Money Management

CDs can be a smart place to put your savings, but they’re not entirely risk-free. Learn the five most costly CD mistakes and how to avoid them. [[{“value”:”

Certificates of deposit (CDs) are a great way to grow your savings for an extended period of time. Many CDs come with fixed interest rates and thus have no market risks, which make them especially attractive for those who don’t want to fiddle around with stocks or other risky investments.

But while CDs are relatively safe, they still have some risks. You might know about early withdrawal penalties — those pesky fees sustained when you withdraw before your CD matures — but if you’re new to CDs, here are five other costly mistakes you should try to avoid.

1. Getting a callable CD

Most CDs can freeze today’s best rates, which is arguably its strongest perk in a shifting rate environment. But not all CD products offer guaranteed returns. Some, like callable CDs, could reduce their APYs at some point during your term.

Callable CDs are a type of CD that give your bank the option to “call” or redeem the CD before it matures. This would allow your bank to take back your CD and replace it with one that has a lower rate. For instance, you might have a 5-year callable CD with a 4.50% APY. If ongoing rates for 5-year CDs dropped to 3.50%, your bank could choose to call your CD and reissue you another with that lower rate.

Most callable CDs advertise higher rates than traditional CDs upfront. But if your bank calls the CD, you might end up earning less than you would have with a traditional CD. To be sure, callable CDs have a “call protection period,” usually three to six months, during which your CD rate is guaranteed. But once that period is over, it’s fair game for your bank.

2. Getting a CD with simple interest only

Many CDs have the power of compound interest. That is, they earn interest on the money you deposit upfront (principal) and the interest you’ve already accumulated. In contrast, some CDs pay by simple interest, which will apply your interest rate to your principal only, not any interest you’ve earned.

To be sure, nearly all bank CDs have compound interest. But if you’re interested in brokered CDs, pay close attention to how interest is calculated. Most brokered CDs, which are offered through brokerage accounts, pay by simple interest. Sometimes, these CDs have higher interest rates than bank CDs do, which might balance things out. But if a broker and bank CD have the same rate, the bank CD might net more if it earns compound interest.

That said, you can sell brokered CDs on a secondary market. Much like an investment, selling CDs in this way could be profitable, especially if the rate on your brokered CD is much higher than those on the market. But since selling your brokered CD is the only way to exit the contract early (there’s no early withdrawal penalty), this could result in a loss if you’re forced to sell at an unfavorable time.

3. Withdrawing interest

Many banks will let you withdraw interest you’ve earned in a CD penalty-free, even if your principal is still locked up. This could come in handy if you need cash fast for an emergency. But be careful here — any interest you withdraw will reduce your CD’s stated APY.

Again, most bank CDs have compound interest. So if you withdraw funds, you detract some power from the growing pot. For example, if you put $10,000 in a 1-year CD with a 5.50% APY, you’d earn about $273.75 after six months. If you continued earning without withdrawing interest, you’d see $550 by the end of the term. But if you withdrew that $273.75 midway through your CD, you would only earn another $273.75, for a total of $547.50. Not a huge difference, but for larger deposits (and more frequent withdrawals over longer terms), it could end up being more significant.

4. Not realizing your CD rate is annualized

When you see a CD rate advertised, it’s usually something like “5.30% APY.” Don’t miss that APY. It stands for “annual percentage yield,” and it tells you how much your CD will earn within a year, assuming you don’t withdraw interest.

If you see a CD with a term shorter than 12 months, you can’t multiply the APY by your deposit to calculate your earnings. For example, if you want to deposit $10,000 in a 3-month CD with a 5.50% APY, you won’t be left with $550 after three months. Your earnings will be more like $136, assuming you don’t withdraw interest.

5. Overlooking taxes

Finally, don’t forget that CD earnings over $10 will be taxed as ordinary income on the federal and state levels. Your bank won’t withhold taxes for you, so you’ll need to set money aside to avoid any surprise tax bills later. This isn’t the case, however, if you hold your CD in a tax-advantaged account, like an individual retirement account (IRA).

All things considered, CDs can help you grow your savings at a much higher rate than other bank products. Just keep these costly mistakes in mind and stay within the bounds of your CD contract. If you do, you’ll get the full yield from your CD.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Poor driving habits could lead to higher auto insurance rates. However, some drivers aren’t aware that their data is being recorded and shared. Find out more. [[{“value”:”

Many drivers have seen their auto insurance rates increase in recent years. As more living expenses rise, Americans part ways with more of their income. When money is tight, price increases like this can cause financial stress.

For drivers who haven’t made recent claims or changed coverage, there may be a reason why their insurance policy now costs more.

Some car manufacturers are sharing driving data

Factors like age, driving history, location, and car type can influence auto insurance rates. These factors could result in higher premiums, but some drivers have seen their rates climb without any apparent reason.

Earlier this month, an article by The New York Times reported that some car manufacturers have been sharing data with car insurance companies. Insurers have been using this data to set and adjust policy rates. Manufacturers are sharing this data through data brokers like LexisNexis.

Unfortunately, this may happen without a driver’s knowledge, and some reported driving habits could lead to increased rates. While some insurers offer programs that drivers can opt into to monitor their driving habits in exchange for potential insurance discounts, this is different.

Some drivers are having their driving habits monitored without their knowledge. For those who drive cars with plentiful tech, it’s wise to verify whether they’re being monitored. Some auto brands are tracking data such as speeding, hard braking, and sharp accelerations.

Vehicles with built-in tech may record driving data. When using certain features, a driver may unintentionally allow the manufacturer to share their data once they agree to the terms and conditions. The New York Times article found that many drivers had no idea their data was being shared. Some auto manufacturers were more forthcoming than others.

General Motors has since stopped sharing customer data

General Motors was one of the car makers included in The New York Times report. For years, the company has been sharing data collected from OnStar Smart Driver, a connected feature that gives drivers insight into how to be better drivers.

However, many drivers said they were unknowingly enrolled in this service and were caught off guard. Unsurprisingly, the company received backlash. General Motors has since announced it will no longer share private data like this. Now that more people know about this practice, it’ll be interesting to see if other car companies announce similar updates.

Drivers should review terms and conditions before using new tech

For those driving newer cars with built-in tech features, now is an excellent time to review the terms and conditions for connected vehicle apps and tools. Some drivers may be allowing car manufacturers to share driving data without realizing it, which could impact their privacy and personal finances. That’s why it’s best to review permissions before using this kind of tech.

Compare quotes to get the best deal

Drivers who are frustrated by insurance increases should consider gathering insurance quotes from other insurers. Switching auto insurance companies could allow some to keep more money in the bank. It’s also worthwhile to verify if any discounts are available to maximize savings.

Some insurers offer discounts to students who maintain good grades, drivers who complete driver safety courses, and customers who pay their policy in full. Review our list of the cheapest car insurance companies to learn more.

Our best car insurance companies for 2024

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool recommends Maker. The Motley Fool has a disclosure policy.

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If you shop at traditional retailers, you may be overspending on everyday essentials. A Sam’s Club membership can unlock savings. Here’s what to buy for cheap. [[{“value”:”

As life gets more expensive, many consumers want to trim their spending. Shopping at cost-effective retailers is one way to do that. Some people find that joining warehouse clubs like Sam’s Club helps them save money when buying groceries and household essentials. If you’re a new member or considering joining, you may wonder which Sam’s Club items offer the most savings. Here are a few affordable must-haves sold at Sam’s Club.

1. Rotisserie chicken

Many Sam’s Club shoppers swear by the rotisserie chickens. At your local club, you can get an entire roasted chicken for $4.98. This is a steal, considering there’s minimal work involved in putting a meal on the table. What can you do with a Sam’s Club rotisserie chicken?

Some ideas include shredding the chicken and adding it to soups or fresh salads, using the meat to make chicken enchiladas, or making a creamy chicken salad for sandwiches.

2. Member’s Mark paper products

It’s no secret that paper goods like paper towels, napkins, and toilet paper can be costly, but many shoppers buy them regularly. If you’re not brand loyal, you can save money by purchasing Member’s Mark or Sam’s Club’s private-label products.

If you have the room to store bulk paper goods, the prices are affordable. It’s a good idea to start with a pack and compare it to what you already use to get a feel for quality. The last thing you need is worse-quality paper towels and toilet paper.

Here’s an example to illustrate the savings. The Sam’s Club website lists Member’s Mark Super Premium 2-Ply Select & Tear Paper Towels (150 sheets/roll, 15 rolls) for $19.98. The pack features 1,031.3 square feet of paper towels, so you’ll pay around $0.02 per square foot.

Target sells its 2-ply, Triple Make-A-Size Paper Towels in an eight-roll pack for $15.99. Each roll has 147 sheets, and each package has 530 square feet of paper towels. If you bought two packs, you’d get slightly more paper towels and 1,060 square feet of product for $31.98 — a price of $0.03 per square foot. The Maker’s Mark paper towels are a better buy.

3. Garbage bags

Many shoppers buy garbage bags regularly — and they’re not cheap. Sam’s Club sells trash bags in bulk at an affordable price. You can keep more money in your checking account by purchasing them at your local club. Let’s compare pricing for a popular name-brand product.

Anyone can shop at Walmart without a membership. The retailer sells an 80-count pack of unscented Hefty Ultra Strong Tall Kitchen Trash Bags for $14.96, which is almost $0.19 per bag. Sam’s Club sells the same product in a 150-count container for $18.48, around $0.12 per bag. You’ll save money and get nearly double the bags when buying them at Sam’s Club.

4. Household cleaning supplies

Another affordable must-have for your Sam’s Club cart is cleaning supplies. These products can be pricey at traditional retail stores and grocers, but you can get a deal when buying in bulk at Sam’s Club. One example is Cascade Platinum Plus ActionPacs Dishwasher Detergent. At Walmart, a 62-pack sells for $22.94, or $0.37 per soap pack.

At Sam’s Club, the usual price is $22.98 for an 81-pack or about $0.28 per soap pack. At the time of writing, they’re on sale for $5 off. At the discounted price of $17.98, each soap pack is about $0.22 each. Sam’s Club frequently runs sales on everyday essentials like this.

Changing your shopping habits could save you money

Many shoppers benefit from a Sam’s Club membership. If you have a club nearby and are looking to save money, you may want to consider changing your shopping habits. Becoming a member and buying everyday essentials here could help you reduce your overall spending. If you need help stretching your money further, you may want to start budgeting. Monitoring your spending and setting goals is easier when you use one of the best budgeting apps.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool recommends Maker. The Motley Fool has a disclosure policy.

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You may be inclined to invest in a financial wellness program for your employees. Read on for a better use of your financial resources. [[{“value”:”

Owning a small business can be a challenge when it comes to doing right by your employees. Small businesses, by nature, tend to have limited financial resources. And so you may not be able to offer the same set of benefits as a much larger operation.

Now, one of the perks you may be interested in offering your team is a financial wellness program. These programs commonly teach workers how to invest and manage their money to meet different goals.

A good 40% of employers offer financial wellness programs to their employees, according to data from Bank of America. But before you commit to offering one, you may want to consider using your limited resources elsewhere.

Put your money where it really counts

Financial wellness programs tend to be well-intentioned. But if you know for a fact that a good number of your employees are struggling financially or don’t have much money to their names, then a financial wellness program may, frankly, end up being nothing more than a waste.

If the bulk of your employees have just a few hundred dollars in savings, or no savings at all, then learning how to invest won’t be particularly helpful for them. You can’t invest money you don’t have. That’s why a better bet may be to use your resources to first help your employees build cash reserves.

The SECURE 2.0 Act allows workers to establish emergency savings accounts for their employees and set a limit of up to $2,500 for contributions annually. Those contributions can be partially or fully funded by employers.

So let’s say that rather than spend thousands of dollars on a financial wellness program for your team of 30 employees, you instead give each employee $500 to kickstart their emergency savings. That alone could be a game changer. It could give your employees more peace of mind and help them avoid resorting to debt the moment an unplanned bill springs up.

Another good way to spend your company money? A retirement plan match. And that retirement plan doesn’t have to be a 401(k). Those can be costly for small businesses. Instead, you may want to look at alternatives like a SEP IRA, which may come with lower fees to administer.

Don’t waste money on a program that won’t have an impact

If you pay your employees a generous wage and are of the impression that they can largely benefit from a financial wellness program, then by all means, introduce one. But if most of your employees are earning a modest or lower wage, and you’re pretty convinced that most aren’t sitting on thousands of dollars just waiting to be invested, then forgo the wellness program and instead hand over the cash. It’ll likely do a lot more good for your workers on a whole.

Remember, the less stressed your employees are about money, the more productive they might be on the job. That’s reason enough to do what you can to make a positive financial impact on their lives.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Bank of America is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

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