What is the best use of “spare” money?
Congratulations! You're making enough money to invest. There are two easy places to start: I recommend against savings accounts because they will quite safely lose your money: the inflation rate is usually higher than the interest rate on a savings account. You may have twice as much money after 50 years, but if everything costs four times as much, then you've lost buying power. If, in the course of learning about investing, you'd like to try buying individual stocks, do it only with money you wouldn't mind losing. Index funds will go down slightly if one of the companies in that index fails entirely, but the stock of a failed company is worthless. "With 40% of your take-home available, you have a golden opportunity here. Actually two, and the second builds out easily from the first.  Golden Opportunity # 1: Layoff Immunity Ok, not really immunity. Most people don't think of themselves getting laid off, and don't prepare. Of course it may not happen to you, but it can. It's happened to me twice. The layoff itself is an emotional burden (getting rejected is hard), but then you're suddenly faced with a gut-wrenching, ""how am I gonna pay the rent????"" If you have no savings, it's terrifying. Put yourself in that spot. Imagine that tomorrow, you're out of a job. For how many months could you pay your expenses with the money you have? Three months? One? Not even that?  How about shooting for 12 months? It's really, really comforting to be able to say: ""I don't have to worry about it for a year"". 12 months saved up gives you emotional and financial stability, and it gives you options -- you don't have to take the first job that comes along.  Now, saving 12 months of expenses is huge. But, you're in the wonderful spot where you can save 40% of your income. It would only take 2.5 years to save up a year's worth of income! But, actually, it's better than that. Because your 12-month Layoff Immunity fund doesn't have to include the amount for retirement, or taxes, or that 40% we're talking about. Your expenses are less than 60% of take-home -- you'd only need 12 months of that. So, you could have a fully funded 12-Month Layoff Immunity Fund only in a year and a half!  Golden Opportunity #2: Freedom Fund Do you like your Job? Would you still do it, if you didn't need the money? If so, great. But if not, why not get yourself into a position where you don't need it? That is, build up enough money from saving and investing to where you can pay your expenses - forever - from your investments. The number to keep in mind is 25. Figure out your annual expenses, and multiply it by 25. That's the amount you'd need to never need a job again. (That works out to a 4% withdrawal rate, adjusting for inflation every year, with a low risk of running out of money. It's a rule of thumb, but smart people doing a lot of math worked it out.) Here you keep saving and investing that 40% in solid mutual funds in a regular, taxable account. Between your savings and the compounding returns off the investments, you could easily have a fully funded ""Freedom Fund"" by the time you're 50. In fact, by 45 isn't unreasonable.  It could be even better. If you live in that high-rent area because of the job, and wouldn't mind living were the rents are lower once you quit, your target amount would be lower. Between that, working dedicatedly toward this goal, and maybe a little luck, you might even be able to do this by age 40.  Final Thoughts There are other things you could put that money toward, like a house, of course. The key take-away here, is to save it, and invest it.  You're in a unique position of being able to do that with 40% of your income. That's fabulous! But don't think it's the norm. Most people can't save that much, and, once you lose the ability to save that much, it's very difficult to get it back. Expenses creep in, lifestyle ""wants"" become ""needs"", and so on. If you get into the habit of spending it, it's very difficult to shrink your lifestyle back down - down to what right now you're perfectly comfortable with. So, spend some time figuring out what you want out of life -- and in the mean time, sock that 40% away." You may also want to consider short term, low risk investments. Rolling Certificate of Deposits can be good for this. They don't grow like an Index Fund but there's 0 risk and they will grow faster than your bank. For my bank as an example today's rates on my Money Market is 0.10% APY while the lowest CD (90 days) is 0.20% APY with a 5 year going up to 0.90% APY. It's not substantial by any stretch but its secure and the money would just be sitting in my bank otherwise. For more information look at: What is CD laddering and what are its pros and cons? "There's a hellova lot to be said for investing in real estate (simple residential real estate), even though it's grandma's advice. The two critical elements are 1) it's the only realistic way for a civilian to get leverage. this is why it almost always blows away ""tinkering in the stock markets"" in the 10-year frame. 2) but perhaps more importantly - it's a really ""enforced"" saving plan. you just have to pay it off every month. There are other huge advantages like, it's the best possible equity for a civilian, so you can get loans in the future to start your dotcom, etc. Try to buy yourself a very modest little flat (perhaps to rent out?) or even something like a garage or storeroom.  Real estate can crash, but it's very unlikely; it only happens in end of the world situations where it won't matter anyway.  When real estate drops say 30% everyone yells about that being a ""crash"" - I've never, ever owned a stock that hasn't had 30% down times. Food for thought!" Investing in mutual funds, ETF, etc. won't build a large pool of money. Be an active investor if your nature aligns. For e.g. Invest in buying out a commercial space (on bank finance) like a office space and then rent it out. That would give you better return than a savings account. In few years time, you may be able to pay back your financing and then the total return is your net return. Look for options like this for a multiple growth in your worth.
At this stage of the game your best investment is yourself. Rather than putting it in stocks, use any spare money you have to get yourself the best education you can. See if you can drop that part-time job and give yourself more time to study. Or maybe you can go to a better, more expensive college. Or maybe college will give you some opportunity to travel and learn more that way. You don't want to exclude yourself from those opportunities by not having enough spare cash. So in short, spend what you need to get yourself the best education you can, and keep any spare money you have somewhere you can use it to take advantage of any opportunities that come your way. H1B visas are not terrible, and I am not against all H1B visas. However, it is a bald faced lie to suggest the number 1, if not only, reason companies use them is to cut labor costs. These companies are not advertising they could have hired local talent, but chose to provide the job to someone from a poorer region.  I think whatever city everybody in the world wants to work or go to school, like Tokyo or London or Paris or Boston, that is going to have the world's best talent. Also, if those people go back to their homelands, they don't bring with them the ideas from the city they worked or matriculated, but rather the best ideas from all over the world.  That isn't at all what is happening in technology. There are plenty of computer science and electrical engineer majors in the USA out of work, and some making six figures with a BS degree and 3 years experience, but so many are out of work. Many of those jobs were outsourced, but the talent used was so poor, the cost to upkeep or update was so expensive, that many companies brought back the jobs to the USA. Those companies still want to hire the same low cost workers, but want them working in the USA for reasons I will spare, here. The USA talent pool is so full, and jobs so scarce, it drives down wages; not actually, because what really happens in the company is toxic to work for, and demands 16 hour days, 7 days a week, for the same great salary that may have once been 40 hours a week with fun puzzles and entertainment and space and a gym on site, etc.  Stopping H1B visas would force companies to bring back their on site gyms, large break rooms, increase work life balance, etc.  Stopping H1B visas mean a lot of billion dollar tech companies would have to pay their shareholders and executives *less* this year than last year, which is outrageous in the **race to the bottom** "I recommend reading What's the catch in investing in real estate for rent? and making a list of expenses.  You have a known expense, the rent, and the assumption that it will rise a bit each year. If not each year, eventually the landlord will bump it, and on average, the rent should track inflation.  The buy side is the complete unknown, especially to us here. The mortgage and taxes are just the beginning. My ongoing issue in the buy/rent debate is that it's easy to buy ""too big"" or at least far bigger that what you are renting.  One extreme - a couple moves from their one bedroom apartment into their purchased 3BR home with far more space than they ever use. No need to paint the full picture of numbers, the house is a money pit, and they live for the house.  Other end - Couple already renting a nice sized home, and they buy a similar one. They rent out the two spare bedrooms for 5 years until they have kids and want their privacy back. They bought smart, for less than market price, and from day one, the mortgage was lower than the rent they paid. By year 5, having sent the extra income to pay down the mortgage, they've paid down half the loan. As the kids come along, they refi to a new 30 yr fixed at 3.5%, and the payment is tiny compared to the rest of their budget.  Simply put, the ratio of house price to rent for that same house is not a constant. When the ratio is high, it's time to rent. When it swings very low, it's worth considering a purchase. But the decision is never clear until every detail is known. The time may be perfect, and the day after you close, you lose your job, or in a good scenario, get a raise and are relocated. Just because you bought low yesterday, doesn't mean the market will pay you a good price today, it takes time for out-of-whack pricing to come back to normal.  A simple question? Maybe. But we first need a lot of details to help you understand what you are considering." Geloman's Indian Spares is the leading supplier and distributor of Indian motocycle spare parts. We provide the largest variety of motocycle spare parts at the comfortable price. If you want to Motocycle spares parts online, then you can visit our company website and book your order which you want. Our motocycle workshop has exactly what you need, to remain well spare parts with your machine running as smoothly as possible for many years to come. "I would split the savings as you may need some of it quickly for an emergency. At least 1/2 should be very liquid, such as cash or MMA/Checking.  From there, look at longer term CDs, from 30 day to 180 day, depending upon your situation.  Don't be surprised if by the time you've saved the money up, your desire for the car will have waned.  How many years will it take to save up enough?  2? 5? 10?  You may want to review your current work position instead, so you'll make more and hopefully save more towards what you do want. Important: Be prepared for the speed bumps of life. My landlord sold the house I was renting out from under me, as I was on a month-to-month contract.  I had to have a full second deposit at the ready to put down when renting elsewhere, as well as the moving expenses. Luckily, I had done what my tax attorney had said, which is ""Create a cushion of liquid assets which can cover at least three months of your entire outgoing expenses.""   The Mormon philosophy is to carry at least one year's worth of supplies (food, water, materials) at all times in your home, for any contingency. Not Mormon, not religious, but willing to listen to others' opinions. As always, YMMV.  Your Mileage May Vary." "Whatever the percentage divisions are, I'm a big fan of keeping things in separate accounts.  This works especially well for fixed bills.  It is essentially a bank account version of the envelope method.  If I take out everything from your paycheck I know is reserved (including reserving savings), for me it is a lot easier to not even miss the money when I'm going towards ""fun"" expenditures - which come from the checking account." "The mix how how you present this feels contradictory. You would pull a 'major' portion from the emergency fund (EF), but at the same time, you'll replace it in a month.  The first bit scares me, this is not the purpose of that fund, and the issue is the aspect of money that's psychological. Money is a habit, if you justify this use of the EF now, it gets progressively easier for this purchase or that, and the fund loses its intended purpose. If the second half is accurate, that your income would replace that money in a month, i'd say the fund wasn't fully funded to its proper level, 6-9 months of all expenses to get you though issues as bad as a job loss.  The great thing I see in your question is what's missing. You're not looking to buy a car with a loan. That puts you in a good situation, and should push those answering to cut you some slack on the one month ""bridge loan"" from your own savings.  Edit - OP add 2 key points, His EF is 3 years expenses (wow, kudos to him!), but he's living like a student (i.e. with parents, which keeps his costs low). If this latter observation seems judgmental, I'll re-edit. The finances of everyone would be far better off if we adopted multigenerational living. The young could save as Fahad is doing, and when parents retire, they can know they are cared for. In the US, I'd say ""when you move out, your expenses will go up drastically,"" but in this case, that may not happen, or not soon. This is my observation the world is a big place and our answers need to fit the OP's situation, not assume our own standards apply to all.  Buy the better car. You saved. You earned it." "For me, the emergency fund is meant to cover unexpected, but necessary expenses that I didn't budget for.  The emergency fund allows me to pay for these things without going into debt. Let's say that my car breaks down, and I don't have any money in my budget for fixing it.  I really need to get my car fixed, so I spend the money from my emergency fund. However, cars break down periodically.  If I was doing a better job with my budget, I would allocate some money each month into a ""car repair/maintenance"" category. (In fact, I actually do this.)  With my budgeting software, I can look at how much I've spent on car repairs over the last year, and budget a monthly amount for car repair expenses.  Even if I do this, I might end up short if I am unlucky.  Emergency fund to the rescue! If I'm budgeting correctly, I don't pay any regular bills out of this fund, as those are expected expenses.  Car insurance, life insurance, and property tax are all bills that come on a regular basis, and I set aside money for each of these each month so that when the bill comes, I have the money ready to go. The recommended size of an emergency fund is usually listed as ""3 to 6 months of expenses.""  However, that is just a rough guideline.  As you get better with your budget, you might find that you have a lower probability of needing it, and you can let your emergency fund fall to the lower end of the guideline range.  The size of my own emergency fund is on the lower end of this scale. And if I have a true crisis (i.e. extended unemployment, severe family medical event), I can ""rob"" one of my other savings funds, such as my car replacement fund, vacation fund, etc. Don't be afraid to spend your emergency fund money if you need it.  If you have an unexpected, necessary expense that you have not budgeted for, use the emergency fund money.  However, your goal should be to get to the point where you never have to use it, because you have adequately accounted for all of the expenses that you can reasonably expect to have in the future."