Money Management

All that and FDIC insured too!? 

It’s a good idea to evaluate your banking needs every so often, such as at the beginning of a new year or if your financial circumstances change. If it’s been a while since you looked at bank account options, you might be surprised to see just how much some accounts have changed recently.

Savings accounts, especially those with online-only banks, are now paying interest of 3% or more, and money market accounts (MMAs) have gone up too, thanks to rate hikes by the Federal Reserve during 2022. With inflation up, it’s a bad time to keep too much in your checking. You may not have considered money market accounts at all before, though. So what are they?

Money market accounts are kind of like a hybrid bank account, a cross between a checking account and a savings account with features of both. And MMAs are FDIC insured, meaning that up to $250,000 kept in one is protected should your bank fail. Let’s discuss some ways to know if opening an MMA might be right for you this year.

Do you want a higher APY?

Everyone wants to make money on their money. That’s what compound interest is all about, and getting a higher annual percentage yield (APY) is the easiest way to achieve greater returns on your cash. If you put $1,000 into your MMA and it earns 4%. After a year, your $1,000 will have grown to $1,040. So the following year, you’ll earn that 4% on $1,040 instead, and will end up $41.60 richer — and so on. The more money you can put into a high-yield account and the longer you leave it there, the more money your money will earn. It’s like magic.

Would you like easier access to your money?

Money is a tool, and as nice as it can feel to log into online banking and see a high balance, sometimes you need to use some of that money. MMAs shine here too, as they often come with check-writing capabilities and/or a free debit card, meaning that when you need your money, you can access it.

A typical savings account might not come with a debit or ATM card, and by definition will not come with checks. So if you had, say, a big car repair bill that you needed to pay out of your savings, you’d be stuck moving that money to another account first to access it. And that transfer might not be instantaneous, especially if you bank with multiple institutions, like I do. MMAs make it easy to get to your money in a hurry. You will be limited to six “convenient transactions” per month, per Regulation D, however — so don’t think an MMA can take the place of your checking account.

Can you maintain a minimum balance?

While it’s necessary to get at your money when you need it, you might also be looking for an incentive to keep emergency savings right where they are. After all, if you spend your emergency fund on a non-emergency expense, what happens when you have a real emergency? To that end, some MMAs come with a minimum balance requirement, either to open an account or to earn the highest APY. This can be a great incentive to save and to leave that money alone. In fact, MMAs are a great place to keep your emergency fund.

If you’ve never considered opening a money market account before, they’re worth thinking about. You’ll gain a higher APY, easier access to your money when you need it, and even incentive to keep the account funded. Pretty cool!

These savings accounts are FDIC insured and could earn you more than 13x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 13x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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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The reason may surprise you.  

Mark Cuban is a billionaire investor who is well-known for his role on Shark Tank as well as for his ownership of the Dallas Mavericks.

He’s also a fan of cryptocurrency investing — which is why it may come as a big surprise that he indicated in a recent interview with comedian Bill Maher that he hopes the price of Bitcoin goes down.

Since Cuban has indicated before that the bulk of his crypto investments are in Bitcoin, it may seem on the surface to make even less sense that he wants the price of the virtual currency to decline further. But there’s a good reason why he made that statement.

Cuban wants Bitcoin’s price to decline for one simple reason

So, why is Cuban hoping Bitcoin’s price falls?

Cuban told Maher on the comedian’s podcast that, “I want Bitcoin to go down a lot further so I can buy some more.”

Essentially, Cuban believes that over the long term, Bitcoin is going to perform well as an investment. In fact, he explained why he believes the virtual currency is a solid asset, indicating that it’s a store of value protected by a digital ledger. Because of this, Cuban thinks Bitcoin is a better investment than gold since if everything went wrong, someone could take your gold bar from you when that’s not the case with your Bitcoin investment.

Since Cuban thinks Bitcoin has solid potential to see its value grow, he is hoping the price temporarily declines to give him an opportunity to buy more of the coins at a discount before things turn around.

In other words, he was simply indicating that he believes he will be able to take advantage of the opportunity to buy a valuable asset at a low price and sell it for much more later. And that’s a goal any smart investor will understand.

Cuban’s investing style makes a lot of sense

Whether you believe Bitcoin is a good investment or not, Cuban’s desired strategy of taking advantage of a temporary price reduction to increase his holdings of an asset is a good approach.

In fact, it’s one that other famed investors such as Warren Buffett have endorsed. Buffett has famously indicated that he gets “greedy when others are fearful” and likes to buy stocks on sale when there’s a downturn, because then he gets the chance to earn greater returns when the price inevitably rebounds over time.

The bottom line is, it can be scary when an asset you own — or one that you believe has solid growth potential — starts to see a price decline. But, if you’re confident it’s a good long-term investment, as Cuban does with Bitcoin, you shouldn’t get scared of a downturn you believe is temporary. Instead, you should be grateful for the fact the asset is on sale and buy as much of it as you can to take advantage of the bargain.

This doesn’t necessarily mean everyone should start buying Bitcoin if the price plummets. You’ll need to do your own research on whether this or other cryptocurrencies are a good investment. But it does mean you shouldn’t always view downturns as a bad thing — even if you lose a little money on paper for a short period of time.

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

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What can’t Costco do? 

To say that bulk-buying giant Costco has a devoted fan base would be massively understating the situation. According to Statista, Costco’s brand value in 2022 was $49.6 billion. The warehouse club is a great place to buy grocery items, vacation packages, electronics, and even fine jewelry. And the customer goodwill generated by its legendary $1.50 hot dog and soda lunch combo is so powerful that company executives vow never to raise the price.

In addition to these goods, Costco also offers a variety of home improvement services if you’re a homeowner. If you’re looking to replace your old worn-out carpet or have solar panels installed on your home, Costco is there for you. Keep reading to find out more about Costco’s Home & Installation Services and whether you should consider using them.

How does Costco’s home services work?

In order to gauge how Costco’s home improvement service works, I picked a category to learn more about the process. Improving and controlling natural light in your home can be extremely important, both for your utility costs as well as your mental health (I am basically a human houseplant), so I picked window treatments.

Costco has partnered with a company that offers custom window treatments (such as blinds, shades, and drapery), so when you fill out a contact form on the Costco website, you’ll be contacted by an affiliated service provider to set up your consultation. Then, if you decide to use the service, you’ll work with them directly. It’s important to note that Costco doesn’t actually provide the installation services or sell the products (although you will qualify to receive a Costco Shop Card if you elect to go through them for installed home services)

Do people like it?

If you’re looking for honest opinions on a variety of subjects, Reddit can be a great place to find them. There’s even a Costco subreddit, r/Costco, so I turned to it to learn more about Costco’s home services and the experiences real consumers have had with it.

Customer experiences have been mixed, to say the least. One poster, squidsinamerica, noted that Costco’s HVAC installation service used a large well-known contractor, but the service was marked up, with the salesperson working from a list of Costco-specific prices for customers who went through the warehouse club rather than contacting the HVAC company directly. They also had some problems with the system, and to their disappointment, Costco’s customer service wasn’t much help.

Other Redditors had a range of experiences, good and bad. User lynnfynn used Costco’s carpet installation referral with great results, but ran into trouble with a curtain installation. GeechieGirl reported success with a garage door opener, window treatments, and a closet organization system. Each of these services was referred by Costco, but completed (or not) by an affiliated contractor.

Should you use Costco’s home installation services?

Ultimately, you’re going to have to do your homework when it comes to home improvements, be they through Costco’s service or otherwise. Costco contracts its services out through local companies or local representatives of national companies, so whether you will have a good experience or not depends on who does the work. You might also find dishonest contractors increasing their prices for services because they can.

Since Costco is synonymous with saving money and also offering great products, it has a lot of goodwill from its customer base. Unfortunately, many people may just assume that using Costco for home improvements will definitely be cheaper than contacting contractors directly or using other referral services (such as that offered by home improvement chain Home Depot).

If you love Costco and are in the market for new carpets, drapery, or a new HVAC system, by all means check out what kind of deal you can get by going through the warehouse club. But shop around, read contractor reviews, and don’t count on Costco home services being the best deal in town.

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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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It’s a smart tactic to employ. 

There was a point not so long ago when putting money into CDs largely didn’t pay off. The reason? CD rates were downright awful. And given the restrictions involved, such as not being able to touch your money without risking a penalty, it made more sense to keep extra cash in a regular savings account.

But these days, CDs are paying more generously. So are savings accounts, for that matter. And if you put money into a CD, you might walk away with a really nice interest rate with very little risk.

After all, as long as your CD deposit doesn’t exceed $250,000 at an FDIC-insured bank, you’re guaranteed to walk away with at least $250,000 once your CD comes due. If you invest your money in a brokerage account, there’s a chance you could lose some of it if market conditions aren’t good, or if the specific assets you choose happen to decline in value.

But the one drawback of putting money into a CD is tying it up for a preset period of time. One strategy, however, makes this less of a problem.

Get regular access to your cash

Dumping all of your spare cash into a single CD isn’t really the best idea. What happens if you invest $20,000 in a one-year CD but have a need for money six months down the line? If you cash out your CD before it comes due, you’ll be hit with a penalty that will generally amount to a few months’ worth of interest (each bank ultimately assesses its own penalty, but generally, that’s what you’ll be looking at).

That’s why a better approach to saving in CDs is to build yourself a CD ladder. With a CD ladder, you spread your money across different CDs with different maturity dates. That way, some of your cash gets freed up at different times.

So, let’s say you have $20,000 to put into a CD. Rather than open one CD, what you’d do is take $5,000 and open a one-year CD. You might then open another one-year CD with $5,000 three months later, and another three months after that. So all told, what you’re doing is making sure you have access to a chunk of your money once a quarter.

Of course, this is just one example. You could decide to space out your CDs so they’re maturing every six months instead of every three months. The point, however, is not to put all of your cash into a single CD with a single maturity date.

Give yourself that flexibility

These days, putting money into CDs is a pretty good bet. But the last thing you need is the stress of feeling like you can’t access your money when you need it.

Laddering your CDs can eliminate that worry and help ensure that you have freed-up cash at your disposal every few months. And that could help you feel far more comfortable with the idea of tying money up in a CD.

These savings accounts are FDIC insured and could earn you more than 13x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 13x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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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It’s possible to live in the moment without living for the moment. 

I’ve never been much of a risk-taker, but I was once a person who closed her eyes to inconvenient realities. I cringe as I look back on the bone-headed moves I made during that time. Yes, I learned from them. And yes, I’m smarter today due to the impact of those mistakes. But I still cringe.

One bad move leads to another

To tell you about the second biggest financial mistake I’ve ever made, I need to tell you about the biggest. The biggest financial mistake was buying a home we could barely afford. Prior to buying that house, my husband and I owned a small, starter home. We both worked, and despite the fact that we were also in college, we could afford the mortgage payment. We were saving for the future, and generally rolling along at a steady pace.

I would like to blame my husband, but the truth is, he’s always wanted me to be happy and I talked him into moving. I can be convincing when I set my mind to it, and I laid out the case for the new house with the zeal of an attorney defending a death row client. I had an answer for all of his questions and played on his emotions by convincing him that our two baby boys needed to live in an area with better schools.

Prior to moving into that house, we never used credit cards and focused on paying cash for anything we needed. After move-in day, keeping up with the Joneses became a way of life. We spent money on things we could live without and found ourselves reaching for a credit card when we didn’t have cash.

Worse yet, that move led to the second biggest mistake: Failing to invest for the future. We had access to an employee-sponsored 401(k) with a generous match, but investing for a future that seemed a thousand years away was not on my radar. I told myself that there would always be time to prepare for retirement. At that moment, I just wanted to lead a fabulous life that we could not afford.

$400

Had I not been so caught up in living only for the moment back then, we would be much further ahead than we are today. While things were tight when I overspent, if we stuck to our monthly budget, we could cover our bills, pay miscellaneous expenses, and have $400 left as a cushion.

I could kick myself every time I remember that squandered opportunity. Rather than invest the $400, I found ways to waste it.

We were 24 and 25 years old when we moved into the second house. Let’s say we’d invested that $400 per month in a 401(k) or an IRA earning an average annual return of 7%. We would have built up a nest egg of more than $303,000 by the time my husband hit age 50. If he retired at full retirement age, that account would be worth more than $1.1 million. And that’s if we never increased our contribution.

The cost of delay

I get that we were young and mistakes were inevitable, but we’re still paying for our late arrival to the investment party. Today, a large portion of our monthly income goes directly to savings and investments. We’ll be fine when retirement rolls around, but it comes as a cost.

Unfortunately, most of the financial blowback hits my husband. While I never want to retire, he would like to one day. In order to hit our financial goals, he’ll be working a few years longer than anticipated. While he loves his job, it bothers me that he doesn’t have the option of leaving earlier. Every time he tells me that the situation is perfectly fine, I’m reminded that I’m the one who talked him into living beyond our means.

The good news is that we drilled the adage, “The best time to start investing was yesterday” into our boys. They’re men now and each not only lives below their means, but they’re serious about building a healthy portfolio.

I know that I’m not your mother, but I would still encourage you to learn from my mistakes. The earlier you get serious about the future, the more you’ll thank your past self when the future arrives.

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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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It’s important to buy the right amount of life insurance in any situation, including one where two partners earn equally. 

It’s often the case that having children is a catalyst for buying life insurance. And that’s understandable.

People who are married, for example, but have independent careers might assume that if their partner were to pass away, they’d still have the ability to go out and earn money. But when kids come into the mix, parents tend to get more serious about life insurance. And that’s not a bad thing.

Now, if you’re the sole breadwinner in your household and your spouse doesn’t work, you may be inclined to only purchase life insurance for yourself, since your spouse doesn’t have income to replace. (That’s not necessarily the right choice, but it’s a different topic.) But what if you and your spouse earn the same amount of money? In that scenario, you might assume that only one of you needs life insurance if you don’t need both salaries to cover bills.

Here’s the logic: Say you and your spouse each earn $80,000 a year, and your family can live on just one of your salaries while you save the other. In that case, if your family were to lose $80,000 of income, you’d have less savings — but you’d still be able to keep the lights on. And that way, you can spend less on life insurance premiums.

But while that logic could make sense to some degree, financial guru Suze Orman feels differently. And she thinks that in the above scenario, it’s important that both spouses buy life insurance, even if they’re equal earners.

The wrong assumptions could hurt you

You might think you can get away with only having one spouse get life insurance when both are equal earners. But what happens if you and your spouse are in an accident, and you both pass away? Suddenly, your kids are left with no parents — and no income for support.

One big mistake people make when buying life insurance is assuming that something bad will only happen to one member of a couple. But unfortunately, you never know when both members will be impacted. And so if you have kids, the last thing you want to do is leave them in a position where there’s no money coming in to support them.

Also, let’s say you and your spouse are equal earners, and you decide that only you’ll purchase life insurance. Well, what if your spouse passes away? At that point, you get to live, but you don’t get extra money to help cover your living costs, which could include extra childcare expenses.

That’s why being equal earners doesn’t really change the equation when it comes to buying life insurance. Regardless of what you and your spouse earn individually, you should still both put life insurance in place. And if you’re equal earners, you may want to buy the same amount of coverage.

Don’t skimp in order to save

Some people might skimp on life insurance to keep their premium costs down. But if you buy a term life insurance policy, you may find that its price tag is quite manageable.

Whole life insurance is another story. Whole life insurance can be very expensive, so in that scenario, it’s easy to see why you’d only want to insure one person. But if you opt for term life insurance instead, you might have an easier time affording coverage, thereby making it a no-brainer to put two separate policies in place.

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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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