Money Management

Financial regrets, I’ve had a few. But buying a reliable car and continuing to drive it 15 years later definitely isn’t one of them. Find out more here. [[{“value”:”

Owning a car is expensive — you’ve got to make the loan payments, of course, but there’s also auto insurance to worry about, oil changes, fuel, and replacing the tires every few years. Oh, and registering it and getting it inspected. But depending on where you live in the U.S., you may not be able to get by without a car.

I’ve always lived in a place where I needed a car of my own to get to work and run errands, and I’ve now kept the same one for 15 years and counting. This means I’ve been free of car payments for over a decade. Here’s why this move has been the smartest thing I ever did for my finances.

One fewer financial obligation

Making my last car payment more than a decade ago was easily one of the most exciting moments of my adult life. Before you think that’s sad, you should know that I managed to make all 60 of my monthly car payments in full and on time, even though I was unemployed for more than a year during that period.

The end of car loan payments meant one fewer financial obligation to stress about. When I paid the car off completely, my salary was significantly lower than it had been when I bought it, so this was a big deal.

I was still living paycheck to paycheck, but it was nice to be slightly further away from a financial cliff than I had been. I’ve been through lots of ups and downs with money since then, and it’s always been great to know I don’t have a car payment.

Cheaper insurance coverage

The other big financial perk to keeping the same car for so long is that my insurance coverage is quite reasonable. Part of that is due to me getting older — I was 25 when I bought the car, and I’m 40 now. Drivers in their 20s likely present a higher risk to insurers than those of us who’ve reached middle age.

But the car itself has also aged, and in the event of a wreck, it’s far more likely that my insurer will opt to total it out rather than pay for repairs that will likely cost more than the car is worth. Plus, it came without a lot of the equipment that equals more money paid out by an insurer in the event of an accident.

Cars now come with all sorts of add-ons, but mine lacks Bluetooth capabilities, in-car GPS, and a back-up camera, and the key must be inserted in the ignition switch to turn the car on.

How else can you save on car expenses?

Between 10 years (and counting) without a car payment and reasonably priced insurance coverage, I’m coming out ahead with my elderly car. And that cheaper car insurance is particularly significant, given how much costs have risen over the last few years.

Auto insurance costs are up an average of more than 20% from 2023 to 2024 — even as inflation has fallen. So any money you can save on insurance is a win for your finances.

I recommend keeping your current car for as long as you can — as long as it’s safe to drive and you’re not dumping more money for repairs into it than it’s worth. Here are a few other ways to save on auto insurance:

Shop around: If you’ve had the same insurer for years, there might be cheaper coverage out there for you — you won’t know unless you check, though.Pay your premium in full upfront: Some auto insurers offer discounts to drivers who pay their annual premium all at once rather than monthly.Take a defensive driving course: See if there’s a course you can take to lower your insurance premiums. I’ve taken the same one twice now (the savings are good for three years) and shaved 10% off my insurance costs.Drive more mindfully: If you have a nasty habit of getting speeding tickets, SLOW DOWN. Being a more mindful driver will save you money and could save your life.

I’ve made a lot of financial missteps over the years, but keeping the same car for 15 years is not one of them. I’d love to drive my old car for as long as possible — especially if doing so keeps saving me money.

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We’re likely to see lower rates on high-yield savings accounts soon. Read on to learn why you should breathe easy, even if your HYSA’s rate falls. [[{“value”:”

Unlike some savings products (like CDs, for example), when you open a high-yield savings account (HYSA), you’re signing on for a variable interest rate. You might start out earning 4.50% or 5.00% on the account, only to see that rate fall to 3.50% over time.

This is a bummer, especially if you’ve gotten used to that nice little bump of interest being added to your balance every month. And now we’re gearing up for lower rates on savings accounts, since economic conditions have changed.

The federal funds rate (set by the Federal Reserve) doesn’t directly inform bank account APYs, but the two tend to move in concert. We’ve had a higher than normal federal funds rate for the last few years, as a response to high inflation. But now that inflation has cooled, the Federal Reserve is looking at a series of rate cuts starting as soon as tomorrow.

Does this mean you should be concerned about your HYSA’s rate — or even close the account altogether and open a new one when rates change? Nope. Here’s why.

Choose the right account and you’ll still come out ahead

And by that, I mean it pays to stick with an online high-yield savings account, rather than one offered by your local brick-and-mortar bank. Online banks can afford to pay higher APYs because they don’t have the overhead costs of maintaining bank branches — when your bank is in cyberspace, there’s no physical building to pay the rent on.

The difference in rates between online and branch-based banks can be stark. I have three savings accounts — one with a branch-based big national bank, one with the branch-based credit union that holds my mortgage, and one with an online-only bank.

My big bank account earns just 0.01% APY, my credit union account earns up to 0.05% — but as of this writing, the rate on my online savings account tops 4.00%. It’s for this reason that the bulk of my savings is kept in this account, where it is growing with interest and protected from the effects of inflation.

Yes, I expect this rate to fall once the Federal Reserve cuts the federal funds rate. But even after that happens, it should still far out-earn my other savings accounts thanks to the bank’s lower overhead costs.

Focus on these factors to find the best savings account for you

The other reason not to worry about the APY on your HYSA too much is that ideally, you’ve chosen the account based on more than just its rate. Here are a few other important factors to consider when choosing a HYSA:

Fees: The best banks don’t charge silly fees to keep your money in a certain account.Money access: Ensure you can transfer money in and out of the account easily — and for better access, consider linking a checking account to it.Mobile app: A great banking app lets you manage your money from anywhere.Customer service: If you know you’ll need help occasionally, pick a bank with 24/7 customer service support.

Don’t keep too much money in savings

This is a good problem to have — and a rare one at that. Only 45% of Americans can afford to cover an unplanned $400 expense by only using money from their bank accounts, according to research from The Motley Fool Ascent. That suggests that most of us don’t have enough money in savings to worry about it being “too much.”

If you’re fortunate enough to have this problem, it’s worth moving some of that excess cash to other accounts where it can earn more interest. If you’re saving for emergencies or near-term expenses (like a home purchase in a year), a savings account is the best place for the money.

But if you’re saving for retirement or college expenses for a child who is currently a baby, consider investing your money. The stock market has returned an average of 10% annually over the last 50 years — and that accounts for good years and bad years. For long-term savings, you won’t find a better place to keep and grow your money — no bank account will give you that high of a return.

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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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Your credit score has a huge effect on your financial life. Here’s how your score stacks up to the typical American’s. [[{“value”:”

The most important grade we receive in our lives doesn’t come on any report card; it’s our credit score. Creditors use this to decide what kind of credit card to offer us and lenders use it to set loan interest rates. Some employers use it to decide whether to hire you and landlords might weigh it when considering you as a prospective tenant.

Having an above-average credit score can help you stand out in all these areas, but most people don’t know what an average credit score even looks like. Here’s what the data says.

The average American’s credit is looking pretty good

The average American had a credit score of 763 as of the first quarter of 2024, according to the Federal Reserve Bank of St. Louis. However, it’s not clear what scoring model the bank used to calculate this.

FICO® Scores — the ones most commonly used by lenders — range between 300 on the low end to 850 on the high end. The following table breaks down the typical score ranges:

Under this system, an average score of 763 would fall in the “very good” range. But the Federal Reserve Bank’s data says that it looked at credit accounts with current scores “between 150 and 950,” so it appears it may be using a different scoring system.

Even so, 763 is still close to the upper end of this range, indicating that it’s a pretty good score on whatever scale the Federal Reserve Bank is using. The data also shows that, apart from a dip due to the pandemic, average scores have been trending upward over the better part of the last decade.

How can you raise your credit score?

Unless you’ve got a perfect 850 credit score, there’s always room for improvement. Some of the best steps you can take are:

Pay your bills on time: Payment history is the biggest factor affecting your credit score. Set up automatic payments or notifications for yourself to avoid late payments. And talk to your lender if you’re struggling to keep up with your bills to see if it can offer you any assistance.Limit how much you charge to your credit cards: Maintaining a credit utilization ratio of less than 30% helps keep your score high. The ratio represents the amount of credit available to you vs. the amount you use. For example, if your card has a $10,000 limit and you charge $1,000 to the card, your ratio is 10%.Limit how often you apply for new credit: It’s best to limit your credit card applications to once every six months. Every time you apply, the lender does a hard inquiry on your credit report that reduces your score by a few points.Don’t close cards if you can avoid it: Closing credit cards can lower your average account age, which hurts your score. There are times when you should close accounts, though. For example, if you have a travel rewards card with an annual fee you’re not recouping each year, it makes sense to close it.

Above all, be patient. Boosting your credit score takes time, but it leads to a plethora of positive financial consequences.

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Click here to read our full review for free and apply in just 2 minutes.

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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Passive income is a great thing. But know that it may take time to earn a decent amount of it. Read on to see why. [[{“value”:”

In my 20s, I was no stranger to working a side hustle on top of my regular job. Often, that meant sacrificing evenings and chunks of my weekends. But it was worth doing for the extra savings I built up.

These days, I don’t have as much time for side gigs thanks to my busy parenting schedule. But thankfully, I don’t have to push myself to take on side jobs like I did in my 20s because I’m able to earn a decent amount of money passively through my savings and investments.

You may be eager to swap your side hustle for passive income, too. And who could blame you? Who wouldn’t want to earn interest in the bank or dividend payments in a brokerage account instead of spending hours each week earning extra money?

But while passive income is a great thing in theory, it’s not so easy to earn in practice. So it’s important to be realistic in your approach to it.

It takes time to set yourself up with passive income

I knew about the concept of passive income in my 20s. The reason I worked a side hustle instead back then? I was earning hundreds of dollars a month — and sometimes $1,000 or more. And there was no way my savings account was going to pay me that much in interest, nor was that doable with a portfolio of dividend stocks.

Granted, in my 20s, savings accounts weren’t paying what they are today. But let’s consider today’s rates for a minute.

In a savings account, you can still snag 4% to 4.5% on your money. if you have $10,000 in savings, that gives you an extra $400 to $450 per year, or about $33 to $37 more per month. That’s probably not going to make a huge difference in your finances.

The same applies to a stock portfolio. If you want to earn $100 a month in passive income with a dividend portfolio that has an average 4% yield, you need $30,000 in stocks. If you want to earn $200 a month, you need $60,000 invested.

I wasn’t there in my 20s, so passive income wasn’t a viable means of supplementing my regular paycheck. But now, a good number of years later, I’m in a place where I’m able to earn a decent chunk of passive income. And I credit my side-hustling back then to get me to a place where I was able to build my savings and investment portfolio.

Be patient and do the extra work while you can

The sooner you start saving money and investing, the more passive income you can earn in your lifetime. But if you’re looking for passive income you can use to improve your life, know that it takes time to get to a place where your money is working for you to that degree.

I suggest working a side hustle in your 20s when you may have more energy to do so. At that age, you may not be encumbered by other responsibilities, like taking care of a house or being a parent (not that people don’t buy homes or have kids in their 20s, but you may not do those things until a bit later). That way, you can stop side-hustling in your 30s or 40s and beyond, all the while enjoying the extra money your savings and investments pay you.

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Click here to read our full review for free and apply in just 2 minutes.

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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Credit cards have all kinds of benefits. Discover some of the unsung perks that don’t get discussed very often. [[{“value”:”

Most people focus on a few benefits when comparing credit cards. If they want a rewards card, they look at the rewards rate and the sign-up bonus. If they want a 0% intro APR, they look at how long the introductory APR lasts.

Those are valuable features, so it makes sense to use them to find the best credit card. But there are also some underrated credit card perks that you shouldn’t ignore, either.

1. Purchase protection

Purchase protection is a complimentary insurance coverage. It covers new purchases you make, normally for the first 90 days from the purchase date. It protects against accidental damage, theft, and sometimes even losing the item, depending on the card you have.

Let’s say your new pair of headphones get stolen at the gym or you spill coffee on your new laptop. If you bought the item with a card that has purchase protection and the purchase is eligible, you could file a claim for reimbursement.

2. Fixed-rate travel rewards

With travel cards, it seems like everyone loves transferable rewards. Many of the most popular travel cards let you transfer your points to their airline and hotel partners. After you transfer your points, you can use them to make an award booking with that partner.

You can score incredible deals this way, especially on expensive bookings, such as business-class airfare. But it’s also a complicated way to redeem your points, and there aren’t always good award bookings available.

Some travel cards also let you redeem rewards at a fixed rate — usually $0.01 to $0.015 per point. Instead of needing to transfer your 100,000 points, you could just use them to book $1,000 to $1,500 in travel. This is much faster and easier. If you’re looking for a travel card, consider picking one that has this feature.

3. A Global Entry/TSA PreCheck credit

Another common travel card perk is a Global Entry or TSA PreCheck credit. When you sign up for either of those programs and pay with your travel card, you get a statement credit for the membership fee.

These programs speed up the airport security process. TSA PreCheck allows you to go through the TSA PreCheck security lanes at the airport without removing your shoes or belt or taking your laptop out of your bag. Global Entry offers expedited security when reentering the United States from abroad.

Global Entry is the better choice, because a membership to that program includes a TSA PreCheck membership. I’ve found both programs useful, as they’ve gotten me through airport security much more quickly.

4. Cellphone protection

Cellphones can get damaged easily, and they’re also a frequent target for theft. Every thief has an idea of how much an iPhone costs. Some people pay for cellphone insurance to protect themselves if their phones are damaged or stolen.

With the right credit card, you can get this free of charge. While not as common as purchase protection, some credit cards offer cellphone protection. If you pay your monthly wireless bill with one of these cards, your cellphone is covered for damage or theft, up to the claim limit.

5. No foreign transaction fees

Rates and fees pages aren’t all that exciting, so it’s understandable why people usually don’t review them for long. But if you ever travel internationally, make sure you have at least one credit card with no foreign transaction fees.

Many cards charge a foreign transaction fee, with 3% being the most common amount. If you spend $3,000 on a vacation abroad, that’s an extra $90 in fees you could have avoided.

When you’re checking out a credit card, look a little deeper than the first few features that catch your eye. These underrated perks may not get as much attention, but they’re still valuable.

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This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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A 20% down payment is required to become a homeowner, right? Nope. Keep reading to find out why a smaller down payment isn’t necessarily bad. [[{“value”:”

Buying a house isn’t cheap — and one of the biggest parts of the equation is a down payment. If you’re buying a home using a government-backed mortgage, like a VA, USDA, or FHA home loan, your down payment requirement could be as low as $0. But if you intend to buy with a conventional loan, you will likely have to put some amount of money down.

According to the National Association of Realtors, the average down payment for a first-time buyer in 2022 was 8% — while repeat buyers put down an average of 19%. Making a down payment under 20% for a conventional loan means signing on for private mortgage insurance (PMI) payments, though.

PMI is protection for your mortgage lender if you stop making payments on the home loan. But is PMI really such a big, bad boogeyman? Here’s why making a smaller down payment for a home isn’t a tragedy — and how it may put you in a better financial position as a new homeowner.

Smaller down payment = more money for other expenses

It’s a good idea to put some amount of money down on a home purchase because doing so can make it easier to get approved for a mortgage and will make your monthly payments smaller. But here’s how making a down payment under 20% can give you more flexibility.

More cash for moving and up-front expenses

Moving isn’t cheap, and if you’re upgrading from an apartment to a home, you’re likely signing on for new and different expenses. Personally, I was happy to pay for movers recently to get my belongings out of a second-floor apartment and into my new home.

I also paid up front for a lawn care service to cut my grass for the rest of the mowing season — as a renter, that wasn’t my responsibility.

More cash for emergencies

Having some money in a savings account for emergencies is a smart idea if you’re looking to buy a house. You won’t have a landlord to call anymore when something breaks — if there’s a leaky pipe in the basement, a broken hot water heater, or a clogged kitchen sink, it’s on you to fix it (or pay someone who can).

More cash for fun stuff

If you leave yourself some money left over when you buy, you’ll be able to afford fun purchases like paint and new furnishings without taking on debt. I recommend putting these costs on a credit card, especially if you have one that pays bonus rewards on home improvement costs. Just don’t carry that balance forward — make the purchases and pay off the card.

PMI isn’t forever

It’s also worth considering that PMI isn’t a permanent addition to your mortgage payment — it’ll be canceled when you reach 20% equity in your new home. Plus, depending on how much you’re borrowing and your credit score, it might not even cost you all that much.

I’m paying for PMI on my new mortgage until I reach 20% equity in my home. But my PMI bill comes to less than $40 per month, likely due to having excellent credit and a house that cost far less than the average home price in the U.S. I’m getting peace of mind worth far more than $40 a month from making just a 10% down payment and leaving myself more savings when I bought the house.

You may be ready to buy, even without 20% down

Even if you don’t have 20% of a home’s purchase price saved up, you don’t necessarily have to wait to buy a house. Other factors are also important, especially if you can afford the additional monthly cost of PMI.

Decent credit score: A FICO® Score of at least 620 is the minimum to get a conventional loan. But the higher you can get your credit score, the more money you stand to save on a loan since it will help you qualify for the best mortgage rates and pay less for PMI.Minimal or no high-interest debt: If you have a lot of high-interest debt, it’s worth paying it down before contemplating buying a home. Doing so will boost your credit score and free up more of your income for all the expenses of homeownership.An emergency fund: Buying a home with no money in savings is a terrible idea. Not having an emergency fund could mean winding up in debt immediately in the event of an unplanned home repair.Homeownership interests you: Ultimately, none of this matters unless you actually want to own a home — if you don’t, you shouldn’t buy one, no matter how much you could put down.

Becoming a homeowner can be good for your finances if you approach it in the right circumstances and in the right way. Don’t assume that a 20% down payment is a hard requirement — you may be able to put less down and still be just fine.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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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