Money Management

Most brokers offer commission-free stock trades, but this goes a step beyond. 

Fees in the brokerage business have been trending downward for some time. Online brokers emerged a little over two decades ago and revolutionized the commission structure for stock trading, and more recently, virtually every major online broker has eliminated stock trading commissions entirely. There are even a few brokers that offer options trading with no fees.

However, mutual fund investing typically still has fees associated with it. To be sure, most brokers have a “no transaction fee,” or NTF list, that often has a selection of mutual funds available to be traded commission-free, but most still charge fees for mutual funds that aren’t on the list. These can be rather expensive — up to $74.95 in some cases. But one broker has just made a big change.

One broker is getting rid of mutual fund fees entirely

Ally Invest — the brokerage arm of online-based bank Ally Financial — recently announced the elimination of mutual fund transaction fees for all self-directed accounts on its platform. This means the approximately 17,000 mutual funds available to invest through Ally’s platform are all commission-free.

Even before this, Ally Invest had a somewhat unique mutual fund commission structure. Instead of having a list of funds with no transaction fee and a list of funds with a high transaction fee, Ally simply charged a $9.95 fee for any mutual fund trades. This was already a big differentiator for investors interested in funds that rarely appear on brokers’ NTF lists, and was the lowest mutual fund commission of any of our top online brokers.

The elimination of mutual fund fees entirely is an even bigger differentiator. Many of the most discount-focused brokers, such as Robinhood and SoFi, offer unique features like free options trading, but don’t offer the ability to invest in mutual funds at all. In an increasingly competitive environment where it is difficult to stand out from other discount-oriented brokers, dropping mutual fund commissions could help Ally’s brokerage business stand out from the rest.

To clarify, the elimination of mutual fund fees only applies to self-directed brokerage accounts. Ally also offers robo-advisory products, and the fee elimination won’t affect these accounts.

There are still some costs associated with mutual fund investing

To be perfectly clear, Ally Invest is eliminating its own mutual fund fees. Virtually all mutual funds still charge their own management fees (known as expense ratios), which typically vary from 0.03% to about 1%, depending on the provider and the nature of the fund. These fees are automatically paid out of the fund’s assets and there’s nothing Ally (or any broker) can do about them.

And although it’s usually wise to avoid them, there are some mutual funds that charge a commission when they’re bought or sold (known as front-end and back-end loads). But these can be eliminated by choosing to only search for “no load” mutual funds.

The bottom line

The elimination of mutual fund transaction fees entirely is a major step. It remains to be seen whether other brokers will follow suit, but for the time being, this is a major differentiator for Ally Invest that could make the platform more appealing to investors who prefer mutual funds over individual stocks and ETFs.

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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.Ally is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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That’s upsetting, but not all that surprising. 

There’s a reason people are encouraged to maintain healthy savings account balances. If a financial emergency strikes — say, you lose your job or your home needs a major repair — that money could help you pay your bills or cover a sudden expense so you don’t have to resort to racking up a costly balance on your credit cards.

Meanwhile, a recent report by SecureSave found that 54% of Americans saw their savings decrease in the course of 2022. And that’s not all that shocking, given the way inflation drove living costs upward last year in a very big way. The problem, though, is that women seem to have been disproportionately affected by inflation compared to men.

Women’s savings took a much larger hit

A good 43% of men saw their savings balances decline in 2022. But 64% of women saw their savings shrink, and that’s a much larger percentage.

A big reason for that could boil down to the gender pay gap. Women are statistically likely to earn less than their male counterparts when they work similar jobs and have comparable experience. And at a time when inflation is soaring, lower wages can easily translate into having to dip into savings more frequently.

Building back up

It’s very easy to see why so many people had to tap their savings in 2022, thereby whittling their balances down. But it’s important for men and women alike to do what they can to rebuild.

First of all, the more money you have in the bank, the more financial protection you give yourself in general. But also, economists aren’t done sounding the recession warnings we heard repeatedly last year. And while we’re not seeing too many troubling signs this early on in 2023, economic conditions do have the potential to worsen over the next 11 months. As such, now would be a good time to build up a savings account that’s been raided repeatedly.

Of course, because inflation is still with us, finding ways to save money can be tricky. But one solid option is to lean into the gig economy. There are plenty of opportunities to pick up work on the side of a main job, whether it’s doing something flexible, like driving for a ride-hailing company, or picking up shifts at a local store or restaurant that needs help in the evenings and on weekends.

Cutting back on spending is another great way to replenish a whittled down savings account. But because of inflation, that’s a difficult ask.

Still, there may be some steps you can take to cut back on spending a bit, whether it’s canceling a streaming service you can live without or implementing one no-spend weekend a month, even if it means spending your Saturday and Sunday entertaining yourself at home. Even a really small step like coupon-hunting prior to grocery shopping could make a difference.

It’s not a shock that Americans’ savings balances declined in 2022. And it’s not even that surprising to learn that women had it worse than men. But anyone whose cash reserves shrunk last year should do what they can to build back up — before economic conditions worsen.

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It’s a fun and eye-opening experience. 

Ask the typical parent with daughters in Girl Scouts what they think about selling cookies, and you might get anything from an eye roll to a full-blown “I hate it.” The reality is that selling those cookies can be a lot of work for the parents. We’re the ones who need to reach out to friends and family, confirm orders, and drive our daughters around to deliver those orders once they come in. We’re also the ones who have to stand there with them (often in the cold) for hours while they set up cookie sale booths in town in an effort to drum up sales.

But despite the work involved, I do feel that selling Girl Scout cookies is a rewarding experience for my daughters. And they even get to learn a financial lesson in the process.

How Girl Scout cookie sales work

When you sell Girl Scout cookies, your troop gets a portion of the proceeds. You can then use that money to pay for things like troop activities and supplies.

Now, the amount of money your troop will earn from each box will hinge on where you’re located and what your local council’s rules are. It will also depend on how many boxes you sell. But for the most part, you’re generally getting less than a dollar for your troop per box of Girl Scout cookies sold. That means you need to sell a decent number of boxes to be able to fund a few nice activities.

My daughters, who are 8-year-old twins, are aware of how the program works. And so they’re very motivated to sit out in the cold if it means selling more cookies and getting more money for trips and such. And frankly, that alone is a good lesson. It’s teaching them not to expect things to just be handed to them, but rather, to work for them.

Also, my daughters obviously need my help to deliver the cookies they sell to friends and family. But they come along to every delivery, and if they can’t make it in person, they write a thank-you note to the purchaser.

Just as importantly, once our troop pools funds from the cookie sales, the girls sit down as a group, review the numbers, make a budget, and decide how to use that money. They recognize that their funds are limited and that they need to work together to prioritize the activities that are most important to them. This, to me, is another worthwhile skill.

An effort worth making

Last year, when some fellow Girl Scout parents and I were deep in the throes of cookie season, I turned to a friend and said something like, “I’d rather just take $50 out of my savings and give the troop the money than have to stand here for another minute in the cold trying to sell these boxes.” And of course, my fellow parents agreed.

But in reality, selling cookies does teach my daughters valuable skills. So even though handing over the money out of my pocket and skipping the cookie sales is the easier way out, it’s not a lesson I want to teach.

I don’t want my children to ever think they don’t have to work hard because their parents will just bail them out. I have friends in their 30s and 40s whose parents still occasionally pay their credit card bills because they can’t manage their money well enough on their own. And frankly, that’s not a situation I want my kids to land in.

I’m not going to be so bold as to say that selling Girl Scout cookies will help my daughters and their fellow troop-mates avoid that scenario as adults. But I’m hoping that between the skills they pick up from their cookie sales and the lessons I teach them at home, they’ll understand what it means to work for money rather than have it handed to them.

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Replenishing your savings might take work, but it can be done. 

The money in your savings account is cash you may be relying on to get you through an emergency situation, like a sudden home repair or a period of unemployment. And without a solid amount of savings, you could end up with credit card debt if a string of expenses comes your way that you weren’t anticipating.

Unfortunately, though, a lot of people have seen their savings account balances decline in the past year, according to a recent report by SecureSave. In fact, 54% of Americans closed out the past year with less money in the bank than they had 12 months prior. And a big reason for that is likely none other than inflation.

In 2022, inflation surged to an extreme degree, and it drove up the cost of everything from food to housing to transportation. As such, many people had no choice but to raid their savings to keep up.

If you’re hoping to rebuild your savings after dipping in last year, you should know that it can be done. But you may need to be strategic about it.

Take advantage of the gig economy

The paycheck you collect from your employer might only go so far in giving you buying power while allowing you to save money. But if you’re willing to take on a second job, you can boost your income in a meaningful way. And since that extra money won’t be earmarked for bills, you can use it to build your savings back up.

Of course, the side hustle you seek out should hinge on your specific savings goals. If you’re hoping to put $1,000 back into your savings account by the end of the year, you may only need to take on the occasional gig, like house-sitting or pet-sitting jobs.

But if you’re hoping to replenish a much larger amount, you may need side work that’s steady and consistent, like working evening shifts at a retail store or driving several nights a week for a ride-hailing company. Either way, there are many options to look at, so assess your savings goals to find the right fit.

Rethink your spending

It’s unreasonable to spend no money at all on leisure and small luxuries. But if your savings have recently taken a pretty big hit, then it may be time to curb your non-essential spending.

That could mean dining out only once a month instead of once a week, and pledging to make your own coffee six out of seven days a week until your savings are in better shape. You might also consider canceling small expenses that could add up, like streaming services and subscriptions.

It’s easy to see why so many people had to raid their savings in 2022. But it’s also important to try to put back the money that’s no longer sitting in your savings account. If you’re willing to work a second job and spend less on non-essential purchases, you may find that you’re able to replenish your savings by the time 2023 comes to an end.

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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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There’s a reason those high home prices have remained sustainable. 

If you’ve been struggling to buy a home due to not being able to afford one, well, there’s a reason for that. Home prices have risen 42% over the past three years, according to the National Association of Realtors (NAR). And while home price gains are slowing down, gains are still being recorded nonetheless.

The good news is that many experts think we can expect home prices to drop. But that doesn’t mean home prices are about to drop overnight. In fact, it could take quite some time for real estate prices to come down to more moderate levels. And one big thing needs to happen for homes to become more affordable.

We need inventory

In December, there were only 970,000 housing units for sale, according to the NAR. That represents a mere 2.9-month supply of housing units, whereas it normally takes a 4- to 6-month supply to balance out the real estate market.

Because there’s not enough housing inventory to meet buyer demand, and there hasn’t been in years, home values have been able to increase and remain high — even over the past year, as mortgage rates have climbed. And so for home prices to come down to a notable degree, we need a large uptick in inventory to hit the market.

It’s easy to see why the real estate market lacked inventory in 2020 and 2021. Back then, we were all grappling with the start of a pandemic, and sellers weren’t exactly rushing to list their homes. Meanwhile, in 2022, financial experts were quick to issue recession warnings, and many sellers no doubt held off on listing their homes to avoid upheaval in an age of potential economic distress.

The hope is that real estate inventory will pick up in the coming year or two. But it’s going to take a lot more homes to hit the market for prices to come down a lot. So anyone who’s been struggling with affordability issues over the past couple of years might continue to experience difficulties until things change.

Should you give up on buying a home in 2023?

It’s true that you might pay more for a home today than you would have three years ago. And you might also spend more to finance it with a mortgage loan given that borrowing rates are up.

But that doesn’t mean homeownership has to be off the table for you this year. If you’ve saved well for a down payment and have a steady job that allows you to earn a good income, you may find that you’re able to fit a home into your budget despite today’s higher prices and mortgage rates. But if you’d rather pause your home search for a while and try again in 2024, that makes sense, too.

Based on how low housing inventory is now, we can bank on it taking a while for supply to catch up to demand. And there’s nothing wrong with waiting things out and seeing what that does for home prices.

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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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