Money Management

CDs are one way to grow your wealth, but they’re not your only option. Check out three times CDs aren’t a good fit. [[{“value”:”

Certificates of deposit (CDs) can be a great alternative to investing in the stock market for those looking to grow their wealth. Money you put into a CD is protected against loss and earns a guaranteed interest rate over the CD term.

But like every financial account, it has its drawbacks, too. If you plan to use your cash for any of the following three reasons, a CD probably isn’t your best option.

1. Emergency expenses

It’s not a good idea to put money for emergencies in a CD because you never know when you’ll need to withdraw it. Typically, you’re not allowed to withdraw funds from a CD before the CD term is up. If you do, you’ll pay a penalty equal to several months of interest. It’s even possible to lose some of your principal if you withdraw the money shortly after depositing it.

Each bank has its own rules, though, and some do permit you to make CD withdrawals at any time. However, if you do, you’ll forgo the remaining interest you would have earned had you left the money alone. Check with the bank or credit union to learn the rules for the CD you’re interested in.

Generally, a high-yield savings account is a much better home for your emergency fund. These accounts still enable you to earn an above-average interest rate on your savings. Right now, the best ones offer rates around 5.00%. And you can withdraw your money penalty-free at any time.

2. Planned expenses before the CD term ends

A CD isn’t a good fit if you have a planned expense coming up prior to the end of the CD term. The bank won’t stop you from withdrawing this money early if that’s what you want, but you’ll still pay a penalty.

To avoid this, you could place just a portion of your savings in a CD and put the rest in a high-yield savings account where you can access it when you need it. You could also try a CD ladder. This is where you divide your money among CDs of different term lengths. For example, you might have a 1-, 2-, 3-, 4-, and 5-year CD with equal amounts in each.

When the 1-year CD term ends, you can either withdraw the cash if you need it or put it into a new 5-year CD. This enables you to take advantage of the higher rates long-term CDs typically offer while still giving you access to some of your cash every year.

3. Retirement savings

A CD can grow your money over time, but you probably won’t earn as much with one as you could by investing that cash in a retirement account. The best CD rates right now are around 5.00%. But this is extremely high and rates won’t stay forever.

Investing your savings introduces the risk of loss, but you could also gain a lot more. The S&P 500 index — a popular stock market benchmark — grew by more than 10% per year on average over the last 10 years. This could grow your wealth much more quickly than a CD.

If you’re nearing retirement age, you might consider moving some of your savings into a CD rather than invest it in riskier stocks. But just keep enough for your near-term expenses here. You can always move more money out of your retirement accounts later.

If none of the things above apply to you, a CD could be a good home for your savings. Think about how long you’re comfortable leaving your money alone. Then compare rates from top CD providers to find the one that best suits you.

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Fidelity Investments found that women want to feel more secure about money and have no financial fears. Discover some ways women are improving their finances. [[{“value”:”

In recognition of Women’s History Month, Fidelity Investments conducted its Women’s History Month 2024 Survey. Over 3,000 adults were polled about their feelings about money, the financial goals they were already tackling or were planning to pursue, and their financial successes and mistakes. Find out what long-term financial goal women will continue working toward in 2024.

Women want to feel secure about their finances

When asked what long-term financial goals women wanted to achieve, one answer topped the list: 58% of women wanted to feel secure and not worry about money. Interestingly, this is the same answer most women gave when Fidelity Investments conducted the same study in 2023. But in 2023, 59% of women shared that goal.

It makes sense why this would be a top goal. Feeling financially secure and having little to no financial fears can make it easier to enjoy everyday life. Sadly, stress is a common emotion for people when thinking about money.

Both men and women who were surveyed feel stressed about money. Study findings show that 57% of women are stressed about money, while 41% of men feel the same. The study found that 93% of women feel stressed about managing their money.

One thing that made a big difference was taking financial action. Women who took financial action within the last six months were more likely to feel less stress when managing their money than women who did not. Taking steps to improve your finances can reduce your stress.

39% of women have adjusted their spending habits

Let’s take a closer look at what actions women have been taking. Within the last six months, 39% of women have adjusted their spending habits. Using budgeting apps to monitor and reduce your spending can help you have more control over your finances.

Here are some other ways that women have made financial progress in the last six months:

32% improved their credit score31% paid down debt27% were more open about money with their partner or spouse23% contributed to an emergency fund

Here’s what goals women plan to tackle in the next six months

Fidelity Investments found that nearly 8 in 10 women had taken money action within the last six months or were going to in the upcoming months. Here’s a breakdown of some of the financial actions women plan to take within the next six months:

40% want to contribute to an emergency fund38% hope to save more for retirement37% plan to save for other goals beyond retirement36% hope to boost their income35% want to adjust their spending habits35% plan to pay down debt

It’s not too late to make financial changes

Are you planning to take any financial action in the months ahead? If you have financial goals you hope to work on in 2024, there’s still plenty of time to make progress. Whether you want to pay off credit card debt, save a down payment to buy a home, or invest more, your goals are within reach

Be clear about your goals and outline a plan to make your financial resolutions a reality. Don’t let your fears stop you from making positive changes, and look to resources for additional help. For more money management tips, check out our personal finance resources.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Keeping your 401(k) in cash could cause you to lose out big time. Read on to learn more. [[{“value”:”

Workers are often encouraged to do their best to save for retirement so they’re not forced to retire on Social Security alone. And to that end, you have choices.

You could save for retirement in an IRA that you manage yourself. Or, you could sign up to participate in your employer’s 401(k) plan if that option is available at your place of work.

It can pay to contribute to a 401(k) because in the case of a traditional employer retirement plan (as opposed to a Roth), you can shield some income from taxes. You may also be privy to an employer match in a 401(k), which equates to free money for your retirement.

But if you don’t actively invest your 401(k), you could end up losing out big time. Here’s why.

You don’t want to stunt your savings’ growth

One of the biggest mistakes you can make in your 401(k) is to keep your money in cash. Imagine that doing so gives you an annual 2% return through the years, whereas loading up on different funds in your 401(k) results in an annual 10% return, which is in line with the stock market’s average.

If you fund your 401(k) to the tune of $500 a month over 40 years, you’re talking about an ending balance of about $362,000 for a cash portfolio versus $2.65 million for an invested portfolio. Clearly, that’s a world of difference.

Actively choose your investments

Often, 401(k) savers who don’t choose investments for their accounts have their money automatically put into a target date fund. These funds are designed to adjust your risk allocation based on how close or far away you are from retirement age.

Target date funds have the potential to generate much higher returns than simply keeping a 401(k) in cash. So of these two options, target date funds easily represent the lesser of two evils.

However, many people don’t choose target date funds — their money simply winds up there. As such, savers are often in the dark about the fees these funds impose. But those fees can be substantial enough to eat away at your returns significantly.

It often pays to actively choose investments for your 401(k). And one option it makes sense to consider is putting your money into index funds.

These funds largely aim to match the performance of the indices they’re tied to. So if you invest in an S&P 500 index fund, that fund will follow the S&P 500 and aim for a comparable return. Because index funds are passively managed, their fees tend to be quite low, making them a far more cost-effective choice.

If you keep your 401(k) in cash, or if you don’t choose investments and allow your money to land in a target date fund, you may wind up regretting it come retirement when you need that money to fund your golden years. Make sure to not only invest your 401(k) but play an active role in choosing the right funds for your savings.

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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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Too many people have extra cash sitting in a checking account. Are you one of them? Here are 10 better choices for how to invest your money in 2024. [[{“value”:”

Do you have some extra cash sitting in a checking account? Back during the years of near-zero interest rates, that might’ve seemed like a decent place for your cash. (At least a checking account has FDIC insurance, right?) But now that banks are paying higher APYs on savings accounts and CDs, you have lots of better options.

You work hard for your money, and you deserve to have your money work harder for you. That extra cash should be earning you some interest, investment gains, tax benefits, or other perks!

Let’s look at 10 better places to put your money than a checking account.

1. Paying off debt

If you have $1,000 sitting in a checking account earning zero interest, but you have a balance on a credit card that’s charging you 20% or higher interest, you’re missing out on an opportunity. One of the first priorities for extra cash should be paying off high-interest debt.

Or if you have an auto loan that is charging you high interest (even some of the best auto loans are charging 7% APR or higher, as of March 2024), it might be worth using your checking account cash to make an extra car loan payment or two.

2. High-yield savings account

Some people might use a checking account as a place to hold their emergency savings. This might’ve made sense when banks were paying near-zero interest on savings accounts, but today’s best high-yield savings accounts can give you a better deal.

Keep your savings in an account that pays you interest. If not, you could be missing out on hundreds of dollars a year (or more). As of March 6, 2024, the best savings accounts were offering 5.30% APY or higher. So if you put $10,000 of savings into one of the best accounts, you’d earn about $530 in a year.

3. 401(k) contributions

If you have extra cash in your checking account, this could be a sign you’re not saving enough for retirement. Consider raising your 401(k) contributions from every paycheck, at least enough to get your full employer match.

And if you’re a high earner in a higher tax bracket, you might want to max out your 401(k) with up to $23,000 for 2024 ($24,000 for people aged 50 and over). This is one of the easiest ways to get a tax break by reducing the taxable income on your tax return — while boosting your long-term savings to invest for retirement.

4. Traditional IRA

Another option to save for retirement while getting a tax deduction is to open a traditional IRA account. Even if you already have a 401(k) or other employer plan, many people can also qualify to get a tax deduction on the money they put into a traditional IRA.

The IRS will let you put $7,000 ($8,000 for people age 50 and over) into your IRA for 2024 — about $583 per month. This is a great way to get a tax break and save more for retirement.

5. Roth IRA

Here’s another clever retirement planning strategy that a lot of Americans might not be taking advantage of: opening a Roth IRA. This is a special retirement savings account that gives you tax-free income in your golden years.

A Roth IRA does not give you a tax deduction in 2024, like a 401(k) or traditional IRA. Instead, your Roth IRA investments are allowed to grow tax free into retirement. You can put up to a total of $7,000 ($8,000 for people age 50 plus) into all IRAs (Roth and traditional IRAs combined) for 2024.

6. Brokerage account

If you’re already maxing out your 401(k) or IRA, don’t qualify for a Roth IRA, or if you want to use your money for a wider range of goals, you could put extra cash into a taxable brokerage account. The best brokerage accounts make it easy to buy stocks, bonds, index funds, ETFs, and other financial assets to help your money grow for the long term.

Keep in mind that investing can be risky. There is no guaranteed return in the stock market, and you could lose money if your investments lose value. But a brokerage account should be part of your plan if you want to build wealth.

7. Certificate of deposit (CD)

Looking for something a little more “safe” that still can earn you some yield? Check out certificates of deposit (CDs). This is a savings product where you commit your money for a certain “term” of time, and the bank or credit union guarantees you a fixed rate of interest on your savings.

Some of the best CDs as of March 6, 2024 were offering rates of 5.30% APY or higher. The best CD rates are often competitive with (or higher than) the best savings accounts — but you have to leave your money in the CD for the length of the term, or else you’ll owe a penalty.

8. Money market account

Many banks offer money market accounts (MMAs) as another option for people who want yield on their savings. Money market accounts have a lot in common with savings accounts, but some MMAs offer debit cards and check-writing capabilities.

One difference is that money market accounts often pay higher interest than savings accounts. That’s because money market accounts are invested in the “money market” — short-term, low-risk securities like government bonds and commercial paper. These investments enable your money market account to work harder for your money.

9. Health savings account (HSA)

If you have the right kind of health insurance plan, you can get an extra tax break from an HSA. The health savings account (HSA) is a great way to pay for out-of-pocket healthcare costs with tax-deductible dollars.

If you have a qualifying high-deductible health plan (HDHP) for 2024, you can put up to $4,150 for single coverage, or up to $8,300 for family coverage, into an HSA. Don’t miss your chance for this tax break, especially if you’re a high earner!

10. 529 college savings account

Are you trying to help your child or other loved ones save for college or pay for private school expenses? If so: put your extra checking account money into a 529 education savings plan. 529 accounts are the best way to save for college or other qualified education expenses — including community college, K-12 school tuition, and some apprenticeships or vocational programs.

You don’t get a federal tax deduction for the money you put into a 529, but some states offer state income tax deductions. And your money is allowed to grow tax free, like a Roth IRA or other tax-advantaged retirement accounts.

Bottom line

In a world where the best savings accounts and CDs are paying over 5.00% APY, and where saving for healthcare and retirement earns tax breaks, no one should leave their cash sitting in a checking account. Get a tax deduction for a traditional IRA contribution, invest in stocks with a brokerage account, or at least get a safe, high-yield savings account so your money grows. You have lots of options to make your money work harder in 2024.

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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Botched your tax return? Read on to see when you do and don’t need to take action. [[{“value”:”

None of us are immune to errors. You might stick a cake in the oven only to forget about it and wind up with a burnt pile of sugar and flour 60 minutes after the fact. Or you might head to the grocery store to buy milk and eggs, only to forget the eggs via a good old-fashioned brain fart.

These things happen. And there’s no sense in beating yourself up every time you make a mistake in life. Similarly, you might make a mistake when filing your taxes.

Maybe you forgot to report the interest income you earned in your savings account last year. Or maybe you forgot to claim a deduction or credit you realized you were entitled to.

You may be wondering if you need to amend your tax return if you realize you’ve made an error. And the answer is, it depends on the type of mistake you made.

There’s no need to amend a tax return because of a math error

Even with the advent of calculators and other tools that let our brains off the hook from crunching numbers, it’s possible to make a math error — both in general and on a tax return. Of course, filing your taxes electronically could decrease your chances of making a math error. When you use tax software, certain calculations happen automatically so they don’t have to happen just in your head.

Either way, you generally do not need to file an amended tax return if you realize you made a math error on the original return you submitted. The IRS will typically aim to correct math errors on its own.

You need to file an amended return if there’s a change to your income or filing status

There are certain situations where you have to file an amended tax return due to having made a mistake. First, if you entered the wrong filing status, you need to file an amendment to correct that. The same holds true if you forgot to claim a dependent or claimed a dependent you shouldn’t have.

It’s also important to file an amended tax return if you made a mistake relating to your income. That could include:

Failing to report income or underreporting incomeOverreporting income by accidentForgetting to claim a tax deduction you’re entitled toNeglecting to claim a tax credit you’re eligible for

You’ll need to file Form 1040-X to amend your tax return. Keep in mind that if you receive an updated 1099 form after submitting your tax return, you’ll generally need to file an amendment. A mistake of that nature may not be your fault — but you’ll be required to file an amended return nonetheless.

Don’t rush through your taxes

You might spend weeks slowly and methodically working on your tax return only to still end up making a mistake after all’s said and done. But generally speaking, the more time you give yourself to tackle your taxes, the less likely you are to make a mistake.

So don’t rush the process. Taxes are due this year on April 15. If you haven’t started yours yet, you have about a month to get your return submitted. Kick off that process soon so you’re not stressed and rushed.

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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 a disclosure policy.

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Getting a raise can make a huge difference in your financial life over the long term if you make this decision. Read on to learn what it is. [[{“value”:”

Since the labor market continues to be tight in 2024, companies are planning for generous raises for many workers. In fact, one survey of more than 1,800 employers found companies were planning average salary increases of 4.00% this year.

Whether your raise is bigger or smaller than the average, it’s what you do with your money that matters most. And when you’re suddenly earning more of it, there’s one smart decision you absolutely should make if you want the funds to lead to a brighter financial future.

Lifestyle creep

When you get a salary increase, it’s easy to just let the extra money be deposited in your bank account and become part of the cash you have available to spend. If you do this, you may be surprised at just how quickly your spending increases and eats up the extra funds. This is called lifestyle creep.

If you don’t make a plan for what to do with your raise, you may find the extra spending becomes a habit that doesn’t make a positive impact on your life — and that the funds end up frittered away by new everyday expenses with little to show for it in the end.

Rather than letting this happen, you should take action immediately upon getting the raise and divert some or all of it toward accomplishing an important financial goal that will improve your future.

Do this with your raise before you get used to spending it

When you get a raise, you have new money coming in that isn’t already committed to existing expenses. So, before you get used to having it, you can arrange for it to be transferred to accounts that will help you accomplish your long-term financial goals. That way, you can make progress on growing your net worth and improving your financial security without having to make big changes to your current living standard.

If you don’t have a lot of high-interest debt, investing the money in a brokerage account or retirement investment account could be the single best thing to do with the money. That’s because you can make this extra cash work for you so it earns even more for you over time.

Say, for example, you were making $50,000 and got a 4% raise. You’d have an extra $2,000 coming in over the course of the year. If you invested that extra $2,000 every year for the next 30 years and earned a 10% average annual return (the average return provided by the S&P 500, historically speaking), you’d have $361,886.85 in your retirement plan. If you earned a 50% employer match on the money by putting it into your 401(k) plan and wound up with $3,000 going into your account, you’d have $542,830.27!

If you owe money on credit cards or other high-interest debt, you can set up automatic payments for the extra money coming in to pay down that debt until it’s gone, and then divert the funds to your investments.

Putting this money toward your personal financial goals is likely to make you a lot happier in the end compared to succumbing to lifestyle creep and just spending it.

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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 a disclosure policy.

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