What’s the best thing you could do with $1,000?

Imagine a group of 25-year-olds each receive a thousand dollars unexpectedly. What would they do with it? What should they do with it? How would they feel about that choice a few years later?

Ron used his $1,000 to buy a plane ticket and hang out on the beach for two weeks. It was a smashing good time. 

Three years later, Ron has:

• Fond memories of the time he learned to surf and drink right out of a coconut, plus lots of Instagram pics he’s already planning to show his grandchildren

Harry was pretty busy so he put his $1,000 in a high-yield savings account earning 0.50% annually, and then forgot about it. 

Three years later, Harry has:

• $1,016

Ginny put $1,000 toward her student loan debt of $19,000. She had a low interest rate of 4.5% and was already paying her loans, but she wanted to be done with them sooner. 

Three years later, Ginny has:

• A plan to pay off her loans 6 months earlier

• An extra $415 in her pocket after her loans are all paid, since she saved on the interest

Draco used that $1,000 to reduce his $6,200 credit card bill. He pays the $195 minimum every month, but 22% APR (annual percentage rate) was really starting to add up. At least that’s what his dad said.

Three years later, Draco has: 

• Zero dollars in credit card debt, a year earlier than he otherwise would have

• $1,182 more, since he saved on the interest

Dudley took his $1,000 and invested it entirely in cryptocurrency in an online brokerage account. 

Three years later, Dudley has:

• A completely unpredictable amount of money, no one knows

• An obnoxious story about the whole experience, no one cares

Hermione also opened an online brokerage account, but she put her $1,000 in a diversified portfolio of ETFs (exchange-traded funds) with low fees. Naturally, she did her research, and her investments earned a solid 9% return. 

Three years later, Hermione has:

• $1,309

• A bit of seed funding for her new start-up, Wands 2.0

Neville invested his $1,000 in a diversified, long-term Roth IRA account and made an average return of 7% per year.

Three years later, Neville has:

• $1,233, including $1,000 that he could get back as cash, if needed, and $233 that will continue to grow tax free until he retires 

• A working understanding of his portfolio and a good start at building for the future

So who won? Well, that depends. Each person had different considerations. Spending money isn’t always a bad thing. Paying down debt is essential. So is saving for the future. And anyway, it’s not a contest! The most important part is learning how to balance financial priorities in a way that works for your current and future self.