Money Management

Certificates of deposit provide an opportunity for serious growth. Read on to learn how younger investors can best take advantage of these tools. [[{“value”:”

Investing can seem intimidating, but it doesn’t have to be. For those who are just getting started, there is one simple, but effective, way to grow your money: certificates of deposit (CDs). Unfortunately, there are some misconceptions about these tools, including the idea that they aren’t useful for younger folks. This article is here to set the record straight and show how you can best take advantage of them as a young investor.

Here’s what you need to know.

How CDs actually work

When you open a CD, you’re agreeing to keep a certain amount of money stashed away in that account for a specific time period. In exchange, the bank will provide interest on that cash, which is significantly higher than you’d find with something like a traditional savings account. And, unlike many other account types, the interest rate is fixed, so you know exactly how much you’re earning over that time period.

CDs have some drawbacks, such as the time requirement. For example, if you end up needing to dip into that cash during the term, you’ll have to pay an early withdrawal fee, depending on how long the cash has been in there. So it’s vital to make sure you can afford that risk by having some sort of savings available for unplanned bills. Banks may have minimum deposit requirements, too, which can also vary based on the CD’s term.

An example of CDs in action

Let’s say you have $1,000 that you want to invest in a CD, and you choose a 6-month CD with a 5% APY. By the end of the term, you’d get $25 in interest on your original investment. That’s not a huge return, but it’s certainly better than putting that cash into a low-rate savings account.

Why CDs are great tools for young investors

Obviously, the more you have to invest, the better. That’s true for CDs, too. But as a young investor with, presumably, less money to put into various investing tools, a CD can be an excellent way to help protect your investments against market fluctuations. Even if you were to compare CD performance against something like a high yield savings or checking account — which may have rates that match or even exceed some CDs right now — there is one factor that you have to consider: the nature of the APY (annual percentage yield).

With CDs, the APY is fixed, so you know what you’re getting back from the jump. But with a high-yield savings account, which can come with other requirements to access, you may see that rate decrease as banks adjust their offerings.

There are other methods you can use to grow your CD balances even more, too. For example, you could choose to split up your invested cash into several CDs that mature at different times, giving you access to some of that money faster, in case you need it. (This is called CD laddering.) Each time a CD matures, you could either cash it out or reinvest it in another CD.

Over time, a CD ladder can net you quite the financial cushion, especially compared to how much your money might grow (or shrink) if invested in the market, which typically is best for long-term investing. Plus, the longer you have to invest, the more you stand to gain. So while some may see CDs as an older investor’s tool, they can be useful for anyone.

CDs aren’t the most attractive investment vehicles, but they are safe (thanks to FDIC insurance) and can be great options for new investors who are looking to diversify their portfolios. Just make sure you’re getting one that matches your circumstances and needs.

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A retirement account is one of the best ways to build wealth. Check out what kind of results you could get if you put $10,000 into an IRA. [[{“value”:”

Individual retirement accounts (IRAs) are often recommended by financial experts. They allow you to save for retirement, while also saving on taxes. Your contributions are tax-deductible, and you only pay taxes when you withdraw your money in retirement.

Before you open one, you may want to know what kind of results you can expect. For an idea of that, let’s look at how much $10,000 could grow in an IRA.

What kind of returns do IRAs offer?

To figure out how much you could earn with an IRA, we need to estimate how much your annual return will be. That depends on how you invest the money you deposit. If you simply parked $10,000 in an IRA, nothing would happen. After you deposit your money, you also need to invest it.

The great thing about IRAs (besides the tax savings) is that they let you buy almost any type of investment. They’re not like 401(k) plans, where you have limited investment options. With an IRA, you can invest in anything your broker offers, which likely includes:

StocksBondsMutual fundsTarget-date funds

Most investors go with a combination of stocks and bonds. Some buy individual stocks and bonds themselves, but it’s more common to buy mutual funds or target-date funds that do the work for you.

As far as returns go, the average stock market return is about 10% per year. The average annual return for bonds is about 6%. While returns vary from year to year, if you invest your money for a long time period, there’s a good chance you’ll get returns in the 6% to 10% range.

Here’s how much you could earn with $10,000 in an IRA

So, let’s say you put $10,000 into an IRA. Just so you know, you’d need to do this over two years. IRAs have annual contribution limits, and in 2024, the limit is $6,000 (or $7,000 if you’re 50 or older).

You’d be able to deduct those contributions on your income taxes in the years you made them. If that money would’ve been taxed at 22%, then $10,000 in total contributions effectively saves you $2,200 in taxes.

The table below shows how much that would grow over 10, 20, and 30 years, depending on the annual return you get.

Over long periods, investing is a powerful way to build wealth. Just look at the 30-year growth. If you get 8% per year, you end up with 10-times as much money. At a 10% annual return, you have over 17-times as much as you started with.

The results also demonstrate how much investment performance matters. That’s why it’s best to invest heavily in stocks while you’re young, so you can maximize growth. Until you’re within about 10 years of retirement, keep most of your portfolio in stocks, not bonds.

Make investing a habit for even better results

Investing can help you build quite a bit of wealth, even if you make a one-time investment and simply leave it alone from there. But you’ll earn more if you make investing part of your routine. A good way to do this is to invest a portion of your income, such as 10%, every month.

Let’s say you have $10,000 in an IRA. You also contribute $500 per month, which comes out to $6,000 per year. You get an 8% annual return — a reasonable estimate. Here’s how much money you’d make:

After 10 years, you’d have $115,462.After 20 years, you’d have $343,147.After 30 years, you’d have $834,702.

Keep in mind that after 30 years, you’ll have contributed $190,000. The other $644,702 is money made from interest and compound interest.

An IRA is one of many ways to save for retirement. A 401(k) plan is also a good idea, if you have that option through your employer. What’s important is that you’re putting away money for retirement through tax-advantaged accounts. If you do that and invest well, you’ll be financially ready when you want to call it a career.

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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.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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CDs are often touted as being 100% risk-free, but that’s not actually the case. Learn about three risks you’re taking when you put your money into a CD. [[{“value”:”

When you’re looking into investment options, certificates of deposit (CDs) can seem like a pretty risk-free investment. After all, they are FDIC-insured so your investment (up to $250,000) is protected against bank failures. And the rate of return you earn is also guaranteed, so you’ll know upfront exactly how much your return on investment will be.

The reality, though, is that while CDs are fairly safe, there are still risks associated with investing in them. In fact, here are three reasons why it’s wrong to assume you can’t lose with a certificate of deposit.

1. You could lose money if you have to take the funds out too early

The biggest risk you face when you put money into a CD is that you’ll be penalized if you must break the CD early. See, you have to commit not to withdraw your invested funds until the CD term matures. Depending what term length you choose, this could take as little as a few months or as long as five years.

Penalties vary by bank and by CD, but typically amount to around 90 to 365 days of simple interest. This can add up to a big penalty. And it’s possible you’ll not just lose gains, but also some of the principal you invested. This can happen if you have to make a withdrawal before earning enough interest to cover the fees.

Now, you may believe this won’t happen to you since you don’t plan to break the CD term early. But no one can predict the future, and circumstances may arise that make pulling out your funds early necessary. So, you need to take this risk under consideration before you decide a CD is right for you.

2. You could lose ground due to inflation

There’s another big risk to think about as well. When you put your money into a CD, your rate is guaranteed for the duration of the term. This is a good thing if interest rates go down. It’s a bad thing if interest rates go up and you’re stuck with a CD that’s not paying you much.

You’ll not only miss out on higher potential gains if this happens to you, but you could also effectively lose ground if you are stuck in a CD that’s paying less than the rate of inflation. If you bought a 5-year CD in January of 2022, odds are your rate would have been around 1.00% or less. In 2022, the inflation rate ended up being 8.00%.

If you were earning 1.00% while prices were going up 8.00%, your invested money was losing buying power. Now, this is a pretty extreme example, but it’s absolutely not unheard of for inflation to outpace CD rates to some degree. It’s a risk you need to consider before opening one.

3. There’s an opportunity cost of tying your money up in a CD

The final risk you should think about is the risk associated with being too conservative with your investments. CDs cap your rate well below what the stock market can offer, even at today’s current high rates.

If you are tempted by the safety CDs provide and you put money into them that could instead go into the market, you risk severely limiting the returns you can earn and thus the wealth you can build. You don’t want to do that, so you should not put money into CDs if it’s money you can leave invested for more than five years. Using a brokerage account to buy shares of an S&P 500 index fund is a better option.

You need to consider these risks before you open a CD. If you decide they’re worth taking, check out The Ascent’s guide to the best CD rates right now. If you decide that you’d rather put your money elsewhere, you can check out this guide to the five best places to put your money in 2024.

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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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[[{“value”:”Image source: Getty Images
If you have a pet, or are considering adopting one, there’s one really important thing you have to think about every single day of their lives: feeding them. When you feed them and how much you feed them is incredibly important — but so is what you feed them.There are plenty of decent pet foods out there, and some really good ones, but it’s hard to know what to choose if you’ve never had a pet before. Let’s walk through two really important reasons why you should choose expensive pet food, and one reason to avoid it.Reason No. 1: Expensive pet foods perform AAFCO feeding trialsWhen I was looking for a new pet food for my dogs, who are now all between 9 and 14 years old, I asked my veterinarian what to buy. I wasn’t going to skimp on their care, and since he was seeing them almost as much as I was, it just seemed like a good idea to get his input.This was the conversation where I learned about AAFCO feeding trials.Pet food is formulated in different ways. Some rely on AAFCO (Association of American Feed Control Officials) guidelines to make a formula that roughly follows the requirements, but without any testing, and others make the food following said guidelines, and then test it over and over again.It costs a lot of money to do AAFCO feeding trials, which generally include feeding a bunch of random animals the food in question for up to six months, weighing and measuring them, taking blood samples, analyzing what comes out at the end of the day and comparing it to what went in. That’s the only real way to know if a food is doing what it’s supposed to do.Just because all the right raw ingredients are there doesn’t guarantee they’ll work or interact in the way you expect they should. For formulated pet foods, it’s very important to actually know what they’re doing to ensure your pet is nutritionally supported for the stage of life they’re in.Reason No. 2: Expensive foods can prevent, treat, or support specific medical needsI’m almost embarrassed to admit how many special diets are currently going on in my house, but elderly pets have specific needs. Sometimes younger pets do, too. For example, I had a friend who had a male cat who had a problem with urinary crystals. If you know anything about this condition, you know that it can often be fatal.My friend’s cat was on an expensive food formulated just for urinary crystals that helped him live a better and more pain-free life. He’s no longer with us, but for years, that cat ate a urinary-focused diet that wasn’t cheap, but did treat his condition.In the same way, my dogs have expensive foods that are formulated for their specific needs as they’ve gotten older. Even our non-prescription diets are not cheap because I only want to feed foods that have undergone AAFCO feeding trials so we can eliminate potential sources of health problems that may exacerbate their existing medical conditions.If you check with your vet, you’ll find both prescription and over-the-counter foods by brands that do AAFCO feeding trials that can also be used to support your pet’s condition, or treat it, depending on the issue at hand.One reason to avoid expensive pet foodsThere’s one reason — and just one reason — to avoid expensive pet foods that people don’t often talk about. And that’s because sometimes, expensive pet foods aren’t made to appeal to a pet’s needs, but to their owner’s lack of understanding of those needs.One of the biggest offenders is dog food made using “human-grade ingredients.” Dogs, as it turns out, aren’t humans, and they don’t have the same needs as humans. That doesn’t mean that quality doesn’t matter, but remember that your dog is just as likely to try to eat eggshells out of the garbage as he is to gobble your filet mignon.Brands that make this claim do not undergo AAFCO feeding trials, and you can always tell from their marketing that the real customer is you, and not your dog. I won’t name names here, but if there’s a lot of color, appeal to “the first ingredient,” or other kind of dodgy-sounding marketing, it’s probably exactly that.You can go broke feeding your pet these foods and still not be providing them a nutritionally sound diet. Always ask your vet before starting a new diet, because ultimately, they’re the ones best trained to rule on your animal’s health and welfare.A pet’s life is short; feed it wellThere’s always a lot of juggling to be done in this life, but one thing that you shouldn’t skimp on — for yourself, your dog, or your cat — is proper nutrition. Sure, we all like a pizza and a mound of chili fries now and then, but there has to be room for broccoli and lean proteins, too.Something else to consider, if cost is an issue, is that some pet insurance policies will cover some of the expenses of prescription pet food. But you won’t have coverage if you don’t ask (or if you don’t have a policy), so aim to find out before you start your pet on a new diet.Alert: highest cash back card we’ve seen now has 0% intro APR until 2025
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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.”}]] [[{“value”:”

If you have a pet, or are considering adopting one, there’s one really important thing you have to think about every single day of their lives: feeding them. When you feed them and how much you feed them is incredibly important — but so is what you feed them.

There are plenty of decent pet foods out there, and some really good ones, but it’s hard to know what to choose if you’ve never had a pet before. Let’s walk through two really important reasons why you should choose expensive pet food, and one reason to avoid it.

Reason No. 1: Expensive pet foods perform AAFCO feeding trials

When I was looking for a new pet food for my dogs, who are now all between 9 and 14 years old, I asked my veterinarian what to buy. I wasn’t going to skimp on their care, and since he was seeing them almost as much as I was, it just seemed like a good idea to get his input.

This was the conversation where I learned about AAFCO feeding trials.

Pet food is formulated in different ways. Some rely on AAFCO (Association of American Feed Control Officials) guidelines to make a formula that roughly follows the requirements, but without any testing, and others make the food following said guidelines, and then test it over and over again.

It costs a lot of money to do AAFCO feeding trials, which generally include feeding a bunch of random animals the food in question for up to six months, weighing and measuring them, taking blood samples, analyzing what comes out at the end of the day and comparing it to what went in. That’s the only real way to know if a food is doing what it’s supposed to do.

Just because all the right raw ingredients are there doesn’t guarantee they’ll work or interact in the way you expect they should. For formulated pet foods, it’s very important to actually know what they’re doing to ensure your pet is nutritionally supported for the stage of life they’re in.

Reason No. 2: Expensive foods can prevent, treat, or support specific medical needs

I’m almost embarrassed to admit how many special diets are currently going on in my house, but elderly pets have specific needs. Sometimes younger pets do, too. For example, I had a friend who had a male cat who had a problem with urinary crystals. If you know anything about this condition, you know that it can often be fatal.

My friend’s cat was on an expensive food formulated just for urinary crystals that helped him live a better and more pain-free life. He’s no longer with us, but for years, that cat ate a urinary-focused diet that wasn’t cheap, but did treat his condition.

In the same way, my dogs have expensive foods that are formulated for their specific needs as they’ve gotten older. Even our non-prescription diets are not cheap because I only want to feed foods that have undergone AAFCO feeding trials so we can eliminate potential sources of health problems that may exacerbate their existing medical conditions.

If you check with your vet, you’ll find both prescription and over-the-counter foods by brands that do AAFCO feeding trials that can also be used to support your pet’s condition, or treat it, depending on the issue at hand.

One reason to avoid expensive pet foods

There’s one reason — and just one reason — to avoid expensive pet foods that people don’t often talk about. And that’s because sometimes, expensive pet foods aren’t made to appeal to a pet’s needs, but to their owner’s lack of understanding of those needs.

One of the biggest offenders is dog food made using “human-grade ingredients.” Dogs, as it turns out, aren’t humans, and they don’t have the same needs as humans. That doesn’t mean that quality doesn’t matter, but remember that your dog is just as likely to try to eat eggshells out of the garbage as he is to gobble your filet mignon.

Brands that make this claim do not undergo AAFCO feeding trials, and you can always tell from their marketing that the real customer is you, and not your dog. I won’t name names here, but if there’s a lot of color, appeal to “the first ingredient,” or other kind of dodgy-sounding marketing, it’s probably exactly that.

You can go broke feeding your pet these foods and still not be providing them a nutritionally sound diet. Always ask your vet before starting a new diet, because ultimately, they’re the ones best trained to rule on your animal’s health and welfare.

A pet’s life is short; feed it well

There’s always a lot of juggling to be done in this life, but one thing that you shouldn’t skimp on — for yourself, your dog, or your cat — is proper nutrition. Sure, we all like a pizza and a mound of chili fries now and then, but there has to be room for broccoli and lean proteins, too.

Something else to consider, if cost is an issue, is that some pet insurance policies will cover some of the expenses of prescription pet food. But you won’t have coverage if you don’t ask (or if you don’t have a policy), so aim to find out before you start your pet on a new diet.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

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.

“}]] Read More