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If Santa Claus deposited cash into your Christmas stocking, you have a few options on what to do with it.

Paying off debt and adding to your savings are two of the smartest options. But no matter what the amount is, this cash can help you start off 2019 on a financially savvy note.

1. Make paying off debt a top priority

While savings accounts are paying annual percentage yields (APYs) much higher than a year ago, the annual percentage rate (APR) on your credit card has also gone up substantially. The top savings accounts listed on Bankrate pay up to 2.39 percent APY. Meanwhile, the average interest rate on variable-rate credit cards is about 17.6 percent, according to Bankrate data.

Pay off credit card debt first, and make paying off other debt a priority as well. Follow Bankrate’s tips for paying off credit card debt.

2. Put your cash in a savings account

Yields on savings accounts are on the rise, but many Americans aren’t taking advantage.

The average savings account yield is just 0.10 percent, but multiple banks offer savings accounts paying north of 2 percent APY. Now’s the time to take advantage of these yields.

However, if you want check-writing ability and a high APY, a money market account may be a better solution.


3. Start an emergency fund

It’s recommended that you have enough savings to cover at least six months’ worth of expenses in an emergency fund. However, only 29 percent of Americans have a fully funded emergency fund, according to a Bankrate survey from June. Another 23 percent have no emergency savings.

Chart: How much do Americans have in emergency savings?

It’s imperative that you have an emergency savings account to cover unexpected expenses, such as a car repair or leaky roof. These funds need to be liquid – meaning you can access them at any time – and earning the highest APY possible.

4. Open a CD

For longer-term savings, a CD may be a better option to earn more interest. The typical time horizon for CDs is between one year and five years.

The best strategy is to choose a CD for the shortest amount of time that gets you the highest APY. Currently, one-year CDs and two-year CDs fit this bill.

Compare CDs on Bankrate to find the right one for your situation.

5. Open an IRA

If you’ve paid off debt and have a savings account or money market account as your emergency fund, you may want to contribute cash to an IRA. A traditional IRA may be able to help you reduce your taxable income  when you file your 2018 taxes. Also, depending on your income and which tax bracket you’re in now – compared with in the future – a Roth IRA may make sense.

IRA contributions for the 2018 tax year can be made until April 15, 2019. Though, depending on your income, you may not be able to contribute to a Roth IRA – or you may be able to only contribute a reduced amount. See if you’re able to contribute to a Roth IRA based on your income.

If you’re not eligible for a Roth IRA and have maximized other options, such as maximizing your contributions to an employer-sponsored plan, such as a 401(k), determine the time horizon for using this money and what you want this money to do for you.

“It could be help with a down payment. It could be just, ‘I want it to grow over the next 10, 20 years – because I know the longer I leave it in, the more it’ll grow,’” says Tim Kenney, certified financial planner at TK Pacific Wealth. “Or it’s just, ‘Hey I think I might need something in the next three to six months,’ whether it’s buying a car or whatever. That’ll help you establish just a timeline.”

Depending on the timeline, a barbell approach may be the type of strategy to pursue, Kenney says.

“If it’s a long-term type of (an) investment, if you’re willing to hold that through, five, 10 years or longer, then I’d feel pretty comfortable with bringing that into the market or some type of a balanced portfolio,” Kenney says. “If it’s anything other than that — five years or less — I would say it’s probably not worth taking the risk, and I would more suggest things like CDs or money markets or perhaps even short-term bond funds.”

6. A brokerage account may be the place for longer-term money

Depending on your goals, a brokerage account may be the right place for some Christmas cash.

Depositing cash into a new brokerage account may help you earn a bonus depending on the deposited amount.

If the cash is not going to be invested, make sure you know what your cash will be earning if it’s going to be sitting on the sidelines in a brokerage account.