Money Management

A rise in inflation should prompt you to look at raising your emergency fund. Read on to see why. [[{“value”:”

Inflation has been in the news a lot in recent years due to its rampant nature. Now, the reality is that moderate inflation is sort of a consistent part of the economic cycle. But the inflation we’ve experienced more recently has been enough to drive living costs up notably.

In February, annual inflation was measured at 3.2%, per that month’s Consumer Price Index (an index that tracks changes in the cost of common consumer goods and services). And while that’s an improvement over the inflation levels we saw in 2022, it’s still high.

If you have money in an emergency fund, you may want to reassess your savings and add to them in light of this recent stretch of inflation. Here’s why.

It’s all about making sure you’re covered

Generally speaking, your emergency fund should contain enough money to cover three full months of essential expenses at a minimum. If you decide to save beyond that for better protection, great.

The reason it’s important to add to your savings account during periods of inflation is that the cost of your essential bills might rise. You may need to pad your savings to make sure you can continue to cover three months’ worth of bills.

As an example, let’s say that at this time last year, your essential monthly bills came to $3,000. What if now, due to inflation, you’re spending more like $3,200 on essentials because the cost of things like groceries, rent, and utilities has risen on you?

If you have a $9,000 emergency fund, you’re still in good shape. But do you have enough money in the bank to cover three full months of essential bills? No.

Now, based on that recent increase, you’d need $9,600 to be covered for three months of bills. So in this example, it would be a good idea to try to add $600 to your emergency fund.

This isn’t something you necessarily have to stress out over, or do immediately. But over time, it’s a smart thing to do.

Keep checking in on your emergency fund

Even during periods when inflation isn’t so rampant, it’s a good idea to assess your emergency savings every six months or so to make sure you’re getting enough financial protection. Even if inflation isn’t an issue, perhaps your rent specifically goes up at some point because your landlord imposes a big increase. Or, it may be that your homeowners insurance rates rise due to an increase by your insurer.

If you’re going to make an effort to build and maintain an emergency fund, it should give you the peace of mind you deserve to have. So keep checking in to make sure you’re truly covered the way you want to be. And if you realize you’re a little short, you can then take steps to calmly but efficiently add money to your savings so that in the event of a layoff or large unplanned bill, you’re not left to scramble or panic.

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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.
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Building a home could mean you have to cope with cost overruns and find someplace to live during the process. Find out about these and other downsides. [[{“value”:”

When most people decide to buy a house, they look for one that’s on the market and already built. But building a home is another option. If you build a home of your own, you’ll often find a vacant lot, hire a builder, and have the builder create a custom property just for you.

Building a home can be fun. I’ve done it once and I’d happily do it again if I had the opportunity. But there are a few issues that you need to consider about acquiring a house this way before you decide to jump in.

1. You will probably go over budget

I’m sure at some point in the history of the world, a new home build has come in at exactly the budgeted amount. But, it’s never happened to me or anyone I’ve ever heard of. In fact, it’s typical for most new builds to go around 10% to 20% over budget.

Houses can go over budget for all sorts of reasons. Sometimes, you might decide you really like a more expensive countertop material than your builder planned. In other situations, your builder will have to dig a well that’s twice as deep as expected for you to get enough water to your home and you’ll spend an extra $10,000 for them to do so (that happened to me a decade ago, and I’m still mad about it!)

The fact that you’ll probably exceed your budget creates added uncertainty that doesn’t exist when you buy an existing house. It also means you better have some extra money in savings if you want running water in your home (or whatever other extras you have to pay for).

2. You’ll have to figure out where to live during the building process

Building a house doesn’t happen quickly. And, while I’m sure some construction projects actually finish on schedule, this has also never happened to me or anyone I know.

During the time your house is being built, you’ll probably need somewhere to live. Unless you’re lucky enough to have another house or generous friends or relatives, this means you’re going to be paying for the place you’re living and your new-build project. This can get expensive, especially toward the end.

It’s also hard to time when you’ll move out of your old place and into your new one since you don’t really know when your new house will be done. This can make selling an existing house or giving notice to a landlord tricky.

You’ll need to make sure you can afford to cover both your current house and the new build in your monthly budget — and have a contingency plan or a kind landlord who is willing to work with your uncertain moving timeline.

3. Your mortgage situation will be more complicated

When you get a mortgage to buy a house, the lender appraises the home and gives you money to buy it if it’s worth enough and you can prove you’re qualified for a loan.

Things are more complicated with a new build since there isn’t a house. You’ll typically need a construction loan. You may be able to get a construction-to-permanent loan which would mean a lender offers you a construction loan which then turns into a permanent loan at the end. But, these loans tend to come with higher costs, including a higher interest rate and a larger down payment requirement. They can also be more difficult to qualify for because there’s more risk to the lender during the building process.

Alternatively, you could get a construction loan and then apply separately for a permanent loan. But this could be a huge disaster if you don’t qualify for the permanent loan or if rates go up in the meantime and the loan becomes more expensive. This also means having to pay two sets of closing costs.

There’s not much you can do about these downsides unless you’re going to pay for your construction in cash — and that’s not feasible for most people. You do need to be aware of them, though, and financially prepared.

4. You’ll have a ton of decisions to make

Finally, during a new build, you have to decide everything from paint color to what faucets and hinges you want. For some people, this is fun. For others, it’s overwhelming and stressful.

So, think about what kind of person you are and whether you’d thrive in designing your own place from the ground up or would be overwhelmed with decision fatigue.

None of these issues would stop me from building a home again if I got the chance, and they may not stop you. But they are worth thinking about, because they can definitely cause issues for aspiring homeowners who are looking to build.

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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.
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It only makes sense for parents to shop at Costco, right? Wrong. Read on to learn how Costco can fit into your life and finances as a family of two. [[{“value”:”

It’s easy to assume that parents are the only consumers who need or want to buy in bulk. Well, let me dispel that myth right here and now. I live alone, and still buy some items in larger quantities. It’s good for my personal finances.

But Costco’s offerings go beyond just economy-sized packages of potato chips, antacids, and paper plates. The warehouse club has great deals for everyone, even if you’re part of a childfree couple. Here are five reasons to consider joining.

1. Toilet paper doesn’t go bad

I put this first, because it’s a major reason I’m considering joining Costco after I buy a house. Paper goods, like toilet paper, paper towels, tissues, and more aren’t perishable the way many of Costco’s grocery items are. And while a childfree couple might not go through as much of these items as someone with a houseful of kids, you still need them.

So why pay high prices for smaller packages of these items at the grocery store? Load up a cart at Costco instead. Personally, I’m hoping to build a majestic fort out of bulk toilet paper rolls in my new basement, once I get it.

2. Try new and exciting products

The free samples at Costco are legendary — skipping them while you shop is a bona fide Costco mistake. And unlike parents, you don’t have to worry that something you try and like, and bring home, will be summarily rejected by picky kids. Unless you’re sure you can consume the entire package of the food in question before it goes bad, it might be a good idea to have your partner try it, too. But you might be able to add all kinds of interesting foods to your life if you wander around eating free samples.

3. Stock your freezer

You may not have kids, but you might have an extra fridge or even a chest freezer to help you take advantage of excellent prices on bulk perishables like chicken and steak.

And maybe you don’t go through enough fresh produce or dairy products to justify a Costco membership if you’re part of a family of two, but you can still take advantage of anything frozen — it’ll last months. (For that matter, some fresh produce can be successfully frozen at home for a future date, so if something you love is in season and on sale, you can do a little DIY freezing.)

4. More ability to take advantage of deals on big-ticket items

It’s actually a myth that all childfree people are rich — we are in fact subject to the same personal finance pitfalls as anyone else. But some of us might have more disposable income, and if you’re looking for deals on big-ticket items like TVs, laptops, and more, Costco is a good place to shop.

Plus, if you’re buying electronics at Costco, you can take advantage of its additional warranty on these items. Costco extends a manufacturer’s warranty to give you two years of coverage — so if that new laptop dies after 18 months, you won’t be without recourse.

5. Costco food court dates

OK, this last reason is silly, but it’s still valid! Costco’s food court is so popular that non-members have been turning up at the warehouse club just to eat there — Costco is cracking down on this, by the way, in case you’re considering trying it out as a non-member.

But if you and your partner are members, Costco’s food court could be a good place to have a cheap and delicious date. Tack on a lunch or dinner to your regular Costco run to stock up on toilet paper, and you can turn a mundane errand into something more special.

As you can see, Costco offers something for just about anybody, regardless of whether they have kids. And best of all, if you try out Costco and it’s not for you, you can get your credit card refunded for the cost of your membership. If you live within range of a Costco warehouse location and want free samples, bulk paper goods, and cheap hot dogs in your life, give it some thought.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Opening a savings account is personal finance 101 — but some accounts are better than others. Learn how to tell if your savings account is a loser. [[{“value”:”

You’ve likely heard for years about how important it is to have a savings account. Everyone needs some cash in reserve for an emergency expense, an upcoming vacation, or even a major purchase, like a house. And opening a new savings account couldn’t be easier these days — you can even do it fully online.

But not all accounts are created equal, and some just aren’t worth your time or money. Here’s how to tell your savings account isn’t the best one out there — and what to do about it.

1. You’re paying fees for the account

In 2024, there is absolutely no reason whatsoever to pay a monthly maintenance fee on your savings account. There are so many banks and credit unions out there, and whether you realize it or not, they are all competing for your precious business. Some of the best have done away with maintenance fees on their accounts — this is more likely to be the case for online-only banks, as they have lower overhead costs than traditional banks.

That said, some bank accounts with monthly fees have ways to get said fee waived. But you need to read all the details about a prospective account to be sure you understand — you might need to make a certain number of deposits every month, or maintain a minimum balance.

I was burned by a maintenance fee in 2022 on my big-bank savings account, despite how easy it ended up being for me to avoid said fee. This just goes to show you that even people who write about money for a living can fall prey to bank fees — so they’re best avoided whenever possible.

2. The APY is nonexistent

Did you know you can earn upward of 5% APY (annual percentage yield) on your saved cash right now? Thanks to a much higher federal funds rate than we’ve seen in years, you can make real money (actual passive income) on a savings account balance.

So if your savings account is earning a pathetically low APY (like 0.01%, which is the actual APY you’ll see on some big bank savings accounts), consider switching. As of this writing, the average APY on a savings account is 0.46%, according to the FDIC — which means some bigger numbers are bringing up that average.

Savings account APYs are variable, and if the Federal Reserve cuts the federal funds rate this year, your APY will fall (the two are linked, though not directly). So there’s no reason not to take advantage of a high rate now and switch accounts.

3. Taking money out is a huge pain

While the act of putting money into a savings account is easily one of the best things you can do for your personal finances, it stands to reason that eventually you’ll need that money for something. And when you do, getting it out of the account ideally shouldn’t involve jumping through major hoops.

Unfortunately, cash access is one potential pitfall of an online-only bank, so if you’re considering a savings account with one, be sure to read the fine print to see if you’ll be able to use an ATM either for free or with fee reimbursement.

Another issue is that many savings accounts don’t come with an ATM or debit card, period. And this makes sense — after all, ideally you shouldn’t be spending out of a savings account super often. My high-yield savings account didn’t come with an ATM card, but there was a fairly easy workaround for me — I opened a linked checking account. Now I can easily transfer cash to it from savings and then use the debit card that came with it to make purchases. I can also visit an ATM in the bank’s network that’s in my neighborhood.

If you need to take a larger amount out of your online savings account than you’re allowed to withdraw at an ATM, you’ll likely need to transfer the money to an account with a traditional brick-and-mortar bank, probably wait a few days, and then visit that bank. It’s not ideal, and if you think this would seriously cramp your lifestyle, think twice about opening an account with an online-only bank — especially if you don’t also have a traditional bank account that can serve as your pipeline to your money. That said, with a little planning and time, this hurdle doesn’t need to be a deal breaker for an online savings account.

You have options for savings accounts

Along with video phone calls, app-based food delivery services, and electric cars, having so many choices for bank accounts is definitely a perk of living in 2024. If your current savings account charges you fees, pays you little or no interest, and makes it hard to access your cash, find a new one. Check out our list of the best high-yield savings accounts to get started with your search.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

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 a disclosure policy.

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