Money Management

The potential savings are enormous. 

The White House recently released a loaded budget proposal hot enough to boil Congress. The $6.9 trillion budget proposes everything from housing assistance to free community college.

Biden claims the budget would lower the federal deficit and cut costs for American families. Here are some changes the proposed budget would make to the American economy:

Fund universal free preschool.Lower health insurance premiums for millions of Americans.Create a national comprehensive paid family and medical leave program that would provide workers with up to $4,000 a month when they need time off.

The budget includes a revamping of the Child Tax Credit. If passed, the budget would potentially save families thousands per year by depositing money directly into their bank accounts.

Here’s how much the boosted Child Tax Credit could save you

The budget proposal would expand the Child Tax Credit, which offers qualifying parents refunds to help them afford childcare. The budget would bump the credit from $2,000 to $3,000 per child, up to $3,600 for children under 6 years old.

For example, a parent with two children, one age 5 and one age 15, would go from earning $4,000/year to $6,600/year in tax credits to help with childcare costs.

In 2021, the American Rescue Plan boosted the Child Tax Credit to $3,000 per kid, but the White House failed to renew the expanded credit. The credit was fully refundable. Parents owed refunds received monthly direct deposits to their bank accounts, or checks through the mail.

Biden’s proposed Child Tax Credit would once again make the credit fully refundable and paid to caregivers regularly. The revamped credit would last through fiscal year 2025.

The revamped Child Tax Credit may be a sticking point during the upcoming budget negotiations between members of the Democratic and Republican parties.

Will the budget proposal pass?

Unlikely. Congress is divided, and the Republican party seems likely to reject Biden’s plan. But that doesn’t mean the expanded Child Tax Credit will fail to pass in a bipartisan compromise.

If the proposal fails, what happens to the boosted Child Tax Credit?

If the proposal fails, Congress must agree on an alternative budget to fund the government and raise the debt ceiling. Failure to pass an alternative budget would lead to the U.S. defaulting on its debt, but that’s unlikely to happen.

Chances are, Congress will pass an alternative budget.

An alternative budget may still include an expansion to the Child Tax Credit. However, parents shouldn’t count on it. Congress has failed to expand the credit before. Plus, Biden wants to raise taxes on the wealthy to fund his proposals, which is a contentious topic among Republicans.

Congress may pass a more limited version of the Child Tax Credit expansion. Such an expansion might boost the credit to less than $3,000 per child.

How does the Child Tax Credit work right now?

Eligible taxpayers receive tax credits every year. Parents get $2,000 per child under age 17 and $500 each for other dependents (such as an older child or a relative). However, parents whose refunds exceed taxes owed only get partial refunds, up to $1,400 per child.

Only taxpayers with less than $200,000 in income qualify. Married couples who file jointly and make less than $400,000 also qualify. The best tax software makes it easy to file taxes and determine whether you are eligible for the credit.

Although unlikely to pass, Biden’s budget indicated the expanded Child Tax Credit is a priority for the Democratic Party. Even if the budget proposal fails, the boosted Child Tax Credit may pass in an alternative budget compromise, saving families thousands of dollars.

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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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Here’s how to know if the account you’re eyeing up actually deserves your attention. 

A savings account is one of those things that nearly everyone has but no one gets that excited to shop for. Even though you can make money — possibly hundreds of dollars per year with the right savings account — switching banks can also be a big hassle.

You don’t want to jump ship for just any savings account. Here are three signs the one you’re looking at is actually worth it.

1. It offers a competitive annual percentage yield (APY)

A savings account annual percentage yield (APY) indicates how much interest you can earn on your savings in one year. The best savings accounts right now have APYs around 4.00%. That means that your savings account balance would grow by about 4% in a year, assuming the APY doesn’t change during that time.

The best high-yield savings accounts are usually available through online banks. Since they don’t have branches, their overhead costs are much lower than traditional brick-and-mortar banks, and they pass that savings along to you in the form of lower fees and higher interest rates.

Even if you go with one of these, your rates will still fluctuate over time. But by shopping around and comparing savings accounts from other top banks, you should be able to determine whether you’re getting a good deal.

2. It offers a bonus for new customers

Bank account bonuses are cash bonuses that banks give to customers who open a new account with them and complete certain qualifying activities. This often includes things like keeping your account open for a certain number of months, setting up direct deposit, or maintaining a certain minimum balance.

Bank account bonuses are most common with checking accounts, but some savings accounts offer them as well. This could help you decide between two similar bank accounts if you’re on the fence.

But remember, a savings account bonus is a one-time deal. You’re still going to be stuck with the savings account afterward, so make sure it’s a good fit for you. Pay attention to its APY and how easy it is to access your funds before deciding whether to sign up.

3. It makes it easier for you to access your money

Savings accounts keep your money liquid, but they don’t give you many options for accessing funds directly. You often have to transfer cash to a checking account before you can withdraw it. And many banks limit the number of free monthly withdrawals you can make.

But times are changing. Some savings accounts now offer ATM cards or other means of accessing your cash directly. This can be useful if you don’t have a linked checking account with the same bank and need to access your cash right away.

Think about how you prefer to access your savings account funds and look for a bank that offers these options. If the new bank account you’re considering offers more flexibility than your current account does, that could be worth making the switch.

What to do when you’re ready for a change

If you decide to switch savings accounts, your first step is to apply for the new account. You may need a minimum initial deposit to open it, though many online banks don’t require this.

Once that’s set up, you can transfer the funds from your current savings account to your new account. If you have any automatic bill payments set to come out of your old savings account, change these over to your new account to avoid late fees.

You may wish to close your old savings account if you don’t plan to use it anymore. This is especially true if it charges you maintenance fees. Reach out to your bank to learn how to close it. Once that’s done, you can focus on reaping the rewards of your new and improved savings account.

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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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Don’t let a popular savings strategy backfire on you. 

Financial expert Dave Ramsey and I don’t always see eye to eye on personal finance matters. Ramsey, for example, commonly tells consumers to shun credit cards and never use them. I happen to think credit cards can be a very helpful and financially rewarding tool when you pay yours off in full every month. That way, you can rack up cash back in the course of buying the things you need.

Ramsey also thinks that consumers don’t need to bother having a credit score, or a good one, because ideally, they shouldn’t be borrowing money. I think it’s important to have solid credit because you never know when you might need money in a pinch.

Not surprisingly, Ramsey and I also don’t fully agree on the strategy of buying groceries in bulk. We both think it can lead to a nice amount of savings. But we may differ slightly in our approach.

Ramsey’s bulk buying rules make sense, but only for some consumers

Ramsey writes that it’s best to avoid buying perishable groceries in bulk, such as fruits, vegetables, and dairy products. The logic is that these items are likely to spoil before you get a chance to consume them, so buying them means taking a risk. And if you end up throwing away a portion of your bulk haul, you won’t end up saving money — if anything, you’ll be setting yourself up to lose money.

His logic makes sense in that you shouldn’t buy things in bulk if you don’t think you can use them up in time. But for some people, buying perishables in bulk makes plenty of sense.

My family is a prime example of this. We often shop at Costco on a weekly basis to stock up on produce, dairy products, and different meats. And we consistently save money on these items by purchasing them in bulk, spending less than what we would at the grocery store.

Meanwhile, my family of five eats certain produce items, dairy products, and meats consistently. We also happen to have a spare fridge in our home for overflow items that can’t fit in our main one. So all told, the strategy of buying these perishable items in bulk has worked out well for us. We commonly finish up our haul well before it goes bad on us, which means buying these products does make sense in our world, despite the risks Ramsey calls out.

Take your own situation into account

Ramsey means well when he warns consumers not to purchase perishable products in bulk, just like he means well when he warns against using credit cards. Ultimately, Ramsey wants consumers to grow their savings accounts and avoid a cycle of debt. So his advice is well-intentioned, even though it can sometimes come off as a little extreme.

Now to be clear, I agree with Ramsey that some people should not purchase perishable groceries in bulk. But I also think it’s important to consider your situation individually before writing off bulk produce or dairy purchases.

If you have a larger family, and you’re talking about items you eat regularly, then go ahead and buy them in mass quantities if it results in a nice amount of savings. It’s a strategy that works just fine for my family, so it may work out well for yours, too.

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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.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.

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