Money Management

Want to get ahead of falling CD rates? Read on to see why it pays to take action before Nov. 7. [[{“value”:”

When the Federal Reserve announced a half-point interest rate cut in mid-September, it didn’t exactly take economists by surprise. The Fed was expected to lower its benchmark interest rate due to cooling inflation. And it won’t be at all shocking to see the Fed make a rate cut again at its next meeting, which is scheduled for Nov. 6-7.

The Fed’s rate cuts are good news for people who are looking to borrow money. But they’re not the best thing for people with money in the bank.

CD rates have already fallen in the wake of the Fed’s September rate cut. And they’re likely to fall again after Nov. 7, assuming the Fed makes another cut at that time. You may want to open your next CD before that happens — but only if a CD actually makes sense for you.

It pays to get moving on opening a CD

The 5% CDs savers enjoyed earlier this year are already pretty hard to come by. But you can still get pretty close to 5% if you shop around. Click here for a list of the best CD rates available now.

If you wait beyond the Fed’s next meeting, you may find that you’re looking at a lower APY on a CD. And while a CD might still be worth it at that point, why get stuck earning less interest on your money when taking action now could help you earn more?

Before you rush to put all of your money into a single CD, though, consider a CD ladder instead. With a CD ladder, you split your money into multiple deposits and sign up for various maturity dates.

In other words, instead of putting $3,000 into a 12-month CD, you could put $750 into a 3-month CD, 6-month CD, 9-month CD, and 12-month CD. This gives you the benefit of having a portion of your money free up at regular intervals so you’re less likely to get hit with a penalty for an early CD withdrawal.

Is a CD right for you?

You may be eager to open a CD before rates fall further. But before you do, ask yourself these questions:

Is the money I’m thinking of putting into a CD, cash I might need for unplanned bills? If so, it should sit in a high-yield savings account so you have access to it at all times without worrying about a penalty.Is the money I’m thinking of opening a CD with, cash I might need for a planned expense? If your car has been giving you trouble or you’ve been talking about replacing your washing machine at home, you may want to leave that money in a savings account.Is the money I’m thinking of depositing in a CD, cash I won’t need for about seven years or longer? In that case, you may want to open a top-rated brokerage account and invest it instead. The S&P 500’s average annual return over the past 50 years is about 10%, which beats the top CD rates you might still find today by a mile.

Remember, even if CD rates fall after the Fed’s next meeting, they’re not necessarily going to plunge overnight. If you’re not quite ready to open a CD, don’t sweat it.

Perhaps you’re waiting on your year-end bonus from work to come up with the money, or some holiday cash gifts you intend to save. The point, rather, is that if you have the money on hand now and you’re convinced a CD is right for you, then it pays to open one sooner rather than later.

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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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Financing is almost a given for many car shoppers, whether they’re after new or used. Read on for the best way to save money on a used vehicle. [[{“value”:”

A lot of experts will recommend buying a late-model used car over buying new. The main reason for this is that you don’t spend the first several years just paying for the car’s depreciation. They’re also generally much more affordable.

However, this isn’t the era of $1,000 beater cars anymore. According to Experian data, the typical used car loan is between $20,000 and $28,000, with a term of more than 60 months.

The same data also tells us that interest rates for used car loans are also quite high. Depending on your credit score, your auto loan interest rate may look like something you’d get on a luxury credit card. This doesn’t need to be the case, though.

The higher your credit score, the lower your APR

There’s one surefire way to get the best interest rates on your auto loan: have a great credit history. A high credit score will get you the lowest rates possible.

Here’s a look at the average rate for a used car loan by credit score:

As you can see, folks with bad credit may be paying a rate more than three times higher than the borrowers with excellent credit. Your interest rate sets the cost of your loan and has a huge impact on your monthly payment.

Pro tip: Having great credit can actually help you get a lower rate on your auto insurance, too.

Top scores pay $188 a month less on $25K auto loan

So, what do those interest rates mean in the real world? Well, the final numbers will depend on your specific loan amount, fees, and so on. But let’s look at a typical example.

Let’s assume a $25,000 loan with a 60-month term. Here’s a look at the monthly payments and total loan cost based on the same APRs we saw above:

From one extreme to the other, you’re looking at a difference of about $188 a month. Multiply that by 60 months, and the person with excellent credit will pay $11,252 less for the same $25,000 car as someone in the lowest score bracket.

Your score also impacts the size of your loan

In the above example, we assumed that everyone gets the same $25,000, 60-month auto loan. But in reality, the people at the lower end of the credit spectrum may not qualify for such a large loan without a substantial down payment.

The better your credit is, the more likely you are to get as much financing as you need — without having to jump through hoops to get it.

A down payment can help balance low scores

Building your credit is the best way to improve your rates and loan size. However, you can also up your appeal as a borrower by bringing a good-sized down payment to the table.

If your current vehicle has a decent trade-in value, this could be the simplest solution. Otherwise, you’ll need to offer a cash down payment, which may take some time to save up, so it’s best to start saving well before you plan to buy the car.

Keeping your down payment in a high-yield savings account can help it grow while you save up. Consider our favorite high-yield savings accounts to take advantage of APYs of 4% and higher.

A cosigner can also help you get approved

Another option for getting approved for an auto loan with a bumpy credit history is to have a cosigner with good credit. You can essentially piggy-back off their good credit, both improving your ability to get approved as well as (potentially) your APR.

The cosigner is taking a risk, however, as you will both be equally liable for the loan. If you default on the loan, both of you will suffer a lot of credit damage. Make sure you can 100% manage the loan before asking anyone to cosign.

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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.Brittney Myers 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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Your interest rate could change soon. Here’s when you’ll have a good idea of what to expect. [[{“value”:”

High-yield savings accounts with interest rates well above 4% can readily be found from reputable financial institutions, but there’s some uncertainty surrounding how much longer that will last.

Specifically, the Federal Reserve cut its benchmark interest rate for the first time in more than four years in September, and this already has sent many high-yield savings account interest rates lower. The Fed is set to meet again very soon, with its next interest rate decision set to be announced following that meeting’s conclusion on Nov. 7.

To be perfectly clear, there is no direct relationship between the interest rates paid by high-yield savings accounts and the Fed’s interest rate moves. However, the latter affects the cost of borrowing money for banks, and as a result, the two tend to move in the same direction. As I’m writing this, the federal funds rate is set to a target range of 4.75%-5.00%, and it isn’t a coincidence that the highest-paying savings accounts on our radar have rates very close to that range.

With that in mind, here’s what the most recent expectations for the upcoming Federal Reserve meeting are, and what it could mean for your high-yield savings account.

If you’re looking to lock in today’s high interest rates before the Fed cuts any further, click here for today’s top CD rates.

The latest Fed expectations

Over the past few weeks, expectations have clearly shifted in favor of an additional rate cut in November. According to the CME FedWatch tool, which tells us the interest rate expectations priced into financial markets, the median expectation is for a 25-basis-point rate cut (0.25%). In fact, the tool estimates that there is now a more than 96% probability of this happening.

This has shifted in recent weeks. In fact, just one week ago, there was a 14% chance of no rate cut at all.

A quarter-percent rate cut would be less aggressive than the half-percent cut the Fed made in September, but it is consistent with the Fed’s own expectations. Along with its September interest rate cut, the policymakers also released their economic projections.

The projection of Federal Reserve Board members called for another 50-basis-points of rate cuts before the end of 2024, and with two meetings to go (there’s another in mid-December), one rate cut at each remaining meeting would certainly make sense.

What it could mean for your high-yield savings account

If the Fed cuts rates by a quarter of a percentage point as it’s expected to do, it would be reasonable to expect high-yield savings and money market account interest rates to fall by this amount or slightly less. As a personal example, when the Fed lowered interest rates by 50 basis points in September, my HYSA’s rate fell by 30 basis points soon after.

It’s also worth noting that this is just the beginning of an expected rate-cutting cycle. The policymakers in the Fed foresee another full percentage point of rate cuts in 2025 and even more in 2026.

Of course, because there is no direct link between the benchmark rates set by the Fed and your savings account interest rate, there’s no way to know for sure what your bank will do. Some might choose to keep their rates higher for longer as a way to attract new customers during the rate-cutting cycle.

But the bottom line is that the Fed’s decision in November is more than likely going to be reflected in the interest rates paid by the top online banks.

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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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I should have started investing earlier. Read on to find out how time and compounding interest can work on your side. [[{“value”:”

Not many people get through their life without having some financial regrets. Maybe it’s a car you bought that was too expensive, a money pit home renovation, or spending too much on a family vacation that wasn’t worth the cost.

But while many financial regrets have to do with spending money, one of my biggest regrets so far is not saving money and investing it early enough in my working career.

I missed out on the benefits of compounding interest

I worked for a while before I paid any attention to setting aside money for my retirement. I didn’t know much about investing and thought little about my long-term financial needs, so I didn’t devote much mental energy or money to it.

That was a mistake, and nothing drives that point home better than looking at the power of compounding interest to turn a little money into a lot of money. Let’s take a look at a hypothetical example of a worker who begins investing right away and does so for the next 25 years, compared to someone who waits 10 years into their career to get started:

The chart shows that 10 additional years of investing could earn 2.5 times more over your investment horizon!

I picked a 7% rate of return because that’s about the historical average rate of return of the S&P 500 after accounting for inflation. I also chose $223 in monthly contributions because Americans’ average savings rate was 4.5% in 2023, and for someone with a median U.S. salary of $59,384, that savings rate equals about $223.

Related: Before you get started investing, make sure you have an emergency fund. Click here to see the best high-yield savings accounts for a rainy day.

How to get started with investing

One of the biggest hurdles to investing is that many people don’t know where to begin. Here are a few basic steps to get started.

1. Open a brokerage account

A brokerage account allows you to buy and sell stocks. Many investing apps are linked to brokerage accounts. When you open the account, you can even choose whether or not you want to set it up as a tax-advantaged account, like an individual retirement account (IRA).

We did the homework for you. Click here to see our complete list of best brokerage accounts.

2. Pick an index fund that tracks the S&P 500

You don’t need to be an investing genius to buy stocks. In fact, one of the best ways to invest is to buy an index fund that gives you a small stake in 500 of the biggest publicly traded companies in the U.S.

When you buy an S&P 500 index fund, you spread your money across a wide range of companies. This helps you reduce some volatility in your investments and allows you to benefit from the S&P 500’s gains. Historically, the S&P 500 has gained 10.2% on average, and after accounting for inflation, that works out to gains of around 7%.

I don’t think too much about my past financial mistakes. I can’t go back and change them anyway, so there’s no point in spending too much time thinking about them. The best way forward is to learn from our mistakes and let them impact how we make new decisions.

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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 good chance your savings account rate will dip shortly. Read on to see what to do about that. [[{“value”:”

It’s a big misconception that the Federal Reserve is in charge of setting consumer interest rates. The Fed doesn’t dictate what rate your mortgage lender offers you, or what rate your credit card company charges on your balance.

Rather, the Fed oversees the federal funds rate, which is what banks charge each other for overnight borrowing. But when the Fed’s benchmark interest rate rises, consumer interest rates tend to follow suit. And when the Fed cuts its benchmark interest rate, consumer interest rates tend to drop.

Meanwhile, the Fed is expected to lower its benchmark interest rate at its upcoming Nov. 6-7 meeting. The Fed already cut interest rates once this year in September, and it’s likely we’ll see a follow-up cut due to cooling inflation.

That’s not a bad thing if you’re looking to take out a loan. But it’s not the best news for people with money in the bank.

Expect to start earning less on your savings

Once the Fed makes its next interest rate cut, there’s a good chance your savings account will start to pay you a bit less. How much less is the big question, and it’s hard to know the answer ahead of time.

A big part of it will depend on the extent to which the Fed cuts rates. If it’s a half-point cut, which was the case in September, your savings account’s APY might take a larger plunge than if the Fed only makes a quarter-point cut.

But either way, following that meeting, you should expect your savings to start paying you a bit less. The question is, what should you do about it?

Should you move money out of your savings now?

You may be inclined to move money out of savings in light of the Fed’s anticipated November interest rate cut. But if that money is serving as your emergency fund, then your best bet is to keep it in a savings account.

If you have money beyond what you need for emergencies in a savings account, then you could look into opening a CD before the Fed’s next rate cut. The nice thing about CDs is that your APY is guaranteed once you sign up.

But money you might need for unplanned bills or a period of unemployment should stay parked in a savings account, even with rates expected to fall. The reason is that there can be steep penalties for withdrawing money from a CD before it matures. With a savings account, you don’t have to worry about those.

However, this doesn’t mean you need to keep your emergency fund in your current savings account. There’s nothing wrong with shopping around to see if there’s a better deal than what your existing bank has to offer. Check out this list of the best savings account rates today.

Of course, if you’ve looked around and are confident your current bank is the right place for your money, then there may not be much action to take with your savings at this point if you need the cash for emergencies. But it’s still good to know what to expect given the Fed’s upcoming meeting. That way, any reduction in interest earnings you face won’t come as a surprise.

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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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