Money Management

It’s a big priority for me. 

There’s a reason so many consumers routinely mishandle their money or wind up with costly credit card debt — they were never given a proper personal finance education. Many states do not require schools to educate children on financial matters — though some are trying to change that.

Indiana, for example, just proposed a bill that would require schools to offer courses on topics like opening a bank account, filing taxes, and applying for loans. And there are other states that have introduced similar legislation in an attempt to incorporate financial education into the classroom.

But it’s also important for parents to take financial education matters into their own hands. That’s something I’m already doing with my kids, even though they’re only in elementary school. Here are three specific things I’m teaching my children in the hopes that these lessons carry through to adulthood.

1. It’s a good thing to save money

My children are too young to get actual jobs. But they occasionally get money for birthdays, holidays, or from their generous mom — er, the tooth fairy. One thing I refuse to let them do is keep physical cash on hand, stuffed away in a random corner of their bedrooms. Instead, my kids all have savings accounts, and they’re required to put their money into the bank until they’re ready to use it.

Meanwhile, I try to emphasize the importance of keeping money in savings and letting it grow rather than blowing money on silly things like stickers and scented pencils. My kids now understand that if they don’t take out $3 here or $5 there, they’ll be able to save for something big.

Recently, one of my daughters told me she wants to save her money so she can pay for a small vacation for all of us. That may be a lofty goal given her age, but I’m glad she recognizes that skipping small purchases could make a large one possible.

2. It’s important to budget

My family follows a budget, and it’s something I’ve shared with my oldest child already so he can understand more about what our finances look like. The reason I shared my budget is for him to recognize that when he asks for something like sushi for dinner, it means spending 20% of that week’s grocery budget, instead of cooking a regular meal at home and spending a lot less.

At the same time, I do want my kids to understand that it’s okay to splurge here and there. But the numbers have to work out.

3. It’s essential to compare prices

My kids can be picky when it comes to food, so they’ll sometimes comment on the fact that a given brand of cereal we have on hand isn’t one they recognize. That’s why I make a point to show them different brands at the supermarket when they’re there with me. It’s important they understand that you might be able to snag the same item for $2 cheaper depending on which brand is on sale at any given time.

In an ideal world, financial education would be part of every school district’s curriculum. But until that happens, it’s important for parents to impart that knowledge onto their kids. By teaching these habits at a young age, I’m hoping my children will be able to avoid some of the financial blunders so many grown-ups fall victim to.

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January’s inflation data contained a big surprise — not necessarily a good one. 

Inflation has been battering consumers since 2021. And while things are looking better in that regard now than they did in mid-2022, January’s inflation report contained some less-than-stellar surprises.

In January, the Consumer Price Index, which measures changes in the cost of consumer goods and services, rose 0.5% from December. That’s a pretty big jump for a single month. And it also explains why so many consumers are still racking up debt on their credit cards and struggling financially.

Now the news of an uptick in inflation is one nobody wants to hear at this point. But could that shift lead to a round of stimulus aid for the public?

A near-term stimulus check is still unlikely

It’s easy to see why consumers might associate high levels of inflation with stimulus aid. When living costs are high, people are apt to struggle. And stimulus checks might help Americans, on an individual basis, better cope with inflation as it continues to surge.

But historically, stimulus checks have not been used as a means of targeting inflation. Rather, stimulus checks have generally come into play during periods when unemployment has been high and consumer spending has declined. That’s not the situation we’re in today.

Quite the contrary — the national jobless rate recently reached a 54-year low. And the economy added more than half a million jobs in January.

In fact, these factors actually help explain why inflation was so high last month. Because so many people were gainfully employed, they had money to spend, and that drove the cost of goods and services up.

Stimulus aid might only make the problem worse

Not only is inflation typically not a driver of stimulus checks, but sending money into Americans’ bank accounts right now is likely to only make the problem of inflation even worse. The reason we’re in this whole inflation trap is that consumer demand has exceeded the supply of available goods and services for months on end. For inflation levels to drop, consumer spending needs to decline.

But if Americans receive another generous payday from the federal government, they won’t be motivated to cut their spending. If anything, they’d probably spend that money rather than save it, thereby contributing to the problem of inflation and causing it to persist.

As such, it’s pretty much time to write off the idea of a stimulus check during the first half of 2023. It’s possible that economic conditions could decline as the year chugs along, and that unemployment levels could climb. But these aren’t things anyone should bank on or hope for.

In time, inflation should start to ease — especially as the Federal Reserve moves forward with additional rate hikes, which is a likely thing for 2023. But for now, stimulus checks aren’t the solution to soaring inflation, even though they might seem like a good one. A better bet is for those struggling to tighten their budgets and boost their income by joining the gig economy. Jobs are plentiful right now, and getting a second one is a good way to cope with higher expenses.

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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.
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Hint: It was a nice amount of money. 

I’ve been shopping at Costco for years, but it wasn’t until I had kids — and started spending more money on food and household essentials — that I decided to upgrade to an executive membership. Last year, my executive membership cost me $120, whereas a basic membership would’ve only cost $60. In exchange, however, I received 2% cash back on all of my Costco purchases — the same way you might get 2% cash back on certain purchases when you swipe a credit card. And because of that cash back, I came out ahead financially.

The numbers made sense for me

Signing up for an executive membership does mean shelling out more money for the privilege of being able to shop at Costco. But for me, that upgrade was worth it. That’s because I wound up getting an executive membership reward certificate for $147 for my spending in 2022. (These certificates are issued once a year after your spending for the previous year is totaled up.)

The way I see it, I came out $87 ahead with my executive membership, because I need to have some type of membership to Costco. Shopping there allows me to purchase groceries and household essentials at a much lower price point than I’d find at supermarkets and big-box stores. So I was looking at paying a minimum of $60 for a membership, no matter what.

When I say I came out ahead by $87, I’m only subtracting the extra $60 my executive membership cost me from my $147 — not the entire $120. But even so, it’s a nice amount of savings.

Should you upgrade your Costco membership?

My family shops at Costco on a weekly basis. We find that buying things like dairy products, produce, snacks, and other household staples results in a lower credit card tab as a whole. And we also spend enough to make an executive membership worth paying for.

In fact, my $147 executive membership reward certificate means I spent $7,350 at Costco last year. That might seem like a lot, but if you divide that by 52 weeks, it’s about $141 weekly. Seeing as how I buy about 50% to 60% of my family’s groceries, self-care products, and household essentials and cleaning supplies from Costco, that’s not such an outrageous sum.

You’ll need to assess your own spending to see if upgrading to an executive membership makes sense for your finances. But you can think about it this way: If you spend $3,000 a year at Costco, you’ll get $60 back with an executive membership, which is the equivalent of what you’ll pay for the upgrade. If you expect to spend more than $3,000 a year, the upgrade makes sense. If not, you may be better off sticking with the lower-cost basic membership.

That said, if you have some large purchases coming up, and you think you might get them at Costco, then you might exceed that $3,000 threshold even if you don’t normally do so within a year. So figure out if you’ll be needing new electronics or kitchen gadgets, because all of those purchases count toward earning executive membership rewards.

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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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Read this if you’re hoping to improve your credit score. 

Your credit score is used in many financial transactions, from taking out a personal loan or getting a mortgage to renting a property or buying insurance.

If your score is lower than you would like it to be, this can cause a host of problems including denials of credit, higher borrowing costs, higher insurance rates, higher deposits for utilities, and even lost employment opportunities.

The good news is, there are ways to turn your situation around. In fact, depending on what the cause of your low score is, it’s possible opening a new credit card could actually be helpful. Here’s why.

A new credit card can potentially help your credit in a few different ways

In certain circumstances, a new credit card could make it possible to improve your credit score by correcting issues that are dragging your score down.

The situation where this could be most helpful is if you have a low credit score because you don’t have much of a credit history. In this case, opening a new card and using it responsibly can make it possible to show you can borrow and pay back your debts. Your positive payment history could steadily improve your score over time.

If you are using a lot of your available credit, then a new card could also help. Your credit utilization ratio (credit available versus credit used) is a key factor in determining your credit score. Ideally, it should be 30% or less if you don’t want to hurt your credit. If you open a new card and have a $0 balance on it, this can help improve your ratio.

Having a mix of different kinds of credit is also important to your score, so if you don’t already have a credit card, opening one could help with this factor as well.

What kind of credit card could help?

If you don’t have great credit and you want to try to open a new credit card to improve your situation, you may find you have difficulty finding a card issuer who is willing to give you a chance. This is one of the hardest things about trying to fix your credit. You need to be able to borrow to show you can do it responsibly and to raise your score.

The good news is, there are cards out there specifically targeted for people with no credit or low scores. Many of them are secured cards, which means you put down a deposit equal to your credit limit. It’s very easy to qualify for these because the lender doesn’t assume any risk, and you can apply for one to start enjoying the credit-building benefits it offers.

Just be sure you understand the card’s terms and conditions, avoid fees, and confirm it reports to the credit reporting agencies. And, be sure to use it responsibly because a new card will only help improve your credit if you develop a positive borrowing history with it.

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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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