Money Management

Don’t move in with your parents or kids without reading this. 

Multi-generational living can have benefits for all parties involved. Older generations can enjoy the company of their children or other younger family members, can form close relationships with grandkids, can stave off the loneliness of old age, and can get help with their own needs as they get older. And younger generations may get financial assistance, help with childcare for their kids, and guidance from their parents or other older relatives.

But before buying a place and jumping into a multi-generational household, there are a few key issues you need to address — including the following.

What kind of property will work for you?

There are different arrangements for multi-generational living. One option is a shared single family home. Another is a duplex or similar style of two-family home. A third option is a main house with an in-law apartment either separate or attached to the main property.

These different options come with differing cost structures and differing levels of privacy. You’ll want to think about your home-buying budget and what would actually work best in terms of the lifestyle that you want.

How will the financials work?

One big benefit of multi-generational living is that it can be cheaper for members of both generations since you combine the financial power of both households. The older generation may have more money saved for a down payment, for example. And younger members of the family may have more money to devote to monthly mortgage payments.

Before you move forward, though, you’ll want to understand exactly how the finances will work and make sure everyone is on the same page. WIll you split the mortgage payment? Will all of the parties be co-borrowers, or will one person be on the mortgage and collect rent from the others?

There are a number of different ways you could split up the costs, and you need to discuss all of the details. Think, too, about things like utility payments, home repairs, and furnishings — especially if you’ll all be sharing one connected space. You don’t want to move in, find out you have very different expectations about cost sharing, and end up in money fights all the time because of it.

What will the rules and boundaries be?

Finally, you’ll want to discuss what you think living together in a multi-generation household will look like. This can include addressing issues such as:

Will you all be in shared spaces together, such as in the backyard of a duplex or the living room of a shared house?Will you do entertaining and most other activities together or will you maintain separate lives while sharing a household?What types of childcare support is expected? Grandparents may not want to be 24/7 on-call babysitters if they move in with their kids and grandkids, and that should be understood.What level of privacy will each family have? Will you have to check in with each other if someone will be home late or wants to go on vacation?

By addressing all of these issues upfront, you can avoid a lot of stress and make sure your shared living arrangements will really work well for all parties.

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Yes, banks use your money to make money, but it’s all for the greater good. 

Have you ever wondered what happens to your money once you’ve deposited it into your savings account? You might be surprised by the way your bank or credit union puts the money to work.

Once your funds are safely in your account, you become a creditor of sorts. In essence, you’re lending the money to your bank. Once they accept your deposit, they agree to refund the amount you’ve deposited on demand. And depending on whether it’s an interest-bearing account or not, they also agree to return the money with interest.

Making money off your money

Making loans is a bank’s bread and butter; it’s how they keep the lights on, and ultimately, how they remain in business. And that’s where your money comes in.

Let’s say you deposit $10,000 into your savings account. Another customer comes in and applies for a $9,000 loan. The bank is allowed to hang onto $1,000 of the money you deposited and use the remaining $9,000 to make the loan.

It’s all legitimate, thanks to the fractional reserve system under which U.S. banks operate. Because of the fractional reserve system, banks must only keep a fraction of deposits in their reserve and are free to loan out the remaining money.

For the sake of illustration, let’s say the bank charges the borrower an APR of 10%, and that you’re earning an interest rate of 1% on your savings accounts. They get to keep the 9% difference.

Why fractional reserve exists

Imagine the dreariest looking town you’ve ever driven through. Now, what if there was no hope of new businesses moving in, and less money available for people to buy homes? What if financing a vehicle became too difficult for most people to pull off due to tightened lending practices?

While it may sound quite dramatic, the fractional reserve system is designed to prevent such a scenario. Because banks only have to keep a portion of deposits on hand, they have more money to lend, and it’s those dollars that keep the economy humming.

Reserve requirement ratio

Fractional reserve banking is the system used in most countries, and it’s highly regulated. In the U.S., that means it’s monitored by the Federal Reserve System. The Fed ensures that all banks keep a set percentage of deposits in reserve. This is called the “reserve requirement ratio.”

The Fed raises or lowers the reserve requirement ratio based on how the economy is doing. It can be used to slow the economy when inflation gets out of hand or to infuse a sluggish economy with low-interest loans. Let’s say the economy is slogging along, and the Fed lowers the reserve requirement. Suddenly, banks have more money available to lend, and because of that, can set lower interest rates.

The reserve requirement helps explain why some banks limit the amount a customer can withdraw from their account to $10,000 or $20,000 per day. Setting these limits helps ensure there’s enough cash available for everyone who wants to make a withdrawal.

The next time you make a deposit, a large portion of the funds may be used to finance a young family’s first mortgage, fund a startup business, or pay for a couple’s 50th anniversary vacation. In other words, it will be put to good use.

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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.Dana George has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Have I got a deal (on peanut butter) for you! 

Groceries are one of the expenses that many Americans have been feeling the pinch on. The Consumer Price Index Summary report of Jan. 12 noted that the cost of “food at home” (meaning groceries) was up 11.8% between December 2021 and December 2022. If you’re trying to cut your grocery spending, one technique to try is changing where you shop for food.

If you’re lucky enough to live in an area with an Aldi store, I recommend stopping in. Aldi is a lower-cost grocery store with 2,277 locations in the U.S., and shopping there offers opportunities to save on your grocery bill — but they may not be quite what you’re expecting.

Aldi doesn’t accept manufacturer’s coupons, and you can’t save by buying in bulk like you would at Costco or Sam’s Club. Instead, customers save money at Aldi by buying products they won’t find anywhere else — more than 90% of its products are made by Aldi-exclusive brands. As these items aren’t heavily advertised the way a big national (or international) brand is, the money saved by the brands is passed on to you. And in fact, Aldi is a great place to pick up a lot of staple grocery items to keep in your pantry, fridge, or freezer, ready to help you cook a meal. Check out these items at Aldi, and keep more cash in your checking account.

1. Peanut butter

Peanut butter is definitely a staple food in my household, and switching from buying a big brand-name peanut butter to trying store brands has been one tiny way I’ve been cutting my grocery bill down. Peanut butter is also an inexpensive source of meatless protein, so if you’re trying to save money on food, eating more of it can help you cut back on meat. Aldi sells both creamy and crunchy peanut butter, as well as organic peanut butter. Something for everyone!

2. Tortillas

Depending on what kinds of recipes you like to make, tortillas might be a frequent buy for you. They’re another versatile food, and Aldi offers a nice variety of corn and flour tortillas and other flatbreads. You can even find gluten-free and keto diet tortillas and wraps.

3. Canned tomatoes

I make a lot of soups, and canned tomatoes are the perfect staple to keep on hand for this purpose. You might also go through a lot of canned tomatoes if you like chili or want a shortcut to making your own tomato sauce. At Aldi, you can find basic canned diced tomatoes, but if you want some variety in your pantry, it also stocks stewed and crushed tomatoes, as well as tomatoes with basil, garlic, and oregano.

4. Fresh pasta

Is there anything easier than packaged fresh pasta for dinner? It cooks in about five minutes, and if you buy it and want to keep it for longer, you can stick it in the freezer for a later date (and even cook it without needing to thaw it first). Aldi’s selection of filled fresh pasta includes cheese tortelloni, mushroom tortelloni, and spinach ravioli. These are very tasty in addition to being inexpensive.

5. Spices and seasoning mixes

I tend to spend extra time (and sometimes extra money) in the spices aisle at Trader Joe’s, but I recently discovered that Aldi is also a great place to buy these. I ran out of everything bagel seasoning and found that Aldi carries it, too. And while you may not find fine saffron at Aldi, you will find staple spices like cinnamon, oregano, and chili powder, along with various seasoning mixes for different cuisines.

We all have to eat, so it’s in your best interest to save money on groceries where you can. Try shopping with a grocery rewards credit card to earn cash back, and check out Aldi for these basic grocery staples.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Could this move be worth considering if you’re looking for a new home? 

In the next year or so, I hope to buy a new house and move into a new neighborhood. This will be my fourth move in around a decade and I am hoping not to have to do it again any time soon since it is a hassle to buy and sell houses and to apply for new mortgage loans each time I relocate.

SInce I want to love the next property I buy and ideally be able to stay there for a long time, there are a few things I am doing to try to maximize the chances I end up happy with my new place.

These steps will hopefully help me find the perfect house

Ideally, by following these steps, I’ll be able to find a house that I can stay in for a long time.

I’m visiting my chosen neighborhood regularly and walking around the places where I think I might want to buy a house. Over the past few months, at different times of the day and night, my husband and I have visited areas in the neighborhood where we think we want to live and taken our dog for walks there. By visiting the neighborhood at different times and spending about 45 minutes to an hour walking around, we get a good idea of things like noise level and activity in the area so we can decide if we’re comfortable with the conditions.We’re testing out our commute. We really want to make sure the area we end up buying in has an easy commute to the places we plan to travel most. That’s especially important to us now because the house that we currently live in has turned out to be a traffic nightmare. There is an exit on the freeway that backs up for long periods of time at what seems like all hours of the day and night. To make sure we don’t get ensnared in this type of situation again, we’ve tested out driving from our new chosen neighborhood to several of the most important places we visit often.We’re talking to current residents. When we run into people out walking their dogs as we’re on our walk, we’ve been able to strike up conversations and ask about things like how the homeowners association (HOA) works and what amenities the neighborhood offers. This has helped us get a better picture of what living in the area would actually be like.

We’re hopeful that by employing these strategies, we’ll ensure we get a great house in the area of the neighborhood that works well for us.

Should you consider making these moves before you buy?

These techniques work well for us because we know what general area we want to be in and we’re pretty close to it already. If you’re moving from long distances or have tons of potential places you may want to live, it will be a little harder for you to implement them.

But when you do find a house you think you like, testing out your commute and visiting it a few times before you make a final offer could help you avoid a decision you seriously regret.

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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 account can give you retirement income for the rest of your life. 

When it comes to saving for retirement, there are many options available. However, one option that’s gaining traction among economists is the guaranteed retirement account (GRA). GRAs offer a secure and predictable way to save for retirement, and they can provide peace of mind for anyone who’s worried about their financial future. Here’s why economists are interested in GRAs.

What is a GRA?

A GRA is a retirement savings proposal for all employees and even self-employed workers who are not participating in an equal or better retirement plan through their work. It is a hybrid of a defined contribution plan, such as a 401(k) or IRA, and a defined benefit plan (pension). It is similar to a 401(k) in that both the employee and employer contribute to it, and similar to a pension in that it provides employees with guaranteed income for life once they reach retirement age.

There are several different types of GRA proposals out there. In one type, the federal government oversees it by providing every American with one in addition to Social Security. The federal GRA would be administered by Social Security to eliminate fees. But a state GRA would allow private sector employees to open an account in a state-level public retirement system. Regardless of who manages it, the proposals require every worker to pay 1.5% or 2.5% into the account and then employers would match the worker’s contributions so the total is 3% to 5%. Self-employed workers would contribute the full amount themselves. The account would need to grow at 2% to 3% above inflation after all costs.

The benefits of a GRA

One of the major benefits of a GRA is that it provides individuals who retire at age 62 or later with a guaranteed stream of income throughout their retirement years. With other types of retirement accounts, such as 401(k) plans or IRAs, there is no guarantee that investments will perform well enough to provide individuals with an adequate amount of money for their retirement years. However, with a GRA, regardless of how investment markets perform, individuals are guaranteed an income stream throughout retirement.

GRAs feature built-in safeguards against market volatility and other risks associated with retirement savings plans. This can help alleviate some uncertainty when planning for your future. The amount you receive is based on how much you have in the account and regularly adjusted for inflation. According to the Economic Policy Institute, an average employee would increase their Social Security benefit by a third if using the 3% contribution amount.

Contributions would start as soon as one starts working, and in one proposal those who earn a salary of less than $40,000 would pay nothing out of pocket. The employer would still make the 1.5% contribution and the plan would provide a tax credit equal to the 1.5% of pay (up to $600 per year). If the worker changes jobs, they would keep contributing to their GRA at their new job. However, if the new job offers a retirement plan that is equivalent to or better than the GRA, employees could opt to join that instead.

GRAs provide an effective way for employers and employees alike to save for retirement and provide peace of mind during these uncertain times. Economists believe that GRAs offer an excellent alternative to traditional savings plans due to mobility during job changes and built-in protection against market risks. While the GRA idea is still in a proposal state, studies show that a majority of Americans across all age groups and political parties support a GRA plan. For example, in a 2018 nationwide poll, 78% of Democrats and 77% of Republicans expressed support for it. Since so many Americans are not ready for retirement, the GRA plan could help level the playing field so that all workers, regardless of who their employer is, have the opportunity to save for retirement.

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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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