Warren Buffett used to gift his family $10,000 every Christmas until he noticed they spent it too fast — here are 4 better ways to use a holiday windfall

In a 2019 ThinkAdvisor interview, Buffett’s former daughter-in-law, Mary Buffett, recalled when he gifted her $10,000 in hundred-dollar bills. She reminisced, “As soon as we got home, we’d spend it, whoo!”

As the king of investing, not spending, however, the CEO of Berkshire Hathaway quickly decided the gift of shares would be a better investment for his family’s future.

With the holidays behind us, you may have been lucky enough to get some cash, as Buffett’s family used to. Tempting as it may be to spend it, follow these tips to use it in a way that the Oracle of Omaha would approve of.

1. Save

One of Buffett’s core principles is the power of compounding: where you can earn returns on both your initial investment and its accumulated growth. For example, had Mary invested her $10,000 and allowed it to grow at a 5% annual compounded rate for 10 years, it would have amounted to $16,288.95.

But finding the best possible rate isn’t always easy. If you’re willing to park your money for at least a year, you can get a rate of return over ten times higher than a typical high-yield savings account with a certificate of deposit (CD). A CD locks in your funds for a set period, providing stability and guaranteed returns, which the stock market cannot promise.

SavingsAccounts.com makes finding the best CDs easy. Their comparison platform provides real-time data on CD rates and terms from various banks, offering tailored recommendations to maximize returns.

Ideal for conservative savers and long-term planners, this tool simplifies the decision-making process, helping you grow low-risk, high-return investments without the stress.

2. Invest

Beyond saving, another way to take advantage of compound returns is through investing.

Investing is higher risk than a savings account, but it can also lead to higher returns. That’s why when Buffett started gifting his family shares instead of cash, Mary Buffett wisely chose to retain her gifted shares in a diversified trust, rather than cashing them out.

But you don’t need to invest in private trusts to ensure your portfolio is diversified.

With Acorns, you get instant diversification every time you spend. Their platform helps you start saving and investing each time you make a purchase on your credit or debit card. When you spend, Acorns automatically rounds up the price of the purchase to the nearest dollar, and places the excess into a smart investment portfolio.

Sign up for Acorns today and receive a $20 bonus investment.

3. Real estate

In 2012, Warren Buffett told CNBC that if there was a way to buy thousands of single-family homes at once, and to manage them easily, he would “load up.” He also emphasized he’d take out mortgages at “very, very low rates.”

Not everyone can purchase multiple properties, nor can they tap into low mortgage rates. After all, the average rate for a 30-year mortgage was 3.65% in 2012. These days, a 30-year fixed mortgage rate is around 6.875%.

There are, however, ways to invest in real estate and avoid some of the downsides of the market.

New investing platforms are making it easier than ever to tap into the real estate market.

For accredited investors, Homeshares gives access to the $36 trillion U.S. home equity market, which has historically been the exclusive playground of institutional investors.

With a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property.

With risk-adjusted internal returns ranging from 12% to 18%, this approach provides an effective, hands-off way to invest in owner-occupied residential properties across regional markets.

If you’re not an accredited investor, crowdfunding platforms like Arrived allows you to enter the real estate market for as little as $100.

Arrived offers you access to shares of SEC-qualified investments in rental homes and vacation rentals, curated and vetted for their appreciation and income potential.

Backed by world-class investors like Jeff Bezos, Arrived makes it easy to fit these properties into your investment portfolio regardless of your income level. Their flexible investment amounts and simplified process allows accredited and non-accredited investors to take advantage of this inflation-hedging asset class without any extra work on your part.

Another avenue to consider is commercial real estate. For instance, First National Realty Partners (FNRP) allows accredited investors to diversify their portfolio through grocery-anchored commercial properties, without taking on the responsibilities of being a landlord.

With a minimum investment of $50,000, investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to Triple Net (NNN) leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns.