Money Management

Some car insurance mistakes could put you at serious financial risk. Learn about common auto insurance traps so you know what to avoid. [[{“value”:”

Like gas and maintenance, auto insurance is one of those extra costs that comes with having a car. It can also be a confusing subject. There are so many car insurance companies and coverage options that it may be hard to decide what to choose.

The reason to get insurance in the first place is to protect yourself from potential financial problems, in the event of an accident. So it’s important to watch out for auto insurance traps that could put you at risk.

1. Getting less coverage than you need

It’s tempting to cut back on your car insurance coverage so you’ll have lower premiums. This is fine if you have more coverage than you need. For example, if you have an older car that isn’t worth much, paying for full coverage might not be worth it anymore.

But don’t skimp on important coverages just to save some money every month. If you have a new car, you should get full coverage. You wouldn’t want to be stuck paying out of pocket if it gets totaled or stolen.

Liability coverage is another area where it’s not a good idea to go with the cheapest option. You may be able to get away with $30,000 in liability coverage to satisfy your state’s legal requirements. But if you cause an accident that leads to $50,000 in damages, you could be sued for what your insurance doesn’t cover.

2. Choosing a deductible you can’t afford

Another way drivers reduce their premiums is by choosing higher car insurance deductibles. The higher your deductible, the lower your premiums, and vice versa.

A high deductible isn’t necessarily a bad thing, but a deductible you can’t afford is. You’ll need to pay your deductible before your insurance company pays out for any damages. If you have a $10,000 claim after an accident, and your deductible is $1,000, you’ll need to pay that before your insurance pays the remaining $9,000. If your deductible is $2,500, then you’ll need to pay $2,500, and your insurance will pay the remaining $7,500.

This also determines the threshold for when your insurance will cover an accident. If your policy has a $2,500 deductible, that means you’ll be paying out of pocket for any accidents costing less than that.

Whatever deductible you choose, make sure you have enough money saved to cover it. If you go with a high deductible, then you’ll also need to have more in your emergency fund.

3. Letting your auto insurance lapse

A lapse, in auto insurance terms, is when you have a car without any insurance coverage. Your auto insurance can lapse if you miss a payment, although it normally doesn’t happen right away. Insurance companies give you a grace period to get caught up. If you don’t, that’s when the trouble starts. Here are some potential consequences of lapsing on your auto insurance:

You won’t be covered in the event of an accident.Your insurance company may notify your state’s Department of Motor Vehicles. This can lead to fines and even a suspension of your driver’s license.You may need to pay higher rates when you get insurance again. Drivers who maintain continuous coverage get lower premiums than drivers who don’t, even for a short period.If you currently have an auto loan or lease, letting your insurance lapse will violate that agreement. The lender could get insurance for you, which is usually expensive, or even repossess the car.

4. Lying to your auto insurance company

Insurance companies use the information you provide to set your premiums. Some drivers stretch the truth, or outright lie, to save money. They may underestimate how many miles they drive per year or omit a few pesky tickets.

You definitely shouldn’t do this. It’s fraud, for starters. If your insurance company finds out (and they tend to be good at it), it could drop you as a client. It might even decide not to pay out a claim if it determines that you provided false information.

All these auto insurance traps save you a little money upfront, but they could cost you much more down the road. There are plenty of legitimate ways to save on auto insurance, including shopping around regularly with the best car insurance companies, taking advantage of discount opportunities, and completing a defensive driving course. Stick to the safe methods so you can save while also having the coverage you need.

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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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This writer is stingy on the allowance front. Read on to see why. [[{“value”:”

There was a time when my kids got a couple of dollars out of me each week just for, well, being my kids, I guess. Back then, a lot of their friends had started getting a weekly allowance, so I jumped on the bandwagon and went the same route.

But I realized after a while that I wasn’t a fan of paying my kids an allowance at all. So I’ve since stopped doing that and have begun taking a different approach to financial offerings for my kids instead.

You don’t get money just for being

The main reason I stopped giving my kids an allowance was this: I realized that just as I, as an adult, am not entitled to any sort of recurring payment simply for existing, so too are my kids not entitled to one on the basis of simply being members of this household.

To put it another way, I was tired of handing my kids money — money they came to expect — for nothing in return. It didn’t seem like I was teaching my kids any sort of valuable lesson.

True, my kids were taught early on about budgeting with their allowance. I explained that they could save their money for bigger purchases or spend it on smaller things for instant gratification — the choice was theirs. And I guess there was some value in going through that exercise — but not enough to get me to keep giving out an allowance just because.

A better system

These days, there’s no allowance in my house. You get birthday money (sometimes, and usually not from me), holiday money (again, that’s usually the grandparents), and Tooth Fairy money (all me). But otherwise, if you want extra spending money, you have to earn it.

To be fair, though, I do give my kids a chance to earn small amounts of money by doing chores around the house beyond what’s expected of them. For example, I won’t pay my kids to pick up their own junk off the floor or put away their laundry. But if they help me put away general household laundry, like sheets and towels and stuff, I might throw them a couple of dollars (I never said my hourly rate was excellent).

Similarly, sometimes I don’t have the time or patience to sit with my younger kids while they do schoolwork or projects. So on occasion, I’ll offer to pay my son a modest sum to sit there in my place.

And yes, you could argue that helping out is something a sibling should just do. But the way I see it, he has enough of his own schoolwork to handle, so if he’s taking 30 minutes to help a younger sibling, I can throw $5 his way.

Recent data from T. Rowe Price found that 79% of parents give their kids an allowance. Of those, many respondents say that their kids have to earn that money. But 16% give an allowance with no strings attached.

I don’t judge other parents who feel that giving an allowance is right for them. But it doesn’t work for me. Unfortunately for my kids, there won’t be any handouts in my household anytime soon.

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There’s no limit to where you can go with credit card points. Check out a simple step-by-step process showing how to use points for a dream vacation. [[{“value”:”

Travel credit cards are one of the best ways to save on travel. If you have a specific destination in mind, you probably want to know which card can help you get there before you apply.

This is a common question. People often ask how they can use credit card points to get to Europe, Hawaii, Australia, or other dream destinations. Fortunately, there’s a simple process you can follow to get anywhere in the world (yes, anywhere) with points.

Pick an airline that flies to that destination

First, we’re going to see which airlines can take you where you want to go. Go to a flight booking website — I like Google Flights. Keep in mind that Southwest Airlines doesn’t show up on most flight booking tools. If you think it flies to your destination, you’ll need to go to Southwest’s website to check.

Plug in your travel dates and departure airport. The dates don’t need to be exact yet, as we’re just picking an airline. Check your airline options and pick the one you want to use.

Look for travel cards with rewards you can use on that airline

Now that you have the airline, the next step is finding a travel card you can use with that airline. The first option that may come to mind is airline credit cards. If you open a credit card with that airline, you can earn miles in its frequent flyer program.

While an airline card can work, I recommend looking for a card with transferable rewards first. Many travel cards let you transfer your points to their airline and hotel partners. The advantage of these cards is that they offer more ways to use your rewards, which could come in handy on future trips. You can do this with cards in any of the following rewards programs:

Chase Ultimate RewardsAmerican Express Membership RewardsCapital One Venture RewardsCiti ThankYou Rewards

Let’s say you want to fly to Germany on United Airlines. You could get one of the United Airlines credit cards. But United is also a transfer partner with Chase. That means you could get one of the Chase Sapphire cards, and you’d be able to transfer your points from that card to United.

Open a travel card and start earning rewards

At this point, you know which travel cards can get you to your destination. This may include airline credit cards, as well as credit cards with transferable rewards.

Compare your card options and pick the one you like the most. Fill out the application, and if you’re approved, you can start using your new card to earn travel rewards.

One of the benefits of travel cards is that they often have big sign-up bonuses. These allow you to earn lots of points in a short amount of time. For example, there are many cards with sign-up bonuses of 50,000 points or more. To earn the bonus, you need to spend a minimum amount, such as $4,000 in the first three months.

Make sure you can spend enough to earn your card’s sign-up bonus. The bonus alone could be enough to cover your airfare.

Redeem your rewards to book your ticket

Visit the airline’s website when you’re ready to book a flight. Search for flights, and select the “Book with miles” option.

The results will include ticket prices in miles instead of cash. If you have enough miles already, you can book your flight. If not, keep using your travel credit card until you do. You may also want to consider opening a new card to earn another sign-up bonus — this is the fastest way to earn points.

There are two ways to book your flight with rewards, depending on the type of card you have:

If you have an airline credit card, your miles will already be in your frequent flyer account. Go through the checkout process, and you’ll be able to use those miles to pay for your flight.If you have a card with transferable rewards, you’ll first transfer your points to your frequent flyer account. You can do this through your card’s rewards program. Log into your account and look for an option to transfer rewards. If you can’t find it, you can also do this by phone — just call the number on the back of your card.

Booking a flight with miles is almost the same as booking in cash. The only difference is that you’re paying with points, which is a pretty nice change. There will be some taxes and fees, so your airfare won’t be entirely free. But when you don’t have to pay for airfare, traveling is a whole lot cheaper.

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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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Saving can be a tricky process. Do you choose a CD or a money market account? Let’s look at the options in this article. [[{“value”:”

So, you’ve fallen onto some good luck, have a chunk of change in hand, and you’re trying to figure out how best to manage it. It’s a smart move on your part, rather than spending it on a new car or a fancy dinner at the Olive Garden. Cars and never-ending breadsticks are great, but they won’t keep you warm in six months, a year, or even five years.

However, growing your newfound windfall might be able to do just that. Or maybe pay for college, or possibly help you buy a house of your own. So it’s really important that you understand the savings vehicles available to you.

When trying to choose between certificates of deposit (CDs) and money market accounts (MMAs), the best way to choose the option for you is to ask yourself these questions.

1. How long do I want to invest?

CDs and MMAs are pretty similar from the outside looking in, so rather than worry about the mechanisms that power them, it might be more important to talk about your investing goals. How long you hope to hold your investment really matters when you choose a savings vehicle.

CDs have fixed terms during which you can’t add or subtract from your funds, and the terms are determined by you. You can choose terms from six months to many, many years. Right now, the best-paying CDs tend to be 6-month to 18-month CDs, making them very appealing for short-term savers. They also have fixed interest rates.

But if you want to save a bit longer, and take a chance on earning some bonus interest, an MMA might be your better bet. They don’t have fixed terms like CDs, and they have variable interest rates. But both of those things put together mean that in times of rising interest rates, you may find yourself money ahead as MMA interest rates soar over time.

2. Will I need to access these funds early?

Another vital element in the decision of CDs versus MMAs is whether or not you’ll need to access the money before you need it for whatever your savings goal is. With CDs, taking out money early will mean forfeiting some amount of your earned interest, depending on how long the CD is for, and how early you withdraw your money.

MMAs, on the other hand, work more like checking accounts in this respect. Although there’s often a limit to the number of transactions you can make, you are allowed to both remove and add money at will to your money market account without penalty. Interest is generally calculated daily, so you simply miss out on the interest on the money you’ve removed for the days it’s gone.

If you think you’ll need to access your funds at some point before your big vacation or purchase, an MMA is a far superior vehicle for holding your funds. The interest rates are similar to CDs right now, and you can always cash your MMA out and put it into a CD if that environment changes.

3. Does the interest rate outweigh the fees?

Now, for the more accounting nerd portion of the equation: When you’re looking at CDs and MMAs, you have to also look at the fees versus the interest you’ll earn. CDs don’t generally have fees unless you withdraw early, but MMAs sometimes do, since they’re a more actively managed investment.

The best money market accounts have very few fees, maybe just a monthly fee if your balance dips below a set level, or an interest rate tier based on your balance. But it’s important to know and understand what fees might be assessed and what they will cost you if they are. For example, if you know that you’ll stop earning the highest interest rate if your balance drops below $1,000, that can be a problem if you expect you’ll need to withdraw some money at some point from your MMA.

That could make a CD versus MMA argument tilt in favor of a smaller, but stable, CD, with the balance in a regular high-yield savings account.

Choose an investment that works for your lifestyle

A lot of times, we like to believe that we’re different kinds of people than we really are. There’s nothing wrong with aspirational thinking, except when it comes to investing. Aspirational investing gets people into a lot of trouble, so when you’re thinking about CDs versus MMAs, you need to think about who you are as a banking customer.

Are you a person who tucks away money and never looks at it again? In that case, a CD might work well for you. But if you’re really, truly a financial goblin like I am — someone who has the best of intentions, but sometimes tries to pack far more money than the budget allows into a savings vehicle and then has to take it back out to make the books balance — an MMA makes a lot more sense due to the flexibility of the product.

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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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Want to bank an extra $200 this month? Here’s your game plan. [[{“value”:”

These are strange times, economically speaking. Unemployment is low and the stock market has had a strong run to start 2024.

Despite that, a lot of people are continuing to struggle with their personal finances. Many are still grappling with credit card debt they incurred during the holidays, while others are carrying balances they racked up in 2022, when inflation seemed out of control.

If your financial situation is precarious, an extra $200 in the bank could work wonders for your outlook. And these steps could leave you $200 richer by the end of March.

1. Clean out for spring — and sell items you don’t need

Some people opt to save their spring cleaning for April. But if you’re willing to get a jump start now, you might discover a host of items you really no longer have a need for. And if you’re willing to make the effort to get those items sold, you could close out the month with an extra $200 in your pocket.

If most of the items you have for sale are bulky in nature, like furniture and kids’ toys, then holding a yard sale may be your best bet for swapping them for cash. For smaller items like electronics, though, consider eBay or Facebook Marketplace.

2. Hit the supermarket instead of dining out

In January, the cost of groceries was up 1.2% on an annual basis, according to that month’s Consumer Price Index. By contrast, the cost of food away from home, such as at restaurants, was up 5.1%.

Generally speaking, it’s almost always more expensive to dine out or order takeout than to cook a meal in your own kitchen. But given how much restaurant prices were up in January, now’s an especially good time to commit to doing more of your cooking at home.

If the idea of cooking the bulk of your meals is overwhelming, start with a plan that involves accessible recipes with basic ingredients. Even if you’re a complete newbie, you’re probably capable of boiling pasta, mixing in a jar of sauce, and throwing in some fresh vegetables you buy at the supermarket. That’s a hearty dish that could result in ample leftovers, as one example.

There are numerous blogs that are loaded with recipes for beginner cooks. Spend a little time making lists of meals and ingredients so you’re better equipped to tackle food prep yourself.

3. Switch auto insurers

Moving your coverage from your current auto insurance company isn’t guaranteed to save you $200. But it might.

Some insurers are more generous than others when it comes to discounts for a good driving record and low mileage. In fact, if you’re someone who mostly works from home and doesn’t drive a lot, it could make sense to look into a pay-per-mile plan, as that might shrink your premium costs substantially.

Even if you’re not changing the type of insurance you have, it never hurts to research your options. Also, don’t discount the possibility of negotiating your premium rate down with your current insurer.

An extra $200 could do your savings account a world of good. Use these tips to close out March with more money in the bank than you started with.

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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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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