Money Management

Both CDs and money market accounts can help you earn more interest on your savings, but they’re not the same. Read on to learn more. [[{“value”:”

Looking for a place to rest your money, either for a short time or for a long while? If high-yield savings accounts aren’t what you’re looking for, other options for you might be either certificates of deposit (CDs) or money market accounts (MMAs). Each has its own advantages and disadvantages, and people who they will work best for. Let’s walk through the key differences between these two types of savings vehicles.

1. Access to funds

For some savers, the most important difference between CDs and MMAs is that one makes it very easy to access your money, and the other, not so much. A CD essentially locks your money in for a set period of time, but money market accounts do not.

In fact, MMAs act more like savings accounts than investments, since you can easily access your funds when you need them (some even come with debit cards), and you can put more money into these accounts as you please.

MMAs are great for people who aren’t 100% certain they won’t need to access their savings or who are trying to meet an active savings goal and will need to add more money over time.

2. Lock-in terms

CDs are well known for having a lock-in period, during which time you’re not supposed to access your money at all. You can’t add or subtract from your savings, it’s locked in and you’re being paid a set interest rate for not touching it over the long term.

CD terms can vary from mere months to several years, depending on which one you choose, with the bulk of the best CD rates currently available on accounts with terms of six to 18 months.

MMAs, on the other hand, don’t have set terms, and you can open, close, add, or subtract from them as you see fit, as long as you understand that changes can affect the interest rate you’ll be paid.

3. Early withdrawal penalties

As mentioned above, MMAs don’t have set terms, and due to that, don’t have penalties for early withdrawals. This can be a huge benefit to someone who isn’t positive that they can leave their money without touching it through a set term.

With CDs, you agree to leave your money in the bank for a set period of time, and if you don’t, you will be penalized financially. How stiff the penalty is depends on how long your term is for and how early in it that you withdraw your money. It usually comes in the form of forfeited interest, which can be significant.

4. Interest rate variability

One last huge difference between CDs and MMAs is their interest rate variabilities. Right now, CD and money market interest rates are very similar, but one is a fixed interest rate and the other is variable.

CDs offer savers a guaranteed return over a set period, and everything is very neat and tied up with a little bow. They have fixed interest rates — but MMAs do not. In fact, MMAs can have highly variable interest rates if the environment is volatile, but this can work for or against you, depending on which direction rates are moving.

If interest rates are going up, an MMA will get you a higher return faster compared to a CD because its interest rate is likely to also go up. If interest rates are falling, your CD will still have the same guaranteed payout for the lock-in period, where an MMA will have a falling interest rate.

Certificates of deposit or money market accounts?

There’s no definitive answer as to which is a better investment vehicle in the CDs versus MMAs debate. CDs are good for some people, in some situations, and MMAs are good for others, in other situations.

If I were to try to paint this with a really broad brush, I’d say that a CD would be fitting for you if you were trying to earn extra interest on money you absolutely knew you’d not be touching, like money for a far-off vacation or event or to pay for future school tuition for yourself or your children. Money that’s essentially already spent is money you won’t touch and you might as well earn some extra cash on it while you wait to pay the bill.

MMAs, on the other hand, are great for people who want to continuously earn a higher interest rate than their savings is likely offering, but who also know, realistically, that they may have to pull some of that money out at some point. This is a great place to put your future home down payment money, or back-up savings for specific expenses, like medical bills that you won’t need to pay out often.

No matter which you choose, be sure that you read all the documentation that your bank provides, understand any fees or minimums that might be required for your accounts, and ensure that you’re honest with yourself about how often you think you may need to access your funds. Those factors will help guide your way.

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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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How much money can you really save at Costco? How about $122 per month with these everyday items — even if you don’t buy a car through Costco. [[{“value”:”

Shopping at Costco is one of my biggest passions in life. Whether it’s enjoying a $1.50 hotdog and nearly-as-cheap frozen yogurt sundae at the Costco snack bar, buying a deliciously seasoned rotisserie chicken for less than it costs to cook my own, or going on “treasure hunts” for surprisingly low-priced big-ticket items, Costco is this middle-aged dad’s consumerist playground. I refer to my local Costco warehouse as “the Theater of Dreams.”

Let me share a few of my favorite real-life Costco savings stories — and show how much you’d save at Costco compared to typical retail prices.

(Note: All Costco prices listed are for online purchases as of Feb. 21, 2024 and were available for my nearest Costco warehouse in West Des Moines, Iowa. Prices may vary based on location.)

1. Maple syrup

My kids love to eat pancakes every morning, and that means my family loves to spend lots of money on maple syrup. Costco keeps my family’s pancakes adequately coated with sweet mapley goodness with its Costco Kirkland Signature Organic Maple Syrup for $14.03 per 33.8 fluid ounces. My nearest Whole Foods location offers 32 fluid ounces of Organic Maple Syrup for $17.99 — so the exact same amount of syrup as Costo’s bottle would cost $19.00.

Costco savings: $4.97 per bottle (we often buy at least three bottles per month)

2. Dark chocolate and cherry trail mix

I work from home and I’m self-employed, so that means: I’m awake, asleep, working, and eating at weird hours. I don’t eat “meals” on a regular “schedule” like normal people; I putter around the house in my slippers and shovel handfuls of food into my mouth while standing over the kitchen sink. None of this is “good” or healthy! But the point is: because of my peculiar lifestyle, I need to eat a lot of trail mix.

Costco sells the best and greatest trail mix that I’ve ever eaten in my life: Ferris Coffee & Nut Company’s Roasted & Salted Cherries, Berries & Nuts with Dark Chocolate. You can buy (if you’re lucky and it’s in stock) a 28-ounce bag of this life-changingly delicious trail mix at Costco for $11.69. This is cheaper than you can get it on the Ferris Coffee & Nut Company website, where it sells for $16.95 per bag (plus shipping).

True story: You know how Costco sometimes stops keeping your favorite item in stock, and then you feel sad about it for the rest of the day? A few months ago, that happened to me with this trail mix. I searched all over Costco’s usual trail mix aisles and couldn’t find it anywhere. So I literally went home and ordered four bags directly from Ferris Coffee & Nut Company, and happily paid the shipping fee (I think it was $10) because I needed this trail mix in my life that urgently. On a typical weekday, this trail mix is about 80% of my caloric intake.

Ferris Coffee & Nut Company: The official trail mix of late-sleeping, highly-caffeinated, easily-distractible personal finance bloggers! Made with Michigan cherries!

Costco savings: $5.26 per bag (you’re going to need more than one bag)

3. Prescription drugs

Costco has a well-stocked in-house pharmacy at every store, where you can get flu shots and other vaccinations, as well as a wide range of prescription drugs and over-the-counter medications. The Ascent’s research found that, based on a few common prescriptions and OTC medications, the Costco pharmacy could easily help you save hundreds of dollars per year.

Costco savings: $739 per year ($62 per month) (depending on your family’s healthcare needs)

4. Discount gift cards (a.k.a. “free money”)

Costco offers a wide range of gift cards that are worth more than they cost. For example: Costco offers a Southwest Airlines gift card for $500 worth of air travel on Southwest — but it only costs you $449.99 at Costco. That’s like getting free money! Costco also offers similar “free money” gift card deals for a wide range of restaurants and fun activities like TopGolf and movie theaters.

Costco savings: $50.01

5. Costco Auto — Costco members-only pricing on cars

The benefits of a Costco membership go beyond the warehouse walls. The Costco Auto Program can help you get special discounts on new or pre-owned vehicles. When you sign up for this program, you start by shopping online for the vehicle you want, and then the website connects you to a participating partner auto dealership that offers you special Costco member pricing on that vehicle. If you then choose to accept that offer, it’s a no-haggle, no-fuss sales process to buy a new car.

Costco savings: $1,000 (typical discount per car, based on The Ascent’s research)

Bottom line

The lowest-cost Costco membership costs $60 per year, averaging out to $5 per month. Even if you don’t buy a car through Costco, just by purchasing the rest of the items on this list and getting the typical Costco savings, you’d save about $122 per month. Especially if you can avoid impulse buys or stocking up on perishable items that you can’t consume, shopping at Costco can easily pay for itself. This warehouse club can help you save money on groceries, get surprisingly good deals on big-ticket items, and put more money in your bank account.

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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 recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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If you owe more on your auto loan than your car is worth, you’re “underwater.” See how to solve this problem with gap insurance. [[{“value”:”

One of the biggest costs of owning a car happens behind the scenes: car depreciation. From the moment you buy your car, you start losing money. Cars are not like houses or stocks — they do not go up in value over time. Instead, cars usually lose value. It’s an unfortunate reality of owning cars, but you need to be prepared for it — and your auto insurance policy should be prepared too.

Many car owners find themselves in a predicament called being “upside down” or “underwater” on your auto loan. This happens when you have negative equity in the vehicle — when you owe more on the loan than the car is worth.

Let’s look at what it means to be underwater on an auto loan, and how you can fix this situation.

Are you underwater on your auto loan? Here’s how to find out

Used car prices declined in 2023, after a few years of sky-high prices during the pandemic. That’s good news for used car buyers, but it’s bad news for current used car owners. If you bought a used car during 2021 or 2022, during the days of global car shortages, that was an especially bad time to be a car buyer. Unless you made a huge down payment, your used car might be worth less than you owe on the auto loan.

Here’s how to find out if your car loan is “underwater”:

Find your latest auto loan statement and see what your outstanding loan balance is.Go to Kelley Blue Book (kbb.com) and click “My Car’s Value” to get an estimate of what your car is worth, based on its mileage and condition.

For example: If you owe $15,000 on your auto loan, and your car is worth $20,000? Congratulations: you are NOT “underwater.” If you had to sell that car today, you could pay off the loan and still have $5,000 left.

But if you owe $15,000 on your auto loan, and your car is only worth $12,000, that’s a problem. You are “underwater” by $3,000. If you had to sell your car today — or your car got totaled in a car crash — you would not have enough value left in the car to pay off the loan. You’d have to come up with another $3,000 to pay off your lender.

How to fix your underwater auto loan

Let’s look at a few smart money moves you can make to avoid getting swamped by unexpected expenses from being underwater on a car loan.

1. Buy gap insurance

Update your auto insurance policy to get gap coverage, which will pay extra money in case your car is totaled. This way you can pay off the loan without having to come up with extra cash. Gap insurance is a special type of extra auto insurance that covers the “gap” between the value of your car and the amount you owe on an auto loan.

Let’s say that your car is worth $12,000 and you owe $15,000 on your auto loan. If your car gets totaled in a car crash, gap insurance will pay more than the car’s value. Instead of just getting paid $12,000 (and having to deal with your auto lender to cover the rest), gap insurance means that your car insurance company will pay the full $15,000 amount of your auto loan (minus your deductible).

Gap insurance is a great way to get to the financial safety of “dry ground” after being underwater on an auto loan. Most of the best car insurance companies offer gap insurance coverage, and it’s not expensive — it might only cost about $3 per month ($36 per year). Talk to your car insurance company and see if you can add gap insurance to your policy.

2. Save up extra cash to cover the difference

Being underwater on an auto loan is another good reason to boost your emergency fund. Even if you get gap insurance coverage, it’s still a smart idea to increase your savings. If your car gets totaled tomorrow, and you don’t have enough cash to pay off the auto loan, what will happen to your personal finances? What if you get stuck with a wrecked car, an unpaid auto loan balance, and no car to drive to work?

Having enough money in the bank to pay off your extra auto loan balance — and having a small down payment ready for your next vehicle purchase — is an important part of financial security. Even if you’re making your monthly auto loan payments and you have good credit, cash in the bank gives you flexibility in case you have to go car shopping on short notice.

3. Pay extra money toward your auto loan

Another way to get your head above water on your auto loan is to make extra loan payments to pay down the principal balance faster. Especially if your car loan has a higher interest rate (even some of the best auto loans are charging over 6% APR as of Feb. 22, 2024), it could be worth paying off your auto loan faster to avoid interest charges.

Bottom line

If you are underwater on your auto loan, don’t panic. Keep making car payments. Over time, as your loan balance goes down, you might catch up on the depreciation. But keep an eye on the amount of your auto loan balance, and be prepared for this possible extra emergency expense. Buying gap insurance can give you priceless peace of mind, and it may only cost about $3 a month.

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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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Pet food bills can be substantial. Read on to see what pet owners are spending today. [[{“value”:”

Adopting a pet is a decision you have to think about carefully before diving in. Not only does it require a huge time commitment on your part, but there’s also a big financial commitment to make, seeing as how you’re forking over money for things like healthcare, supplies, and, depending on your situation, pet-sitting services.

And then there’s food to think about — something your pet needs daily. Data from Forbes Advisor finds that the average dog owner spends $339 per year on food, while the average cat owner spends $310. But these are only averages.

If you have a large-breed dog, for example, then you could easily end up spending twice as much as the typical dog owner. Similarly, if your pet has special dietary needs, you could easily end up spending four to five times as much — or more.

That’s why it’s important to budget carefully for pet food costs, and explore ways to keep those bills down. Subscribing to auto-deliveries from sites like Chewy or Amazon Prime could help you save money on pet food to some degree. But if your dog needs a special diet, your options for saving on food may be limited.

It’s crucial to save on other pet costs too. Putting pet insurance in place is a great way to potentially avoid a scenario where you’re shelling out thousands of dollars a year on veterinary bills.

The upside of pet insurance

Much of the time, pet insurance companies will not cover the cost of diet-specific pet food. But in some cases, you may be eligible for coverage for prescription food. It depends on the policy you put in place.

Either way, though, it’s important to get pet insurance, because while the cost of pet food may be somewhat predictable once you settle into a routine with your animal, the cost of medical care can be quite variable. You never know when your pet might get hurt or sick out of the blue. And without pet insurance, you might really struggle to pay those veterinary care bills.

What’s more, with the right pet insurance, you may find that it’s easier to keep your pet in good health. And that could, in turn, help you avoid a scenario where you have to pay a fortune for special food due to a condition that develops.

Do your best to make pet ownership affordable

As mentioned above, there are things you can do to lower the cost of pet ownership. In the context of food, buying in bulk is a good bet, as is signing up for automatic pet food deliveries, which may result in a discount.

You can also talk to your vet about lower-cost food options if you’re struggling to keep your pet fed. They may be able to suggest an alternative brand that’s not as expensive as the one you’re using now.

But on top of finding ways to save on pet food, it’s equally important to find ways to limit what you’re spending on medical care. And buying pet insurance is a good way to go about that. Though you will have to factor your premium costs into your budget, you get the peace of mind that if a massively large medical expense arises, you probably won’t have to pay for the bulk of it on your own.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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