Money Management

You don’t want to keep too much cash in savings. Read on to see if investing some of your cash makes sense. 

These days, savings accounts are paying quite generously, making the idea of keeping extra money in the bank quite appealing. But in time, rates are apt to come down. And even if today’s generous savings account rates hold up for a while, the reality is that if you invest your money in the stock market, you could make a lot more.

Over the past 50 years, the stock market has rewarded investors with an average annual 10% return, as measured by the performance of the S&P 500 index. By contrast, you might earn 4.5% in a savings account today.

So, let’s say you have $10,000 to work with. At a 4.5% annual return, over a 20-year period, that sum will grow into a little over $24,000. But at a 10% annual return, that sum will grow to over $67,000.

That said, when you invest money, you take on the risk of losing it. And you may not have access to your money exactly when you want it.

For example, let’s say the market tanks one year. If that happens to be when you’d like to cash out some stocks to pay for a vacation, you’re pretty much out of luck.

That’s why it’s important to make sure you’re really ready to invest. But if these signs apply to you, it may be the right time to move some of your savings into a brokerage account.

1. You have more than a six-month emergency fund

You need money in the bank at all times for unplanned bills. But generally speaking, if you have enough of an emergency fund to cover three to six months of essential expenses, then you’re in a pretty good spot to cope with the unexpected, whether it’s a major home repair or the loss of your job.

Now, if you’re the sole breadwinner of a large household and are self-employed, you may feel more comfortable with nine to 12 months’ worth of living expenses as your emergency fund. But once you’re beyond that point, investing your money makes sense.

2. You don’t have any major purchases happening in the next five years

Maybe you’re hoping to buy a home in four years, or you expect to need a new car within the next 24 months. If so, then you may not want to put your money into investments. If their value drops, it can take time for your portfolio to recover. And that may not happen soon enough if you’re working with a five-year timeline.

But if you aren’t anticipating any major purchases in the next five years, then you might as well invest your money. Even if your portfolio loses value, you’ll probably have time for it to recover ahead of whatever milestone you might need cash for.

3. You’ve educated yourself about investing and know where to start

You don’t want to kick off your investing career by throwing your money into random stocks and hoping for the best. Before you invest your money, make sure you know what you’re doing to a reasonable degree.

This doesn’t mean you have to become an expert in picking stocks overnight. But you should know some basics about what to look for in a stock — such as choosing companies with good cash flow and manageable debt.

And if you don’t think you’re equipped to choose individual stocks, that’s OK, too, because broad market index funds or exchange-traded funds (ETFs) are a good bet for people in your boat. The key, however, is to have an idea of where you’ll put your money once you move it out of savings.

It’s smart to keep your savings account nice and loaded up. But if these signs apply to you, you may be ready to start investing so you can generate even more impressive returns on your money than a bank will give you.

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 can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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

 Read More 

It’s important to sock money away regularly for retirement. But read on to see why there’s another important step you also have to take. 

You’ll often hear that if you don’t save independently for retirement, you’ll risk ending up cash-strapped. And that, unfortunately, is totally true.

In 2024, the average monthly Social Security benefit will be $1,907. That’s an annual income of under $23,000.

Now in time, the average Social Security benefit is likely to rise with inflation. But even so, you should expect to supplement those benefits with savings you’ve built up, whether by contributing to a 401(k) plan through your employer or an IRA.

In fact, a good bet is to allocate money to a retirement plan year after year throughout your career. But it’s not enough to simply send that money into a designated account and call it a day. You’ll also need to play an active role in investing it.

You want your money to grow

Although keeping money in cash can be lucrative today thanks to the generous interest rates savings accounts are paying, in the long run, you should be aiming for higher returns than that. That’s where the stock market comes in.

Over the past 50 years, the stock market’s average annual return has been 10%, as measured by the performance of the S&P 500. And if you’re able to snag a comparable rate on your retirement savings, you might end up with a pretty sweet nest egg by the time you’re ready to end your career.

Let’s say you’re able to save $300 a month for retirement over a 40-year period. That’s a great thing. But what you want to do during that time is also invest your money to make sure it’s growing.

Now let’s be a little conservative and say that your portfolio generates an average return of 9% over time, which is a bit below the stock market’s average. Even so, at $300 a month over 40 years, you’re looking at coming away with over $1.2 million. And that could make your retirement pretty darn comfortable.

Have a plan for your investments

Investing your retirement savings could be the ticket to growing that money nicely. But you don’t want to choose different stocks at random.

Instead, you should try to focus on companies with solid growth potential. And you can get a sense of that by reading through their financial statements and seeing how well they’re managing their cash flow and debt.

If that sounds overly complicated, here’s some really good news. You can pretty much avoid the hassle of having to research stocks individually by instead loading up on S&P 500 index funds over time.

An index fund is a passively managed fund that will aim to match the performance of the market benchmark it’s associated with. So in this case, an S&P 500 index fund would effectively invest in the same stocks as that index and most likely deliver about the same return over time.

If you’re able to commit to funding a retirement plan consistently, you’ll be doing a great service to your future retired self. But take the process one step further and make sure you’re actively investing your money. That could really set you up for the retirement of your dreams.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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

 Read More 

The start of a new year is a good time to improve your finances. Read on for a few suggestions to focus on in 2024. 

It’s that time of year again — everyone’s talking about New Year’s resolutions, and I am clearly no exception. To find out more about the less-popular resolutions, I dug into The Ascent’s research about financial resolutions for 2024. What I learned surprised me.

Here are a few underrated resolutions that can have a major positive impact on your life and personal finances.

1. Saving an emergency fund

For my money, this is absolutely the best financial resolution, because it can give you so much peace of mind. I lived without an emergency fund for basically my entire adult life until very recently, and I can promise you that living paycheck to paycheck with little money for surprise bills is extremely stressful. The Ascent’s survey had just 8% of respondents note that this was their 2024 financial goal, however.

Saving an emergency fund is such a wonderful thing to do for your future self. Knowing you can handle an unplanned expense (like a big bill from the auto mechanic) can help you sleep better at night. And you’ll avoid going into debt and having your emergencies cost you even more once you’ve paid interest on them. As of August 2023, the Federal Reserve Bank of St. Louis found that the average APR on a credit card was 21.19%. Trust me, it’s no fun knowing you’ll be paying a similar figure on top of the cost of an unplanned bill.

To make it easier to build emergency savings, consider automating the process — that way, there’s no forgetting to save. And leaning on one of the best high-yield savings accounts can grow your money more quickly, thanks to higher interest rates.

2. Investing more

Only 8% of survey respondents named this goal as one they’re pursuing for 2024. I understand getting bogged down in the day-to-day tedium and expenses of life in general, but if you can carve out more money to invest for the future, it’s like building yourself a pair of wings so you can someday fly.

Thankfully, it’s a great time to be an investor, as you have access to so many free and low-cost tools to make it easier. You also have options for what kind of account you want to open — a taxable brokerage account will give you flexibility, but will not shield you from taxes either now or in the future.

If you’re comfortable investing over many years between now and retirement, opening an IRA account is likely a smarter bet. Go with a traditional IRA and you’ll save on taxes now — but opt for a Roth IRA if you’d like tax-free withdrawals in retirement. And if you have access to an employer-sponsored retirement account like a 401(k), it’s worth contributing to it — especially if you get a match on some of the money you put in it.

3. Building better financial habits

Yes, I know this one seems a bit vague, but stay with me. This was the financial goal named by 5% of survey respondents, and it could form a great foundation for a host of other money moves in 2024 and beyond. What does this look like? Well, you could dig into The Ascent’s personal finance coverage — we write about the stories and developments that hit you right in the wallet.

If you’re serious about getting better with money, another great move could be finding a financial advisor to meet with in the new year. They can go over your finances with a neutral eye and make recommendations for budgeting and debt payoff. If you need help deciding how to invest for the future, they can be a great resource there, too.

Even just taking the time to check up on your bank account and credit card balances a few times a week can do a world of good for your finances. Knowledge is power, and keeping tabs on your balances has never been easier thanks to mobile banking apps. Speaking of those apps, they also come with neat tools that can help you budget and save for goals, and you might even get access to your FICO® Score. Since this is the credit score used by 90% of lenders, knowing yours can help you decide which credit card to apply for and get approved — or notice when something is amiss and your score is lower than it should be.

As you can see, there are plenty of less-flashy goals you could target in the new year. They might not make your friends and loved ones say “wow,” but if you lean into them, they really could change your life for the better.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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 Target. The Motley Fool has a disclosure policy.

 Read More 

For a good last-minute Christmas gift, consider gifting someone a CD. Here’s why this could be the gift that keeps on giving. 

The weeks leading up to Christmas generate a lot of enthusiasm. The presents are piling up underneath the tree, the kids and grandkids are eager to open them, and even the dog is sniffing at that bacon-flavored wishbone stuffed in a stocking up high lest he tear into the wrapping paper early.

Then the big day comes, the new toys are played with and strewn about the room, the dog is passed out from turkey feedings from the table (who knows where the wishbone went), and, slowly, gradually, ever so slightly, the post-holiday blues begin to settle in.

Though there might not be a way to prevent the loss of excitement after Christmas, there’s a way to extend the spirit of giving with a certificate of deposit (CD). It might not be the most exciting gift they ever receive (how could a CD compete with Barbie, Hot Wheels, and PlayStation?), but it is a gift that keeps on giving. Here’s why CDs would make a perfect Christmas gift this year.

Lock into a high interest rate

In the past, CD rates were so lackluster, to give one as a Christmas gift would have been as significant as dropping a roll of pennies in your kid’s stocking.

But all that has changed in 2023. Thanks to a mega push by the Federal Reserve, whose campaign against inflation led to the greatest round of federal funds rate hikes in over a generation, CD rates are well north of 5%. These days, you can find many short-term CDs — that is, those that mature in 12 months or less — as high as 5.5%.

Now, younger kids may not care so much about earning interest through a CD (and, if they do, good on you for introducing them to the secrets of money). But older kids, especially those who are a few years from graduating from high school or college, might perk their ears. Imagine telling them you deposited $500 in a three-year CD with a 4% APY. When they graduate, that $500 could be squarely theirs, plus the $60 they earn on interest.

Not only will your kids get cash instead of a toy or game (which will likely be out of fashion in six months or less), but you can also teach them about saving money. Here’s what happens, you might say, when you save instead of spend. You could even set up a CD ladder, teaching them how to strategize with today’s top-paying CDs.

How to gift a CD to a minor

To give a CD as a gift, you can open a custodial account and deposit the funds for them.

Many banks offer custodial accounts for CDs. You just need your child’s personal information (like birthday and Social Security number) to open one. You’ll be listed as the custodian, which means you’ll approve transactions on the account until the minor reaches the age of maturity. Depending on the state in which you live, that age could range from 18 to 25. If the CD matures before your child reaches the age of maturity, you could choose to reinvest it in another CD, savings account, or another financial product with a good return of investment.

Some CD terms you might want to consider as gifts include:

6-month CDs12-month CDs18-month CDs2-year CDs3-year CDs4-year CDs5-year CDs

Since CD rates are likely going to drop in 2024, December might be the best month to lock into these high rates. That can make many top-paying CDs hot Christmas gifts, even if Santa doesn’t have many on his list.

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 can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

Costco’s new food court offering may be a giant letdown. Read on to learn more. 

For many people, a trip to the Costco food court is a big part of the shopping experience. And just as Costco’s aisles are commonly filled with competitively priced items, so too does its food court tend to offer a host of bargains, like the famed $1.50 hot dog and soda combo.

But at first glance, Costco’s latest food court offering seems anything but cost-effective. And whether it will be worth the price point is yet to be determined.

A new cookie is coming to Costco’s food court

A Costco food court in Springfield, Virginia recently began advertising a new double chocolate chunk cookie on its menu. The item was marked as out of stock, but its cost was listed at $2.49. And that, frankly, seems to be surprising a lot of fans.

Several Reddit users expressed their dissatisfaction with Costco’s decision to add such a pricey item to its food court menu. One user even brought up the fact that a roast beef sandwich and cookie combo at the food court would cost a whopping $12.49 based on the sandwich’s $10 price point. That’s hardly a cheap meal, and it seems off-brand for Costco.

Should you try the new food court cookie?

Costco Insider reports the new food court cookie will contain 850 calories. This tells us that we’re talking about a pretty large dessert. It will reportedly also be served warm and may replace the long-standing food court churro.

To be absolutely clear, Costco itself has not verified any of this information, so all of it needs to be taken with a grain of salt. It’s also unclear how quickly this new cookie offering will roll out to Costco locations across the country. But if you’re wondering whether you should give the new food court cookie a try, the answer is, it depends.

On the one hand, $2.49 doesn’t seem like a bargain when you can purchase a 24-pack of Costco’s chocolate chip cookies from its bakery for a lot less.

The price of a 24-count for two-day delivery is $11.69, but in-store prices are usually much cheaper. Depending on your Costco location, it may be possible to score 24 cookies for more like $10.

The standard Costco bakery chocolate chip cookies contain 210 calories per serving. Assuming a single cookie constitutes a serving (since the standard cookies are pretty large in their own right), that makes the total caloric value of a 24-pack 5,040.

If the above-referenced Costco Insider information is true, and each food court cookie contains 850 calories, it means that a 24-pack of standard cookies is equivalent to about six food court cookies. But in that case, you’re looking at spending about $15 on six food court cookies instead of $11.69 or less for the standard bakery equivalent. So that reads like not such a great deal.

However, you may not always want 24 cookies. Sometimes, you want a single warm, giant-sized cookie to fill your belly after a busy afternoon of grocery shopping that’s forced you to skip lunch. So it’s also easy enough to make the argument that the $2.49 price point (which, to be clear, has been verified based on an actual food court photo) is worth it.

Remember, too, that any time you buy prepared food, you’re paying a premium for the convenience. When you grab fast food on the way from work, which is pretty much as inexpensive as prepared food gets, you’re still generally paying more than you would to buy groceries and make your own burger and fries.

But if your personal finances are in a good place, then it’s sometimes OK to pay extra for the sake of convenience. So if the new chocolate chip cookie hits your Costco food court, go ahead and give it a try if it tempts you. You may, however, want to make plans to share it with a friend if it ends up being anywhere close to its purported size.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

 Read More