Did your employer shower you with a nice holiday bonus this year? Lucky you! While it might be tempting to run out and spend like crazy, we Fools think that bonus money is best used to put yourself on firm financial footing.
We reached out to our team of Motley Fool contributors and asked them for their best suggestions on how to use holiday bonus money. Read below to see what they said.
One way many people use holiday bonuses is to set them aside for major expenses down the road. If you have children, it’s easy to put off saving for a college education, yet you have a specific time frame during which you can save and invest before your kids graduate from high school. Opening a 529 plan account is a great way to get your educational savings started on the right foot.
A 529 plan lets you invest money on a tax-deferred basis and avoid tax on income and gains as the funds accumulate and your kids approach high-school graduation. Moreover, distributions from a 529 plan are free from federal income tax so long as you use the proceeds for qualified educational expenses. 529 plan assets are generally treated as being owned by the parent rather than the student, and that can have favorable financial-aid impacts as well.continue reading »