Money Management

CDs offer lower rates than you could earn from investing, plus you have to tie up your money for a set term. Find out if they’re still worth buying. [[{“value”:”

CDs are currently paying pretty high yields. In fact, there are a lot of CDs to be had with rates above 5.00%. You’ll take minimal risk if you open one from our carefully-curated list, since these CDs are all FDIC insured.

But, while you can get risk-free returns above 5.00% today, CDs still aren’t a great investment for most people. Here’s why.

CDs aren’t always great for long-term investors

When you buy a CD, you’ll find out your interest rate upfront. It’s guaranteed for the CD term. It won’t change, even if market conditions do.

Unfortunately, even though rates are pretty high right now, the rates CDs offer are still well below what you could make with other investments, like an S&P 500 index fund. Your interest rate on your CD is capped at the rate when you bought it, so even if you get a CD paying 5.00%, you’re limiting your potential returns to about half of what the S&P 500 has reliably provided over the last several decades.

Now, accepting a lower CD rate because CDs present almost no risk of money loss can make sense, because there is some risk to stock market investing. But the S&P 500 has a really consistent track record for long-term investors. If you have a long enough investing timeline (five or more years), odds are that you won’t lose money and you’ll instead earn somewhere around the 10% average returns the S&P 500 has paid for decades.

Plus, CDs are unlikely to pay 5.00% or higher forever. There are already 20% fewer CDs providing these yields than there were just a few months ago. And while your rate is guaranteed for the CD term, once that term expires, you could find yourself earning much lower yields.

This means they really aren’t a great long-term option if your goal is maximizing your returns over many years.

CDs aren’t always great for short-term investors

For one thing, you have to agree to lock up your money — usually for at least three months and for as long as five or 10 years, depending what CD term length you pick. So, if you’re a short-term investor and will need your money really soon, a CD isn’t a good place for it.

In an ordinary market, you’ll also get lower rates for CDs with shorter terms. That’s not the case right now. Because interest rates are so high and expected to fall soon, shorter-term CDs are temporarily paying more than longer-term ones. Once economic conditions stabilize, though, it’s almost certain you’ll have to accept a much lower yield if you only want to invest for a few months’ time.

These yields may not be much different from what you can get in a savings account that keeps your cash more accessible.

See, while high-yield savings accounts typically pay a slightly lower rate than CDs do, that’s also not the case right now. Savings account rates are comparable to, or in some cases higher than, CD rates at the moment. That means, in the current climate, it really may not be worth putting your cash into a CD and giving up the liquidity savings accounts offer.

Even in a normal market, the discrepancy between high-yield savings accounts and CDs isn’t usually huge. Giving up the access to cash that comes from using a savings account often isn’t worth the small amount of extra interest income a CD may be able to provide. That will be especially true if, in the future, neither type of account offers the amazing rates available today.

Now, it’s true that CDs lock in your rate while savings accounts don’t. But if you’re only buying short-term CDs lasting a few months to a year, you’re still vulnerable to interest rate fluctuations, so this isn’t a huge benefit worth giving up liquidity for either.

Should you invest in a CD anyway?

As you can see, there are some downsides to CDs and only limited upsides. Because of that, a CD really only makes sense in specific circumstances when you have money you’re definitely OK with tying up for three months to five years, but definitely not OK with keeping invested any longer.

That’s a pretty specific situation that most people won’t find themselves in. If that’s not your situation, check out the best high-yield savings accounts for short-term investing or open a brokerage account for your long-term investing needs, instead of choosing a CD.

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You don’t need to get lucky with the lottery to become a millionaire. With time and careful spending, many of us can build wealth. Find out how these banking practices could help. [[{“value”:”

When you think about millionaires, you might assume they spend their time in private jets, flying around the world sipping champagne, and snacking on caviar. The reality is that many self-made millionaires got there by being frugal, making consistent investments, and avoiding unnecessary spending.

But what can we learn from their banking habits? Here are three that many of us can emulate.

1. Millionaires have easily accessible cash in case they need it

If there’s one piece of money wisdom I’ve heard more than any other, it is this: You need an emergency fund. A Capgemini survey of 3,000 high-net-worth individuals early last year showed that they held 34% of their money in cash or cash equivalents. That figure was higher than in previous years because higher interest rates have made savings accounts more attractive.

Having three to six months of living expenses socked away in a high-interest savings account cushions you against the unexpected. That cash is there in case you lose your job or have to cover a medical expense. It can help you avoid taking on high-interest debt, reduce stress, and invest with a long-term perspective.

What it means for you: If you’re already worried about how to cover your essential bills each month, an emergency fund may seem like an unattainable luxury. It’s certainly much easier to build that kind of financial security when you have money to spare.

Even so, many of us can put some cash aside for emergencies. You don’t need to pull those savings out of a hat overnight. And having even something saved is better than nothing. Check out our top high-yield savings accounts to find a good home for your savings.

Look over your recent bank statements and see if you might be able to cut $10 or $20 from your spending. Perhaps there’s a subscription you aren’t using or some spending areas you could cut back on. If you put $10 a week into your savings account, you’ll have $500 within a year. That’s a great start.

2. Millionaires check their balances

Tom Corley interviewed hundreds of millionaires and non-millionaires for his book Rich Habits, Poor Habits. He found that 96% of self-made millionaires balanced their checkbooks every month. You don’t see many checkbooks in use these days, but the process of tracking your transactions and making sure everything adds up is still a useful banking habit.

READ MORE: Best Checking Accounts

What it means for you: Schedule regular times to check in with your finances. I have repeating calendar entries with reminders so I don’t forget. You’ll be able to avoid overdraft fees and be confident that you have enough money to meet your obligations. If you’re trying to pay down debt, build your retirement fund, or save for a specific goal, it’s a great way to make sure you’re on track. You’ll also notice any fraud or bank errors and be able to take action quickly.

Online banking makes it easier than ever to keep track of your money. You can view your balance, check recent statements, and transfer money at the click of a button. If you have several accounts, consider connecting them to a budgeting app so you can see all your activity in one place.

3. Millionaires avoid credit card debt

According to Corley’s research, only 3% of self-made millionaires carry a balance on their credit cards. Credit cards often charge high rates of interest, which means carrying a balance can be costly. When you are building wealth, every dollar counts. If you’re spending money on interest payments, that’s money you can’t invest or save for the future.

Millionaires use their credit cards. Over 90% of self-made millionaires said they had credit card rewards points or dollars. But they pay their balances off at the end of each cycle, so they get the benefits of a card without the interest costs.

What it means for you: If you carry a balance on your credit card, you’re not alone. And you are likely hyper-aware of how much you spend in interest. Unfortunately, at the end of last year, Americans owed more than $1.12 trillion in credit card debt, according to the Federal Reserve Bank of New York. Increasing numbers of people are struggling to repay that money.

If you’re unsure about how to tackle your credit card balance, start by making a repayment plan with clear goals about how much you’ll pay off each month. See if you can aggressively cut your spending or increase your income, even for a short period. Put any extra cash toward your balances. Check out our guide on paying down credit card debt for more.

More widely, avoid using your credit card for spending that you can’t cover. If you can’t afford to buy something outright, see whether you can delay the purchase until you’ve saved enough. An emergency fund will let you cover unexpected and essential expenses without whipping out your card.

Key takeaway

A lot of self-made millionaires got there by growing the gap between what they spend and what they make. The bigger that gap, the more money they have to invest. And over time, those investments can generate wealth.

The way you bank is one aspect of building wealth, but it says a lot about your attitude toward money. Building an emergency fund, avoiding high-interest debt, and monitoring your financial situation are all habits that will help you reduce your spending and free up cash to invest for the future.

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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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Freelancing is a whole new way of life. Learn what you can expect if you take the plunge. [[{“value”:”

I’ve been a full-time freelancer for more than a year now, and cutting the W-2 strings wasn’t a decision I made lightly. I had just changed careers from museum work to digital content editing and writing a year before I started freelancing part-time, and taking it a step further seemed like a scary prospect.

Ultimately, though, I took a deep breath and decided to try it out — after using my part-time freelance income to put my personal finances into solid shape first. I paid off all my debt and built actual savings for the first time, giving myself a safety net.

Here are the money changes I faced as a result. If you’re considering becoming a freelancer, I hope my experience can help you decide.

1. I’m never not thinking about income taxes

No one really enjoys paying taxes, but they’re the price of living in a civilized society. If you’re a W-2 worker, you likely only think about income taxes once a year, when you file your tax return (and perhaps dream about a tax refund). Your employer pays on your behalf, and you can find a summary of the taxes paid on your paystub.

As a freelancer, I’m not so lucky — not only do I pay higher taxes (as both employer and employee), but they aren’t taken out of my pay automatically. Instead, I have to keep track of how much I earn and ensure I’m putting aside enough money to cover my tax bills with my state and the federal government — which I pay quarterly.

I don’t have to do all the math by myself because I pay a CPA to file my annual returns and tell me how much I should be paying every quarter based on my earnings. Every time I get paid, I take a percentage of it right off the top, and it sits in a sub-account of my high-yield savings, ready to go when I owe taxes (on Jan. 15, April 15, June 15, and Sept. 15).

2. I have to fund my own PTO

No traditional employer means no traditional employer-sponsored benefits, like paid vacation time. In my museum days, I wasn’t usually privy to great benefits, but my longest-tenured gig did offer plenty of PTO. These days, if I want paid time off, I have to plan ahead and fund it myself.

At the end of last year, I decided to do just that, and designated another sub-savings account as my personal PTO fund. I’m steadily funneling post-tax cash to it, with a goal of having at least two weeks’ worth of my typical pay ready to go. If I want to take a trip and not do any work, or even just need a sick day, I can make up the paycheck shortfall out of this money.

3. Health insurance is my second-largest monthly bill

My days of getting health insurance through work are over. Instead, I turn to my state’s healthcare marketplace for a plan — and since I qualify for no income-based subsidies, I must foot the bill for it entirely. For 2024, my monthly health insurance premiums are my second-largest expense, after my housing.

To be fair, I could have selected a less costly plan. But my cheaper 2023 plan cost me a ton of money beyond my premiums, thanks to its high deductible — and no, it didn’t even qualify for an HSA. So I decided to splurge a little in 2024. That’s one perk of getting your own coverage — you can opt for whatever plan you want.

4. My work (and earning power) is entirely flexible

If I’m starting to bum you out with my lamentations about health insurance and taxes, I’m sorry. But the work flexibility I gained when I became a full-time freelancer is absolutely worth more to me than any of the above issues I deal with now.

I usually worked on a fixed schedule and from a fixed location for the entirety of my old career. This made sense, as the work I was doing was for the benefit of spaces that the public visited in person. Now my work is entirely based on the internet, and as a remote freelancer, I can do it from wherever I want.

Usually, this means I work from home — I’ve put time and money into creating a comfortable home office, and it’s the area where I’m most productive. But I can also take my work with me if I’m traveling, which means I don’t end up needing to take as much time off unpaid (or dip into my PTO fund as much). Working is a good way to kill time in an airport, in case you’re wondering.

It also doesn’t matter if I work outside the typical nine-to-five schedule; since my work is on the internet, it’s always available to me if I have wifi. I’m a morning person, and in the past when I had jobs on that traditional “office work” schedule, I struggled to make it past 3:00 p.m. and stay productive. Now I can start my work day earlier and finish earlier — or take a break in the afternoon and come back to my tasks later in the day if I have the time and inclination. It’s been a game changer and easily worth the financial complications of freelancing.

Is freelancing right for you and your finances? Well, if the thought of sourcing your own benefits and paying more taxes more often isn’t a turn-off, you might want to consider it. In my experience, the benefits have far outweighed these drawbacks — both for my life and my budget.

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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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Leave it to parents to impart great financial wisdom. Read on for some tips my mom was kind enough to share when I was growing up. [[{“value”:”

It’s been many years since I’ve lived in the same house as my mom. But we talk multiple times a week, and during those conversations, she’s often eager to impart advice.

Often, that advice is of the parenting variety. Some of those tips are more well-received than others. But one type of advice that has definitely been well-received on my part is the financial advice my mom was kind enough to share with me when I was younger. Here are three incredibly helpful tips that have guided me as an adult.

1. Always have emergency savings

Last year, SecureSave found that 63% of Americans could not cover an unplanned $500 expense simply by tapping their savings. And that’s kind of frightening.

One thing I’m grateful my mom taught me was to always have money in the bank. And I actually built an emergency fund in my 20s that wound up coming in handy on multiple occasions for the following decade and beyond.

When I got into a minor accident that totaled my way-too-cheap car, I was able to dip into my savings account to help buy a new one. And I’ve used my emergency fund numerous times since buying my house, to fix the myriad things that have gone wrong.

So I’m glad my mom hounded me to put my babysitting money into the bank when I was a teen. That was technically the starting point for my emergency fund, even though I didn’t really make a ton of progress toward building it until I began collecting a regular paycheck.

2. Never let credit card companies make money off of you

I grew up watching my mom use a credit card at stores, and she explained to me at a fairly young age how they work. My mom also helped me apply for my first credit card when I went off to college.

But I’m really glad my mom explained back then to never charge more on my credit card than I could afford to pay off at the end of my billing cycle. Back then, my wages were truly minimal, as I only had income from a part-time job I did along with my studies. But I’m thankful I took that advice, because had I allowed a balance to accrue on my credit card, it no doubt would’ve taken me ages to pay it off.

Of course, I’ve upheld that rule since. And I’m happy to report that although I’ve held credit cards in my name for more than 20 years, not once have I allowed a credit card company to take away some of my money in interest form.

3. Spend more for a higher quality of certain items

There wasn’t a lot of money in my household growing up, so my parents taught my siblings and me how to be frugal. But my mom always emphasized the fact that certain things in life are worth spending on.

While we wore a lot of hand-me-down clothes and little-known brands, one thing my mom usually invested in was warm coats. To this day, I’m still willing to spend a little extra on my kids’ coats, even though I’m someone who’s very frugal about buying children’s clothing. I’ll also pay extra for quality footwear, because good running shoes can spell the difference between tired, injured feet and healthy ones.

Food is another area where I’m willing to stretch my budget a bit. It would be cheaper to buy my kids extra chips to snack on instead of fruits and vegetables. And to be clear, they certainly consume their fair share of chips. But I make a point to prioritize fresh produce because it’s important to me that my kids attempt a balanced diet (or as balanced as you can get when half of what they consume is instant mac and cheese).

I’ll be the first to admit that I’m not always someone who listens to my mom — that wasn’t me as a kid, and I tend to be pretty opinionated as an adult. But these are three lessons I’ve definitely kept in mind through the years, and I’m grateful for the positive impact they’ve had on my finances.

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Gas prices can be very different throughout the United States. Read on to learn where you can save the most on fuel costs. [[{“value”:”

If you’ve only lived in one region of the United States, you might not realize just how big of a difference there can be when it comes to gas prices. In fact, you might be surprised to learn that the difference in the per-gallon average between the least and most expensive states is nearly $2.30 per gallon as of this writing.

With that in mind, here’s where you can find the cheapest gas, and why it is so inexpensive in some places.

Why are gas prices different throughout the country?

As you’ll see in the next section, gas prices can vary dramatically from one state to the next. There are some good reasons for it.

First, and most significant, is taxes. There are state and local taxes on gasoline, and these can vary widely. On the high end of the spectrum, California has an average state gas tax of $0.779 per gallon. On the other end, Alaska’s gas tax is less than $0.09 per gallon. Not surprisingly, this has a lot to do with how much you pay at the pump.

In addition to taxes, there are some other factors that influence gas prices. According to the U.S. Energy Information Administration, here are some of the main contributing factors to the cost of gasoline:

Distance from supply: It costs a lot of money to transport gas a long distance, so it could be cheaper right near a refinery compared with somewhere that is 200 miles away from the nearest supply source.Competition: If there are fewer gas stations in a specific area, it can cost more than in areas where stations are abundant.Environmental regulations: Some states require the use of reformulated gasoline to help reduce pollution, and this can make the gas cost more. Other locations restrict transportation and storage of gasoline, which can also add to the cost.

Where is gas the cheapest?

The national average price of a gallon of gasoline is approximately $3.66 as of April 30, according to AAA.

I won’t keep you in suspense. The state with the cheapest gasoline is Mississippi, which has an average price of just under $3.10 per gallon. Colorado is very close, with a per-gallon price that also rounds to $3.10.

These aren’t the only states with below-average gas prices. Oklahoma, Louisiana, and Arkansas all have average prices of less than $3.20 per gallon, and another seven states have gas that costs less than $3.30 per gallon.

If you’re curious, California has the most expensive gas in the United States, with an average price of $5.39 per gallon. Six other states (Alaska, Hawaii, Washington, Oregon, Nevada, and Arizona) have gas prices in excess of $4.00 per gallon, as well.

To clarify, these are the average prices for regular gasoline (as opposed to mid-grade or premium).

The bottom line

Here’s why this can be a big deal for your budget. The average American drives 14,263 miles per year, according to the Federal Highway Administration. And the average fuel economy of a new vehicle sold in the U.S. is about 25 miles per gallon.

A quick calculation shows that the average driver buys about 571 gallons of gas per year. If you were to buy that gas in California, you’d spend $3,078. In Mississippi, you’d pay $1,770 — more than $1,300 less than in the Golden State.

Of course, gas prices are only one factor to consider when deciding where to live. Even other transportation-related costs like car insurance rates can vary widely. But the gas savings in a low-cost state can amount to more than you think.

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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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If you’ve decided to open a CD, you’ll want to pick the best one for your situation. Read on for tips to choose the right account. [[{“value”:”

If you’re hoping to invest in a CD, now is a great time to find one. There are quite a few CDs offering rates above 5.00%. That’s an extremely competitive yield, considering you’re taking on very little risk with this investment.

The one problem, though, is that there are so many good CDs out there, it can be hard to pick the best one for your situation. If you’re struggling to choose, here’s what to do.

1. Decide how much you want to invest

Some CDs have no minimum balance requirements at all. You can invest with whatever amount of money you have available. Others require you to deposit at least $500 to $2,500 — or more. You’ll need to find a CD that doesn’t require you to invest more than you can afford to tie up.

When you decide how much to invest, think carefully about two things:

How much money can you afford to leave invested for the CD term? There are penalties if you take money out early, so be absolutely certain you won’t need the cash.What is the opportunity cost? Any money you put in CDs is not as liquid as cash in a savings account. And investing in a CD will cap your annual returns at about half (or less) the returns you could make if you invested in an S&P 500 fund. So, consider what you’re giving up by tying up your money in a CD.

2. Decide how long your CD term should be

Most CD terms fall between three months and five years. That’s a big range of time. Whatever CD term you choose, you’ll be guaranteed to earn the promised rate during that time period. And you’ll have to leave your money invested for that duration to avoid penalties.

When you decide on a CD term, consider:

Your comfort in committing your funds for that long: If there’s a chance you’ll need the money sooner, you should choose a shorter term.Rates offered by CDs with different term lengths: Right now, short-term CDs are paying more than long-term CDs. This is the opposite of what usually happens, as you normally get paid more for agreeing to commit your money for longer. You may decide you want to take advantage of the chance to earn some impressive yields without a long commitment.The likelihood that interest rates will go up or down: If you think rates are going to go down soon, it may pay to buy a CD with a longer term, like a 3- or 5-year CD, so you can ensure you’re able to keep earning the high rates available today.

3. Comparison shop to find the best rates

After you’ve decided how long your term should be and how much you can invest, it’s time to shop around and see the different CD offers that are out there. The Ascent’s list of the best CD rates is a good place to start. You’ll want to focus on:

The rate paid: The higher the APY, the better.The term: Pick a CD based on the term you chose.The minimum investment required. Pick a CD that doesn’t require you to invest more than you decided was safe.

After doing these three steps, you should be able to identify the best CD, buy it online, and start watching your money grow.

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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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