Money Management

High-yield savings accounts are offering higher yields than we’ve seen in decades. Learn why you might want to open one today. 

A high-yield savings account is a safe place to park some extra cash. Whether it’s your emergency fund, money for a down payment, or just good ol’ regular savings, these accounts can help your money keep pace with inflation at an interest rate that’s higher than your average savings account. And with APYs as generous as they are, you might be selling yourself short if you’re storing cash in a regular savings account. Here’s why.

1. You could earn a lot of interest

Currently, many banks are offering high-yield savings accounts with APYs between 4.00% and 4.75%, with some offering rates slightly higher than these. That means, for an account with an APY of 4.75%, you could earn $0.0475 annually for every dollar saved, or $475 for every $10,000.

Compare that with a regular savings account at Bank of America. For accounts below $2,500, your APY comes out to a whopping 0.01%. And if your account is above $2,500, then lucky you — your savings will still grow at a rate of, yep, 0.01%. That means you’ll earn $0.0001 in annual interest for every dollar you save in this account — that’s about enough penny to give you Lincoln’s nose.

To show you the difference between these two accounts visually, here’s how much $5,000, $10,000, and $15,000 would grow in a regular savings account (APY: 0.01%) and two potential high-yield accounts:

2. Rates might change later this year

One drawback to high-yield savings account — APYs can fluctuate.

Unlike certificates of deposit (CDs), which can fix today’s interest rates for a specific period, a savings account doesn’t guarantee you’ll continue earning at today’s interest rate indefinitely.

Right now, banks can offer high yields on savings accounts and CDs, simply because the federal funds rate is the highest it’s been since 2006 and 2007. A higher federal funds rate — currently at a range of 5% to 5.25% — can boost a bank’s interest-earning revenue, which gives it some extra margin to dish out more internet to clients and depositors.

But these rates aren’t going to last forever. While we don’t know the exact date when the Fed will start lowering rates, we know it’s tied to inflation. A downward trend in inflation data might eventually compel the Fed to change its policy. Last month, annual inflation was at 4.9%. That was down from March when it was at 5%, which was also down from February when it was at 6% — down from January when it was at 6.4%. Though we’re still far from the Fed’s target of 2%, a trend appears to be emerging.

Again, it’s unclear when banks will change rates on high-yield savings accounts. But if you want to earn significant interest, I wouldn’t hesitate. Now might be the best time to earn high interest while you can, if you’re sure a high-yield savings account is right for you,

3. Money is (relatively) accessible

Now, if you’re really financially savvy, you might be thinking, “If rates will eventually change, why don’t I just lock them in with a CD?” And I would agree with you: You can lock today’s rates for a certain period — anywhere from three months to five years — with a good CD.

But before you do, ask yourself this: Will I need access to my savings in the next three to six months? If your answer is a strong yes — or a weak one but supported by a strong hunch — a CD is probably not the best choice.

Most CDs don’t allow penalty-free withdrawals. If your money is locked in one, you typically have to forfeit a portion of your interest to gain access. This makes CDs poor choices for emergency savings.

Most banks still follow Regulation D guidelines and let account holders withdraw cash six times monthly from a high-yield savings account. That can give you peace of mind knowing you can access your money if you need to.

Maximize your earnings

Of course, you don’t have to choose between a high-yield savings account and a CD. You could split your savings between the two, keeping emergency funds in a savings account and cash you don’t need right now in a CD. Whichever you decide is right for your money, May is a good month to act; otherwise, you might regret not opening a savings account with today’s high APYs if rates drop in the near future.

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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.Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

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An escrow account holds funds for your property taxes and insurance. Learn the consequences of overfunding it. 

If you have a mortgage loan, your monthly payments to your lender may include more than just payments of your principal and interest on your home loan. You may also be required to pay into an escrow account.

Many mortgage lenders require you to pay money into escrow each month to cover your property taxes and your homeowners insurance bill. These bills typically come due once per year, but mortgage lenders want to be sure you have the money to pay them. So, they’ll divide the amount due by 12, add the required amount onto your mortgage payment, and you’ll pay it as part of your monthly mortgage bill.

The money you pay as part of your mortgage that is intended for property taxes and homeowners insurance premiums will then be put into a special escrow account. This is a secure account where your money is held until it is needed to cover the tax and insurance bills when they come due. Your lender then pays those bills out of escrow.

Why would you have too much money in escrow?

Typically, you will end up with too much money in your escrow account if something changes, like your property taxes decrease or your homeowner’s insurance premiums go down. If you had been paying $300 a month into your escrow account to cover property taxes totaling $3,600 per year and your property taxes were lowered to $3,400 per year, you could become entitled to an escrow refund for that excess amount. Your lender would owe you $200 that you overpaid into escrow.

But what happens if your escrow account has too much money it? The answer depends on your situation.

You may be entitled to an escrow refund — or the money may be applied to next year’s escrow payments

If you end up with too much money in your escrow account, you may be able to request an escrow refund, or a lender may send you an escrow refund automatically. If you request a refund or are entitled to one automatically, this will usually come in the form of a check from your lender.

When your lender collects payments to put into escrow, it will do an escrow account analysis at some point during the year. If the lender discovers you have overpaid into the account, this is when an automatic refund could be issued or when you may become entitled to request a refund check. However, some lenders do require that you have a certain amount of surplus funds in the account before they’ll issue a refund, such as a minimum of $50.

In some case, mortgage lenders may also default to applying the overpayment to next year’s escrow. This would mean instead of getting your $200 back in the above example, you would just pay $200 less into your escrow account next year toward your taxes and insurance.

If your lender allows you a choice, it’s up to you whether you receive a check or the extra money in your escrow account just allows you to pay less the next year. If you have this option, think carefully about whether you’d rather get a lump sum back that you can use as you wish or would rather have slightly lower mortgage payments for the upcoming year. This way, you can make the right financial choice for your needs

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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. Christy Bieber 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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A recent survey showed an overwhelming 92% of employees are experiencing financial stress in one form or another. Keep reading to learn more. 

It is no secret that finances can cause stress, but just how widespread is the issue? The worry of paying bills, providing for your family, and achieving your financial goals can take a toll on not only your wallet but also your mental health. A recent survey by BrightPlan shows that financial stress among employees and employers has more impact than we realize.

Impact at work

According to the survey’s findings, 92% of employees have financial burdens due to unstable economic conditions. The leading factors contributing to financial stress include steep inflation, a potential recession, escalating interest rates, and recent turbulence in the stock market.

Financial stress affects even senior executives, with 76% of C-Suite and HR leaders experiencing it. On average, employees are losing more than a day’s worth of work every week, costing U.S. businesses a staggering $200 billion annually in lost productivity and engagement.

Impact at home

The effects of financial stress are not just limited to the workplace. According to the BrightPlan study, 64% of those surveyed agreed that financial stress made their relationships with friends and family worse.

A whopping 72% of people have had to turn down social invitations due to financial constraints. But it’s not just social events and relationships that suffer — 60% of people surveyed feel that their financial struggles have negatively impacted their health.

Financial struggles can take a toll on your relationships and every other aspect of your life. Feelings of isolation, embarrassment, and shame often stem from money worries, making the situation even worse.

Reducing your financial stress

The good news is that you can act to reduce financial stress and regain control over your money. Here are some practical ways to start moving toward financial peace of mind.

Build your financial knowledge

Start by utilizing the financial wellness programs your employer offers. Shockingly, one in four employees surveyed are unsure if their company offers financial benefits. If your company doesn’t offer any, look for free financial resources you can take advantage of.

Develop a proactive approach and seek out classes, online workshops, and mentorship programs. Don’t know where to get started? The BrightPlan study shows that employees desire the following financial benefits the most:

Emergency savings fundDebt management servicesHomeownership assistanceFinancial advisor accessPersonal loan or home loan access

If you fail to plan, you plan to fail

Another way to reduce financial stress is by building a financial plan. Having a clear plan and understanding where your money is going can help alleviate stress and give you a sense of control over your finances.

This plan should include setting financial goals, such as paying off a credit card or building an emergency fund. Setting financial goals provides you with a clear plan and direction, which can help eliminate financial anxiety.

Tell your money where to go!

One of the biggest stresses of managing finances is not knowing where your money is going. Creating a budget can help you manage your money better. Start by writing down all of your monthly bills and expenses and compare it to your monthly income.

Budgeting apps can do this automatically and give you encouragement along the way. Apps like Mint and Rocket Money allow you to link your bank accounts to get an overview of your finances. The insights provided by these apps are invaluable when it comes to money management.

Increase your income and reduce your expenses

Next, try to increase your income by negotiating a raise, finding a part-time job, or taking on a side hustle. Second, evaluate your spending habits and look for areas where you can cut back, such as dining out or subscription services. Also, make a plan to pay off credit card debt as soon as possible.

Keep a positive attitude and celebrate small victories along the way. Overcoming financial stress may take time and effort, but it is a worthy investment in your future.

The cost of financial stress can manifest in many ways, including decreased productivity, missed days of work, and strained relationships. But there are ways to combat it. By understanding its impact, increasing financial literacy, and taking advantage of free resources, we can reduce the negative impact it has on our lives. Remember that taking care of your overall well-being and finances go hand in hand. Investing time and effort into both can pay dividends in the long run.

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The right credit card could make your summertime travel more affordable. Read on to learn more. 

It’s hardly a secret that travel has gotten expensive in general. But if you’re hoping to do your fair share of travel this summer, you may be in for a shock.

Because summer is a popular time to take vacation, you might end up spending even more to book a flight or hotel room than you would at another time during the year. In fact, a late April U.S. News & World Report survey shows that higher prices have made Americans rethink their travel plans.

Almost 20% of Americans are cutting back on the number of summertime trips they intend to take this year, while around 25% are reducing their trip budgets. And about 20% of Americans are cutting back in other areas to free up money for summer travel.

Meanwhile, almost 21% of Americans expect to spend $1,001 to $2,000 per person on summer travel, while almost 15% anticipate spending $2,001 to $3,000 per person. All told, a good 50% of Americans might spend $1,000 or more per traveler to get away this summer. And if you think you’ll do the same, then it’s really important to use the right credit card when booking your trips. Doing so could result in a world of savings.

It pays to get a travel rewards card

The downside of getting a travel rewards credit card is that many of these cards change an annual fee. But if you expect to do a lot of travel, the savings you get can more than make up for those fees.

For one thing, many travel reward cards make it easy to rack up extra cash back, hotel points, or miles, all of which can defray some of your future trip costs. Furthermore, it’s common for travel reward cards to offer perks that make air travel less expensive.

On Delta, for example, it costs $30 to check your first standard-sized bag on a domestic flight (and to be clear, that’s $30 each way). But many travel reward credit cards give you the benefit of a free checked bag when you fly domestically.

So let’s say you’re planning to take three trips this summer, or six flights total. If you check one bag per flight, that’s $180 in fees you might be facing. So if you have to spend $95 on an annual fee for a credit card that gets you out of those fees, it’s worth it.

Travel rewards credit cards also tend to offer perks like discounts on in-flight purchases. And some even give you airport lounge access, which can make for a more comfortable situation when you have a long layover between connecting flights.

Make the most of your summer

The last thing you want is to have to compromise on summer travel plans due to the expense involved. But with the right credit card, you may find that summertime travel is more affordable than expected. So it pays to research travel rewards cards and see which one might save you the most amount of money.

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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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You deserve a comfortable retirement. Keep reading to learn how to assess your assets and liabilities ahead of retiring. 

Net worth can be a more useful way to gauge your financial situation, as it takes your debts into account in addition to the money you’ve saved. But what is a good net worth to have before you retire? In this article, we’ll take a look at what net worth really means, what the average American household’s net worth is, and what to keep in mind when assessing your situation.

What does net worth mean?

Net worth is the difference between a person’s assets and liabilities. For example, if the value of your home, car, and other possessions is $1 million, and you owe $400,000 in various mortgage, auto loan, and other debts, your net worth is $600,000.

In other words, think of net worth as the amount of money you would have left if you sold everything you own and paid all of your debts.

To calculate your net worth, start by adding the value of your major assets. You can estimate the fair market value of your home and cars, and be sure to consider other valuable items. Include liquid assets like:

InvestmentsChecking account balanceSavings account balance

Note that you don’t need to include every item you own. Other common categories include things like jewelry, art, collectibles, and home furnishings, but there is no set list of the items to include and exclude from net worth.

Then, add up your debts, which is usually a rather straightforward calculation. Add your mortgage and auto loan balances, too. And don’t forget about any personal loans, credit card balances, and other debts you may have. Subtract this from the value of your assets to determine your net worth.

The average retiree’s net worth in the United States

According to the Federal Reserve’s latest Survey of Consumer Finances, which is conducted every three years, here is the average American household’s net worth for the three age groups that cover the majority of retirees:

We won’t get too deep into a statistics lesson, but the important thing to know is that the median net worth means that half of households in that age group have a higher net worth, while half are lower. And when the average is significantly higher than the median, as is the case in all three age groups here, it implies that there are some outliers with very high net worth. In a nutshell, the median is generally the better representation of the typical retired household’s net worth than the average.

Net worth isn’t the only factor in a financially secure retirement

One important point to keep in mind is that net worth isn’t the only thing that determines quality of life in retirement. A household with a relatively low net worth could actually have a more secure retirement if they have a pension or other stream of income to cover living expenses, for example.

In a nutshell, the biggest factor in a financially secure retirement (for most households) is income, not net worth. It’s true that a large retirement nest egg can be used to create an income stream from investments, but there are other sources to keep in mind, such as pensions, Social Security, annuities, and more.

The bottom line on net worth in retirement

The averages and medians mentioned here can be a good tool to determine where you stand relative to other retirees, but the most important takeaway is that there is no set net worth that you should have by the time you retire. The amount you need to be financially comfortable depends on a variety of factors, such as your other income streams, fixed and variable expenses, and your lifestyle.

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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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Costco has a large selection of gift cards at a discount. See what’s currently available in this list of the best gift card deals at Costco. 

Not every member realizes it, but Costco is a great place to get cheap gift cards. It offers gift cards from a wide variety of brands and sells them at less than face value. You could easily save 10%, 20%, or more just by buying gift cards at Costco.

Gift cards are a convenient option to give to friends and family on special occasions, but that’s not all they’re good for. If you find a discounted gift card for a company you like, you could buy it to save some money in the future. For example, if you buy a $100 gift card for $80, you’ve effectively saved $20 once you redeem it. It’s a simple trick to improve your finances.

So, what kind of savings are currently available? Here are the best gift card deals at Costco right now.

1. Southwest Airlines $500 e-gift card

Price: $449.99Discount: $50.01 (10%)

Airline credit cards aren’t the only way to save on your next flight. You can currently get $500 for Southwest Airlines flights at a 10% discount. This e-gift card is redeemable online, by phone, or at the ticket counter. Note that it’s only valid for Southwest flights and not any other types of purchases with the airline.

2. Domino’s four $25 e-gift cards ($100 total)

Price: $79.99Discount: $20.01 (20%)

These Domino’s gift cards are valid on all menu items and at all U.S. Domino’s locations. You can redeem them online, by phone, or in stores. If you’re not a Domino’s fan, Costco also has gift card deals available for Papa Johns, California Pizza Kitchen, and Blaze Pizza.

3. Cinemark $50 e-gift card

Price: $39.99Discount: $10.01 (20%)

Movie lovers can use these Cinemark gift cards at all the chain’s theaters nationwide. In addition to movie tickets, Cinemark gift cards can be used to purchase food, drinks, or merchandise. Costco also has ticket and gift card deals available for AMC and gift cards for Alamo Drafthouse Cinema.

4. Spafinder two $50 e-gift cards ($100 total)

Price: $79.99Discount: $20.01 (20%)

Spafinder is a company with a global partner network of spas and other wellness companies. You can use Spafinder gift cards at any of its participating spas, salons, wellness centers, yoga studios, and fitness studios.

5. AppleTV+ 12-month subscription ($69.99 value)

Price: $62.99Discount: $7.00 (10%)

AppleTV+ is one of the most affordable streaming services, and it’s even more affordable if you buy a subscription voucher through Costco. A 12-month subscription costs $62.99 here compared to the standard yearly rate of $69.99. There’s also a six-month subscription available for $33.99 through Costco. At the standard monthly rate of $6.99, six months of service would cost $41.94.

6. Peet’s Coffee five $20 e-gift cards ($100 total)

Price: $79.99Discount: $20.01 (20%)

If Peet’s Coffee is your go-to cafe, Costco sells five $20 gift cards for just about the price of four. They’re usable at all participating Peet’s Coffee & Tea retail locations and on its website. Note that these can’t be used at airport, supermarket, BART, or other licensed locations.

7. Chuck E. Cheese four $25 e-gift cards ($100 total)

Price: $74.99Discount: $25.01 (25%)

Families with young kids can save on their next game night with this four-pack of Chuck E. Cheese gift cards. These are redeemable at over 400 locations across the United States, but they can’t be used for birthday parties or group events.

Buying gift cards at Costco

Costco offers gift cards at its warehouse locations and at Costco.com. Most of the gift cards on its website are e-gift cards. After purchasing one of these, you receive an email with the code you can use to redeem your gift card.

Gift card offers like these are an easy way to save money. Keep in mind you can also save even more by earning rewards on gift card purchases. If you have a Costco executive membership, you earn 2% back on qualified purchases, up to a maximum of $1,000 back per year. You could also pay with cash back credit cards (for in-store purchases, Costco only accepts Visa credit cards). Methods like these could potentially help you save another 3% to 4%.

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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.Lyle Daly has positions in AMC Entertainment. The Motley Fool has positions in and recommends Apple, Costco Wholesale, and Visa. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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