoubtedly more people are struggling than not, those who are still working may have seen their expenses drop, due to canceled travel, limited dining options and more time at home.

If you’ve managed to end up with extra money during the pandemic, here’s how to take advantage of those savings.

Start or fill out an emergency fund

2020 has served as a stark reminder that unexpected things can happen, and when they do, it’s a good idea to be prepared.

"We say if you have a steady job, your contingency fund should be three to six months of expenses," says Tara Unverzagt, certified financial planner and founder of South Bay Financial Partners in Torrance, California. "I would bulk it up even more because of uncertainty. I've never known anyone to be upset because they had too much cash, but have known lots of people who were upset they didn't have enough."

That level of savings is a stretch goal for many people; an extended period of reduced expenses may provide you with the opportunity to finally reach it. Establishing an emergency fund is one of the best things you can do for your future self, and if you put it in a high-yield online savings account, it will benefit from a higher interest rate than a regular savings account.

Invest for retirement

If you haven’t started investing, there are two easy jumping-off points: your employer’s 401(k) if it offers one and an IRA. Both are accounts that can help you invest for retirement with some tax benefits. Roth IRAs, for instance, allow your money to grow and be taken out in retirement tax-free.

Even if you’re already contributing to a 401(k) or an IRA, you may want to consider upping that contribution. Let's say your reduced expenses mean you can save an extra $500 a month over the next year. If you have 30 years until retirement and you earn a 6% return, that $6,000 you invest could add over $34,000 to your retirement balance.

Save for nonretirement goals

If you’re on track for retirement, consider putting extra funds toward other things: college for your kids, a new car or a dream vacation.

Investing can help you achieve those goals faster than just saving, but you generally don’t want to invest money you’ll need within five years. On the other hand, if you’re starting a college fund for a newborn, that money will have approximately 18 years to take advantage of the market’s returns.

If you’ve been able to save some extra money, you may also want to consider increasing your charitable contributions. The donations may be tax-deductible.

Explore real estate investments

One of the easiest ways to invest in real estate is to invest in real estate investment trusts. REITs are companies that own (and sometimes operate) real estate that generates income, such as apartment buildings. Publicly traded REITs are bought and sold on exchanges, just like stocks, and have similar liquidity, meaning you can sell them with relative ease.

Get some help

When you suddenly find yourself with extra money, it can be difficult to figure out the best way to put it to use. Financial advice is widely available these days, and it’s often inexpensive. Online financial advisers and robo-advisers are good options can help you stay hands-off with your portfolio during turbulent times in the market by ensuring that your investments are aligned with your risk tolerance. Robo-advisers offer investment management and typically charge between 0.25% and 0.50% of your assets per year. To develop a more comprehensive financial plan, it may be a good idea to enlist the help of a financial adviser.

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