Money Management

Savings accounts offer flexibility, but CDs have higher APYs. See why opening a CD can be better than a savings account. [[{“value”:”

Certificates of deposit (CDs) are paying some surprisingly high APYs in 2024. In fact, the best CDs on our curated list currently offer up to 5.55% APY! Despite these high yields, CDs aren’t the right fit for everyone. They require you to lock up your money for a specific “term” of time, and they charge early withdrawal penalties if you need your cash too soon.

But depending on your financial goals, the best CDs could be better than a savings account.

Let’s look at a few reasons why you might want to open a CD instead of a high-yield savings account.

1. You’re not afraid of commitment

CDs typically require you to commit your money for a certain period of time, called a “term.” This term could be as short as three months or as long as five years; it all depends on which are offered by the bank and which one you want to invest in. If you’re saving for a specific goal with a certain deadline, like “I want to buy a home in 12 months” or “we want to save for our wedding in nine months,” CDs could give you a better APY than a savings account.

But the downside is: you have to lock up your money. If you sign up to invest $1,000 in a 12-month term CD, you’re not supposed to get your $1,000 back until the term is up. What if you need your cash sooner than that? If you take that $1,000 of principal out of the CD before the 12 months is over, you’ll have to pay an early withdrawal penalty that could wipe out most of the interest you’ve earned.

So before you commit to a CD, make sure you’re willing to leave that money alone until the term is up. (The only exception to this rule is a no-penalty CD, which some banks and credit unions offer — but these special CDs tend to have lower APYs than standard penalty-charging CDs.)

Why locking up your money in a CD could be a good thing: It keeps your savings safe. If you need an extra nudge or set of guardrails to keep you from blowing through your savings, committing that money to a CD could help you. Knowing that you’d have to pay an early withdrawal penalty can help strengthen your motivation to leave your CD alone and let it grow. Sometimes commitment is helpful, even when it’s hard!

2. You can lock in a higher APY for a longer time

It is widely expected by various Wall Street analysts and economists that the Fed is going to cut interest rates in 2024. No one knows exactly when it will happen, but there’s a chance that today’s 5.00% (and higher) APYs on CDs are as high as they will get for a long time. If you believe that interest rates are about to go down, locking in a higher APY today can be a smart move.

One of the best reasons to open a CD is that it helps you lock in a guaranteed rate of interest on your savings. Even the best high-yield savings accounts don’t offer a guaranteed rate. Savings account APYs can change rapidly (up or down) along with the Fed’s latest moves on interest rates.

Why locking in a higher APY can be a good idea: Let’s say that the Fed cuts interest rates moderately by the end of 2024. The same CD that pays 5.00% APY today might only offer 4.00% APY by the end of the year. Locking in a higher APY today could help you boost your savings and stay ahead of possible rate cuts.

3. You just want a higher APY than savings accounts offer

The best CDs tend to offer slightly higher APYs than the best high-yield savings accounts. For example, currently, the highest CD rate identified by The Ascent’s research was 5.55% APY, while the highest-yielding savings account paid 5.32% APY. That means the best CD would pay you an extra 0.23% APY for locking up your money. Is that worth it to you?

I’m on the record as saying that I’m not opening any CDs in 2024, even though the APYs are higher than savings accounts. But that’s because I value the flexibility of a savings account so highly. I want freedom to move my money more than I want that extra 0.23% of APY. It’s worth it to me to preserve my options for how to use my cash, without worrying about early withdrawal penalties.

But I’m not everyone. If you’re trying to save for a specific goal, like a new car or a down payment on a house, you might want the highest possible yield to help your cash savings grow. If you’re confident that you can leave your CD money in the bank long enough to avoid early withdrawal penalties, then go for it! Opening a CD instead of a savings account could be the best decision for your personal finances.

Bottom line

CDs aren’t the best choice for everyone, because they require you to commit your money for a certain length of time. They charge early withdrawal penalties. And the APYs aren’t always much higher than the best savings accounts. But if you have specific savings goals, if you want the highest APY you can get, and if you want to lock in a guaranteed rate of interest to stay ahead of possible rate cuts, one of the best CDs could be better than a savings account.

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Saving money on home internet could help your personal finances in 2024. See how much you can save by switching to a new ISP or reducing your internet speeds. [[{“value”:”

Monthly bills have a way of sneaking up on you. The costs of streaming subscriptions, car insurance, and other necessary recurring charges have all gone up in the past few years. But one monthly bill in your budget that might need more attention is the cost of home internet service.

I recently checked my home internet monthly statement and was shocked to discover that I’m paying $142 per month for internet. Although I’m pretty happy with our high-speed cable internet service, that number feels high to me. Especially since there are lower-cost options like high-speed fiber internet getting installed in our neighborhood.

Let’s look at the latest trends in home internet costs to see if you’re overpaying for home internet — and what you can do about it.

Average home internet costs: Too high, or fairly priced?

It can be hard to pin down accurate numbers for average home internet costs in America. That’s because your exact price will depend on your home internet speed, your type of internet service, where you live, and what kind of plan you sign up for. But according to recent survey data from Reviews.org, Americans spend an average of $81.29 per month on home internet. Another report from Allconnect found that the average internet price in U.S. urban areas was $83.75 per month.

There’s some good news here: even if your home internet bill has gone up in recent years, you might be getting faster internet speeds for the money. Allconnect research found that people in U.S. cities have seen their internet speeds nearly double in the past five years, while prices have stayed flat.

If you look at the price you’re paying per Megabit-per-second (Mbps) of internet speed, you might feel better about your home internet bill. Internet service might be getting a bit more expensive, but it’s also getting better. When I did an internet speed test on Reviews.org, it told me that I’m getting 244 Mbps of download speed, which was faster than 97% of the speed test results it’s seen for my ZIP code. According to the speed test results, other providers in my area had lower average speeds than what I’m getting now. Maybe $142 per month is worth paying.

How to save money on home internet

But on the other hand: even if you’re happy with your home internet speed, you can still make your personal finances happier, too. Try these easy strategies to save money on home internet.

1. Downsize your download speeds

Are you paying for more internet bandwidth than you really need? Sometimes you can save money on home internet by switching to a lower-priced plan with slower speeds.

For me, downsizing my internet is not an option. I need a high-speed internet plan with 244 Mbps (or more), because I work from home, my family watches lots of streaming services, and my teenage kids play online video games with their friends all day and night. My children use so much internet bandwidth, it’s amazing that they have not caused regional internet outages.

But if you are not such a heavy user of internet bandwidth, you might save money by switching from, for example, a 300 Mbps plan to a 100 Mbps plan.

2. Get an introductory offer from a new internet service provider

Do you have new internet service providers (ISPs) moving into the neighborhood? The availability of high-speed fiber internet has increased significantly in the past few years.

For example, in my neighborhood, there are new fiber internet providers offering introductory deals for $75 per month or $50 per month, with speeds up to 500-940 Mbps. I’m not sure if these other services would actually deliver the advertised speeds; sometimes the actual internet speeds don’t reach the highest levels.

Cellular phone service providers like T-Mobile and Verizon also offer 5G home internet service, promising fast speeds that could be competitive with your current ISP. T-Mobile home internet costs $50 per month (if you also have T-Mobile phone service), and Verizon 5G home internet starts at $35 per month if you bundle it with Verizon 5G mobile phone service. Both of these companies also offer to help cover your early termination fees when you switch.

Switching internet providers might not be the right move for me, but if you’re in a similar situation, you might check your options. Even if I switched from a $142 per month plan to a $75 per month plan, I would save $67 per month on home internet — or $804 per year!

3. Demand a discount

If you’re pretty happy with your current ISP, you can still renegotiate the terms of your customer relationship. Call the internet company and ask for a discount. Here’s a script you can use: “Hi, I’ve noticed lately that some other internet providers in my area are offering better prices. Is there anything you can do to help me stay with your company?”

Hopefully the customer service rep will get the hint, and will transfer you to the Retention Team. (You can also just ask to speak with the Retention Team.) This is how home internet companies keep you happy as a customer — the squeaky wheel gets the grease, as the saying goes. If you call to complain about your price, and mention that you’re looking at other options, the ISP might decide to cut you a deal.

Bottom line

Depending on where you live and how many streaming services you’re binge-watching at a time, you might be able to save hundreds of dollars per year on home internet service. Check your options for home internet in your ZIP code and see if you can save $30-$50 (or more) out of your monthly budget.

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Insurance pays the fair market value of a car if it’s totaled. But find out why that may not be enough to get a new car without spending out of pocket. [[{“value”:”

Auto insurance is supposed to protect against financial loss. But that’s not always the case in every situation — even for drivers who aren’t at fault for a crash, who have plenty of insurance coverage, and who do everything right.

In fact, there’s a very common situation where someone who wasn’t at fault at all could find themselves with a big bill to pay personally, despite an auto insurance company supposedly covering the costs.

This is a common — and costly — problem after a car accident claim

There’s a really simple reason why a person who does everything right in a crash could find themselves facing big bills they personally have to pay. The issue is that auto insurance pays for the fair market value of the vehicle at the time of the accident. And it may not always be possible or reasonable to find a replacement car at that price.

Most people are aware of this issue with brand-new cars. A new car loses around 15% to 20% of its value as soon as it is driven off the lot since it is no longer “new.” This means a driver who has a $40,000 car for a month or two and gets into a crash could get a payout of around $34,000 or so and have to pay another $6,000 out of pocket to buy a similar new car again.

The solution to that issue with new cars is to buy new car replacement insurance, which many insurance companies offer. But there’s also a similar problem with older cars that doesn’t have such an easy fix.

Older cars could be a big problem to replace

Let’s say that a driver has an extremely well-maintained 2014 SUV that they’ve taken care of and kept in awesome condition. If someone totals their car in 2024, they won’t get much for their 2014 vehicle — maybe around $7,000 or $8,000 depending on the vehicle model (or perhaps more for a luxury car).

Now, that person could try to find a similar 2014 SUV for that price, which has been as well-maintained as theirs was, but that simply may not be possible. And if that’s the case, they’d likely have to upgrade to a newer model with more availability and more guarantee of reliability — but that comes at a much higher cost than the old model vehicle they wanted to keep forever.

This exact scenario happened to my in-laws a few years ago and they ended up spending thousands to get a newer car since they couldn’t find a reliable used model within hundreds of miles that was comparable to the one they had. And it could happen to anyone in that situation.

Unfortunately, there’s not much drivers can do about this, since there’s no such thing as “old car replacement” coverage. The best option is to make sure to be fully insured to get as much as possible after a potential accident, and to have emergency cash in a savings account. This is just in case the worst happens and an accident does necessitate buying a new car at a higher price than the insurer is willing to pay.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

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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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Savings accounts are a great place to put some of your money. But if you’re not investing most of your cash, you’re missing out. Here’s why. [[{“value”:”

Many savings accounts pay favorable interest rates these days. Finding a bank that will pay you a 4% annual percentage yield (APY) or higher is relatively easy.

That’s great news if you’re opening a savings account, but there’s one thing you need to be cautious about: Keeping too much money in your savings account. Here’s why storing too much cash in savings can be a bad idea, and why putting most of your money in a brokerage account is a much better financial move.

What savings accounts are best for

Generally speaking, there are two valuable ways to use a savings account:

Near-term spending: This would be money you plan to use sometime in the next three years. It may include money you’re saving toward a down payment on a car, an annual vacation, or cash you’re putting aside for your wedding.Emergency savings: This is money that you’ve saved to cover unexpected expenses, like fixing your car, replacing a broken appliance, or a home repair. You should start with a goal of saving $1,000 and then eventually build that amount up to three to six months’ worth of expenses.

Why you shouldn’t have all your money in a savings account

While many savings accounts pay high yield these days, they’re still not paying enough to generate long-term wealth. If you want your money to grow significantly, you need to invest it — here’s why.

1. You can earn way more by investing

Let’s take the average historical rate of return of 10% for the S&P 500 and see just how much money you can make from the market compared to keeping it in a savings account.

If you have $10,000 in a savings account that pays you a 4.50% APY and you add $100 every month for 10 years, you’ll end up with about $30,577. That might seem like a pretty good return until you see how much you could have earned if you invested that money.

If you take the same $10,000 and buy a low-cost index fund that tracks the S&P 500, add an extra $100 per month, and earn the historic rate of return of 10%, you’ll end up with $45,062. That means investing your money would make you about $15,000 more over 10 years — without you having to do anything!

And if we use this same scenario over 20 years, the money invested in the index fund turns into $136,000 — while the savings account money is just $62,533!

2. Investment accounts have more tax advantages

Putting your money into an investment account often gives you tax advantages you can’t get with savings accounts. The type of advantages depend on whether you have a regular individual retirement account (IRA) or a Roth IRA.

Just for reference, in 2024, you can put up to $7,000 into your IRA account (regardless of whether it’s a traditional or Roth IRA) or $8,000 if you’re 50 or older.

If you have a traditional IRA, you may be able to deduct some or all of your contributions from your taxable income. For example, if you contribute $7,000 to a traditional IRA this year, you may be able to reduce your adjustable gross income (AGI) by $7,000, thus lowering your taxable income. The drawback to a traditional IRA is that you have to pay taxes on your account distributions in retirement.

For a Roth IRA, you don’t receive a tax advantage in the year you make your contributions. So, if you contribute $7,000 to your Roth IRA, it will not reduce your AGI. Instead, you get to withdraw money from your account tax free in retirement, a potentially significant tax savings at a time when you may have limited income.

Whether you choose a tax-advantaged investment account or not, investing your money is one of the best ways to ensure you reach your financial goals. And with so many free stock investing apps available, getting started is easy.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

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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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An unexpected job layoff can devastate your finances. Discover how much money the average American has saved and why you should start saving now. [[{“value”:”

You’ve probably noticed a lot of chatter about layoffs recently. Many companies have announced they would be laying off a portion of their workforce over the last few months.

When you’re used to bringing in regular income, a sudden job loss can devastate your finances. Unfortunately, many Americans aren’t financially prepared for a layoff. Find out how to protect yourself so you’re not left scrambling if you lose your job without much notice.

30% of Americans have $500 or less saved

Unless your employer offers you a severance package, you could be without pay after being laid off. Many workers immediately file for unemployment to help bridge the gap. However, it can take time for unemployment claims to be processed and checks to be received. This is why having extra cash in a savings account can be helpful.

The Motley Fool Ascent surveyed Americans in July 2023 to gather more data about their savings habits. The study showed that 71% of Americans have $5,000 or less saved. Even more alarming, 30% of Americans have $500 or less in their savings accounts.

These stats suggest the average U.S. worker is likely not financially prepared for a layoff. Those with minimal savings may feel financial stress if they unexpectedly lose their job.

Rent or mortgage payments can easily cost $1,000 to $2,000 or more — depending on where you live and your housing situation. Neglecting to save could hurt you in the future.

Do this to protect yourself financially

It’s best to plan for emergencies before they occur. Building a sizable emergency savings fund is one way that workers can prepare for significant life changes like layoffs. Knowing you have extra cash in the bank can be a huge blessing when something unexpected happens.

You should consider how your finances would be impacted by a layoff even if you feel confident about your role and your company’s future. Layoffs can impact anyone, and when it happens, many workers are totally caught off guard. Now is a good time to prioritize savings contributions.

Setting aside a portion of your paycheck into a savings account is smart. Even if you can only afford to save a little bit, your savings will add up over time. Plus, by keeping your savings in a bank account that earns interest, you can earn interest as your money sits in the bank.

Automation is a game changer for savers

Remember: It’s never too late to start saving.

If you’re worried you’ll forget to save regularly, automation can help.

You can automate your savings through your online bank account. Once you enable automatic transfers, money is automatically transferred from your checking account to your savings account on payday or another preset date each month. Doing this can save you time and ensure you stay on top of your savings goals.

It’s best to keep your savings in a separate bank account to avoid accidentally spending it.

If you need a savings account, check out our list of the best high-yield savings accounts to compare options and learn more. For additional tips, check out our personal finance resources.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

See the 10 stocks

*Stock Advisor returns as of February 12, 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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