Money Management

Even if the Fed cuts interest rates in September 2024, the best savings accounts are still worth getting. Check out a few reasons why. [[{“value”:”

There’s a lot of chatter in the news these days about Fed interest rate cuts starting this month. If the Fed cuts interest rates, does that mean opening a high-yield savings account is a bad deal?

No! Even if interest rates go down soon, there are still several good reasons to open a savings account. Here are a few reasons why you should keep your cash in the bank, and keep looking for the best high-yield savings accounts in September 2024.

1. Savings accounts keep your money liquid

One of the best reasons to open a savings account is to keep your money “liquid,” meaning it’s easily accessible and you can withdraw your cash at any time. If you have an emergency savings fund of a few thousand dollars (or less), it’s important to have that money ready to withdraw on a day’s notice.

Opening a CD instead of a savings account can be the wrong move for your emergency fund. That’s because CDs make you lock up your money. If you take your deposit out of the CD before the agreed-upon length of time (or “term”), the bank can charge you early withdrawal penalties.

Savings accounts are simple, easy to use, and flexible. Your money is there when you need it, with no penalties. No matter what happens next with Fed interest rate cuts, the liquidity and freedom of accessing your cash make savings accounts a good choice.

2. Savings accounts still pay good interest

Even after the first Fed interest rate cut, the best savings accounts will likely still pay fairly high interest — perhaps as high as 5.00% APY. If you can put $10,000 into a savings account that earns 5.00% APY, that means after one year, you’ll have earned $500.

Keep in mind that unlike CDs, savings account rates are not fixed — the APY on your savings account can change at any time based on Fed interest rate changes or the bank’s decisions. And no one knows for sure what the future of savings account rates will be. The Fed might keep cutting interest rates throughout 2025, and drive down APYs by 1.00% or more.

But even if the best savings account APYs go from 5.00% to 4.00% (or less), savings accounts offer guaranteed “passive income” on your savings. You don’t have to do anything, you don’t have to take risks — you just have to sit back and watch your money grow.

3. Savings accounts are safe compared to stocks or other investments

Speaking of risks: another good reason to open a savings account is that savings accounts are safe. In fact, savings accounts are generally considered to be one of the safest places to keep your money. As long as you use a bank that’s a member of the FDIC, your savings account is FDIC insured in case of bank failure (protected up to $250,000 per depositor, per FDIC-insured bank, per account ownership category).

If you’re worried about losing money in the stock market, keeping cash in a savings account is a safe strategy. Any short-term cash, like an emergency fund or money that you’re saving for a short-term goal (such as two or three years from now) should probably be kept in a savings account.

There’s such a thing as holding too much cash in your portfolio, but most Americans don’t have that problem. You don’t have to invest every dollar. If you only have a few thousand dollars of cash (or less) outside of your 401(k) or other retirement accounts, and you don’t want to risk losing your money to the volatility of stocks or other potentially risky assets, keeping your cash in a savings account is a smart move.

Bottom line

Opening a high-yield savings account gives you flexibility for using your money, the guaranteed protection of FDIC insurance, and respectable earnings on your cash. Even if the Fed cuts interest rates soon, the best savings accounts might still offer 5.00% APY.

There’s nothing wrong with keeping your emergency fund and other short-term cash in a safe, accessible bank account that earns interest.

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Checking accounts aren’t the best place for long-term money. Here are three signs yours might be overfunded. [[{“value”:”

Of all the financial problems that life can throw at you, having a cash-stuffed checking account isn’t the worst one to encounter. On a scale of “I don’t know what to do with my unlimited PTO” and “the wifi doesn’t reach the farthest end of our pool,” this problem might fall somewhere in the middle.

Even if it’s not particularly severe, a bloated checking account isn’t ideal. Not only can it keep you from earning more interest elsewhere, but it could also lead you to spend money instead of saving it.

It’s not always easy to know how much is too much in your checking account. If the following three signs resonate, it might be time to open a high-yield savings account.

1. You have more than a few months’ worth of expenses

Of all the different bank products, checking accounts typically offer the best access to your money. Debit or ATM cards, check-writing privileges, and branch availability make your cash widely accessible. This ready access to your cash makes checking accounts good for emergencies, especially if other cash is tied up in less-accessible accounts, like CDs.

At the same time, you don’t want to keep too much emergency cash in your account, even if it’s there to cover the unexpected. One to two months’ worth should be sufficient, especially if you’re also storing cash in a savings account.

I keep at least one months’ worth of emergency expenses in my checking account. I do this so I never have to worry about having sufficient cash to meet that months’ expenses, thereby helping me avoid overdrafting. I have a bigger emergency fund that’s connected to my account and that I can tap anytime.

Depending on your situation, you might want to keep more than one month, but I wouldn’t go over two months’ worth. At that point, you’re losing money on interest that could be earned in high-yield savings accounts.

2. You’re not expecting a big expense soon

Some people use checking accounts to stash money for big expenses that they’re expecting. They know, for instance, that they’re going to spend $5,000 for a home remodeling project. Since they know they’re going to spend this money, they just keep it in their checking account until they pay the contractor.

Using your checking account to prepare for big purchases is fine, if it helps you stay focused. But if you’re not making the purchase within a few months, a savings account would be the better option. Because interest rates on checking accounts are typically low, a savings account would help you hit your goal faster. You can always use a credit card for the purchase, then move money from your savings into your checking account to pay for it.

3. You don’t have retirement accounts

If your checking account is swollen with cash, and you don’t have a retirement account, that’s a good sign it’s a bit bloated.

Checking accounts aren’t the best place to keep money for long-term purposes. They might offer the most convenience, but they don’t have the best interest rates, nor do they offer growth that outpaces inflation. By stashing lots of cash in your checking account, you’re missing out on better growth opportunities in your IRA or 401(k).

If you believe your checking account is overfunded, check out some high-yield savings accounts to balance it out. Keeping some cash in your checking account isn’t a bad thing, but be sure to balance that stability and money access with growth in other places.

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Smart shoppers can use gift card savings to cover the cost of their Costco membership. Discover how gift cards can save you hundreds of dollars. [[{“value”:”

Buying gift cards at warehouse stores like Costco can be a great way to get extra value from your Costco membership. You can regularly save 10%, and some gift cards will give you discounts of 30% or more. That includes big brands like Uber and Instacart — as well as some others that may surprise you.

While gift cards do make great gifts, you don’t have to give them away. Look for brands you buy regularly, whether that’s movie tickets, eating out, or gaming. For example, if you often order pizza from Domino’s, you can pick up $100 worth of gift cards for just $74.99. What’s more, if you’re a Costco executive member, most gift cards qualify for your 2% cash back.

It’s worth checking regularly to see what’s available online or in-store. Costco’s gift card selection is always changing, and there are sometimes extra savings to be found. Here are five lesser-known gift cards to watch out for.

1. Spafinder

The only thing that beats a bit of pampering is when that pampering comes at a 20% discount. Spafinder has over 20,000 locations in the U.S. Your gift card will give you access to all kinds of services, including massages, facials, and salon treatments.

You pay: $79.99

You get: Two $50 eGift cards worth $100

You save: $20.01 (20%)

2. Roblox

I haven’t met anyone under the age of 18 who doesn’t love Roblox. The gaming platform has something for everyone, from virtual worlds to individual games. It’s free to set up an account, but — as any parent will tell you — you need to pay to do anything beyond the basics. If your kids or younger relatives are eager Roblox fanatics, this is the gift card you need.

You pay: $44.99

You get: $50 digital gift card

You save: $5.01 (10%)

3. Go City Passes

If you’re the type of sightseer who likes to cram a lot in, Go City passes could be for you. The pass gives you free access to as many attractions as you can fit in. For example, in New York, that includes the Empire State Building, the Edge, the One World Observatory, and more.

Costco online has two-day Go City passes for New York, San Diego, Los Angeles, and Oahu right now. The company boasts it can save you up to 50% on top attractions. You’ll save even more with a gift card.

You pay: $179.99

You get: A two-day Go City pass. In New York, that’s normally worth $259.

You save: $79.01 (over 30%)

4. Landry’s restaurants

Costco sells a couple of different restaurant chain gift cards, so look to see which one is best for your tastes and local area. Landry’s is the company behind eateries like McCormick & Schmick’s, Rainforest Cafe, and Bubba Gump Shrimp Co. The gift card is valid in over 400 restaurants throughout the U.S., with a heavy presence in Texas.

You pay: $79.99

You get: Two $50 eGift cards worth $100

You save: $20.01 (20%)

5. Theatre, concert, and sports tickets

Keep an eye out for tickets to your favorite shows. To give you an idea, as I write this, Costco members can get two three-day tickets to the GoldenSky Country Music Festival in Sacramento for $299. Buying them directly would cost $232 each — $464 for two. Using the gift card would cut the cost by more than a third.

In fairness, it’s a relatively limited selection ticket-wise. Even so, Costco currently offers tickets to Cirque du Soleil in several cities, music festivals, and shows of well-known performers. You can also get discounted gift card tickets for top sports events, including football, baseball, and NASCAR.

How to maximize your gift card savings

We’ve seen how you can score some great savings by buying Costco’s gift cards. Watch out for extra discounts, as these can save you even more. For example, Costco often sells a $500 Southwest Airlines eGift card at $449.99. But every so often, you can get it for $429.99.

Plus, you may also be able to earn rewards on your gift card purchases:

Costco Executive members: If you’re an Executive member, gift card purchases are eligible for your 2% cash back reward. The only type of gift card that doesn’t qualify is the Costco Shop Card, the warehouse giant’s own card.Costco credit card rewards: Some — but not all — credit card companies allow you to earn rewards on gift card purchases. It’s worth finding out if yours does and double-checking to see if there’s a fee or whether it might be treated as a cash advance (and therefore subject to immediate interest charges).

Whether you’re opting for popular gift cards or lesser-known ones, you can use gift cards to snag some serious discounts. That said, it’s similar to shopping a sale — don’t buy gift cards just because of the offer. If you weren’t already planning to go to that GoldenSky Country Music Festival, you’re spending money, not saving 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.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, JPMorgan Chase, and Uber Technologies. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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Side hustles can be risky if your boss finds out. But sometimes, it’s all for the best. See why starting a business can be the best career decision. [[{“value”:”

In 2010, when my wife was pregnant with our second child, I had a side hustle that almost got me fired from my corporate cubicle job. I started freelancing on the side on a website called Elance (now Upwork).

And I loved it! Making extra money on my nights and weekends, while working from home with a flexible schedule, was the most empowering feeling I’d ever had. I still remember how exuberant I felt when I saw my first side hustle business income arrive in my bank account: “I just got money from the internet!” I shouted. “Maybe I can make enough money this way to support my family.”

I even won the Grand Prize in a contest on Elance/Upwork where I wrote a blog article about why I loved freelancing — I got paid $10,000 for that single blog post. I was triumphant! Nothing could stop me! But then, my day job found out about my side hustle.

Here’s the story of how my side hustle almost got me fired from Corporate America — and why it was worth it.

Beware of HR policies about moonlighting

I did not violate any company policies with my freelance side hustle. (I double-checked the fine print in the HR handbook before I started). I was not working for competitors, using company time or company resources for my side hustle, or otherwise breaking the rules of my full-time employment.

But still: Many corporate employers don’t look fondly at moonlighting side hustles. Freelancing or working a remote side job while holding down a full-time paycheck might not get you fired, but your boss might question your loyalties — “if you have all this extra time and energy to do side hustles, what are we paying you for?”

That’s what happened to me: I got put on a 30-day termination notice at my day job because of my freelancing at night. Oh well!

Don’t burn the candle at both ends

Another pitfall of side hustles is that you might spend so much time and effort on side projects that your performance suffers at your day job. This started to happen to me, too. I was getting burned out at my day job and my side hustle started to seem more appealing.

Burning the midnight oil on freelance projects was exciting and profitable, but it made it harder for me to wake up early to go to work at my corporate cubicle job. And once again, my boss noticed.

Sometimes you just have to quit your job

It turns out that I had a happy ending with my corporate job: I rallied under pressure, started showing up on time and working harder, and I didn’t get fired. Right after our second child was born, I took unpaid FMLA leave — and then I quit my job to pursue my own business full-time.

I had built up a few months’ worth of cash savings in the bank and I had a few freelance projects all ready to go. I left my corporate job on good terms and with no hard feelings. And I’ve never looked back.

The process of leaving my corporate job was stressful, but it was the right thing to do. Sometimes it’s hard to choose the right time to quit your job to start a business. Lots of people don’t get to choose. Leaving a corporate job to start a business isn’t always a neat, tidy process.

I did the best I could. If anything, my only regret is that I didn’t quit my job a year earlier — because I could’ve had another year to build up my small business and get to a better level of income and career fulfillment.

Why side hustles are worth the risks

As I look back on my corporate career, I’m grateful that I never got fired from a job (despite a few close calls). But even if I had gotten fired because of my side hustle, pursuing a side hustle and starting my own business still would have been the right choice.

By starting my own business, I’ve gone on to make more money, have more fun, and travel all over the world in ways that never would have been possible at a corporate cubicle job. I’ve taken my family to places like London, Berlin, Tokyo, Paris, and Montréal. I’ve been able to be productive and make money 365 days per year, from anywhere with wifi, on my own schedule, on my own terms.

And some people might think that leaving a corporate job is too risky. But as a small business owner, especially if you’re an online freelancer, consultant, or e-commerce business owner, your money can come from the entire internet, instead of from one cubicle, one office building, and one boss. Which deal sounds like better financial security to you?

Bottom line

Sometimes in life, you can’t wait for a corporation to give you permission to make your dreams come true. You have to do what’s right for you and your loved ones. If you value the perceived stability of having a steady paycheck from a full-time job, that’s totally fair — but if you have the hustle, skills, curiosity, and relentless spirit of an entrepreneur, you might want to put more time into your side hustle instead.

Turning your side hustle into a full-time business can deliver bigger income in your bank account, and blissful freedom in your everyday life.

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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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A lot of people are rushing to open CDs. Check out three moves to consider instead. [[{“value”:”

There’s a reason certificates of deposit (CDs) have been such a popular savings option lately. CD rates are still sitting near record highs, but that may not be the case for much longer. Once the Federal Reserve begins cutting the federal funds rate, banks will likely follow suit and CD rates won’t be as generous. So you may have heard that now’s the time to open a CD — before you end up stuck with a lower rate.

Opening a CD this September isn’t necessarily a poor choice. But it may not be the best decision for you — not when you could go one of these routes instead.

1. Put your cash into a savings account

The nice thing about CDs is that they let you lock in a guaranteed interest rate on your money. With a savings account, your interest rate is not set in stone. So once the Fed starts its rate cuts, your savings might start to pay less.

But there’s a big benefit to sticking with a savings account: the flexibility to take a withdrawal whenever you want without risking a penalty. With CDs, there’s generally a fee when you tap a CD before its maturity date. And that’s important right now.

First of all, you never know when an emergency expense might arise, like a home or car repair, so it’s a good thing to leave yourself with access to money for unplanned bills. On top of that, a lot of people are worried about the state of the economy.

August’s jobs report was better than July’s, but the number of new jobs added last month fell short of economists’ expectations. And whenever there’s an upcoming election, there tends to be a degree of economic uncertainty to begin with. While there’s no need to sound a recession alarm anytime soon, it’s also not a bad idea to keep more cash in a savings account — even if it means earning a bit less interest than with a CD.

2. Invest in a brokerage account

You may like the idea of earning a 5% return on your money in a CD. But if you invest your money in a brokerage account, you might enjoy a return that’s twice as large. Over the past 50 years, the stock market has delivered an average annual 10% return, accounting for good years and bad.

If you’re not sure what you want to do with your money, a short-term CD of 12 months or less could be a better bet. But if you’re willing to invest your money on a long-term basis, then a portfolio of stocks is a better bet for maximum returns. And if you’re not sure how to choose stocks for your portfolio, investing in an S&P 500 ETF, or exchange-traded fund, is a good alternative.

3. Start an IRA

The sooner you begin saving and investing for retirement, the more your money is likely to grow. So while you could invest your money in a brokerage account this month, an individual retirement account (IRA) offers one big benefit: Your contributions can serve as a tax break.

The maximum amount you can put into an IRA in 2024 is $7,000 if you’re under age 50 and $8,000 if you’re 50 or older. These limits can change from year to year, though.

But for now, let’s say you’re thinking of putting $3,000 into a CD, only you pivot to an IRA instead. That means the IRS won’t tax you on $3,000 of your income. If you fall into the 22% tax bracket, that contribution shaves $660 off of this year’s IRS bill.

You may be tempted by today’s strong CD rates, and that’s understandable. But if you dig deeper, you may come to the conclusion that a savings account, brokerage account, or IRA is a better option.

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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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The Federal Reserve is set to start lowering interest rates. Here’s when it will happen and what you need to know. [[{“value”:”

Sept. 18. That’s a key date for CD investors to know, as it could mark a turning point that causes generationally high yields to start to reverse course and head lower.

Specifically, Wednesday, Sept. 18, is the date when the Federal Reserve will announce its latest interest rate decision. The central bank is widely expected to lower the target range on the federal funds rate for the first time since 2020. This could have an almost immediate impact on CD interest rates.

With that in mind, if you have money in CDs, are thinking about putting money in CDs, or aren’t sure what the best income investment is for you, here’s what you need to know about what the Fed’s interest rate decision will mean to you.

The Fed is expected to lower the federal funds rate

The Federal Open Markets Committee (FOMC) is the name of the policy-making arm of the Federal Reserve. Among other things, this committee is tasked with setting the federal funds rate, a benchmark interest rate that has implications for the rates consumers pay when they borrow money and the yields they receive on deposits.

Technically, the federal funds rate is the interest at which banks lend money to one another overnight, but it’s the consumer interest rate effects that you’re most likely to notice.

The federal funds rate is currently set in a target range of 5.25%-5.50% by the FOMC. It was increased rapidly in 2022 and 2023 to help fight inflation after being held at a “near-zero” target range of 0%-0.25% for about two years.

Eight times each year, the FOMC meets to determine its interest rate policy. As mentioned, the Fed is widely expected to lower rates at the conclusion of its September meeting. Experts disagree on whether the federal funds rate will be lowered by 0.25 percentage points or 0.50 percentage points, but the overwhelming consensus is that we’ll see the first interest rate cut since the COVID-19 pandemic started in early 2020.

What’s more, this is expected to be the first in a series of rate cuts that are expected to continue through 2025. In fact, by the time the FOMC meets in December 2025, the median expectation is that we’ll have seen a total of 2.5 percentage points of rate cuts.

What does it mean for CD investors?

The short answer is that banks that offer high-yield CDs will likely lower their CD interest rates soon after the Fed’s decision, according to the magnitude of the rate cut.

This is especially true when it comes to shorter-term CDs (say, 18 months or fewer), which tend to be most reactive to short-term interest rates. Longer-term CD yields tend to be based on a combination of the current interest rate environment and expectations for future interest rates, which is why 5-year CDs have generally paid lower interest rates than 1-year CDs in recent years.

Here’s how you can prepare

If you already have money in CDs, there’s nothing you need to do. Your interest rate is already locked in for the entire term.

On the other hand, if you have money on the sidelines and are thinking about opening a CD, or if you have money in a high-yield savings account that you aren’t going to need for the foreseeable future, it could be a smart idea to act quickly and lock in a CD rate before Sept. 18.

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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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