Money Management

Many banks offer attractive rates on their savings accounts, and savers can win big. Find out why you may still want to stash some of your extra cash in a CD. [[{“value”:”

Many people keep their savings in a bank account that earns interest. Doing this allows them to be prepared for future expenses and earn extra money while their money sits in the bank. You may wonder where the best place to keep your savings is.

With savings accounts paying up to 5%, is there any benefit to keeping your extra money in a CD instead of a savings account? There’s one significant benefit you should consider. I’ll explain what you need to know when deciding where to keep your extra cash.

Savings account rates can change

I keep my emergency fund in a high-yield savings account to earn more interest. Traditional savings accounts tend to have much lower interest rates, so I benefit from the higher rates high-yield savings accounts offer. Every extra dollar I earn is a win for my wallet.

I also use a high-yield savings account so I can easily access my money when needed. I can withdraw my money without penalties if I need to use it for an unplanned expense. I can access my money within a few business days, even with an online bank.

However, one important thing to know is that savings account interest rates can change anytime. That means my bank’s current rate may not be the same a few weeks or months from now. So I could earn less from interest if the rate declines in the future.

Many banks are offering rates of up to 5% for their high-yield savings accounts, but that could change at any time. So, if you want to benefit from a guaranteed rate, a high-yield savings account may not be the best place to keep all your extra cash.

CD rates are guaranteed for a fixed period

Some savers use certificates of deposits (CDs) to lock in rates. If you’re concerned about the rate for your high-yield savings account dropping, this may be an option to explore.

Here’s how a CD works: You earn interest at a set rate for a fixed period, depending on the terms of the CD. It’s common to see CDs with terms of six months, one year, two years, or longer. But you’ll pay penalties if you withdraw your money before the term ends.

No-penalty CDs exist, but they typically don’t offer as attractive interest rates as regular CDs. Any extra money you pay in fees adds up and impacts your personal finances. It’s essential to understand the terms before opening a CD.

Consider your plans for your money

Before deciding whether to move your extra savings into a CD, consider your plans for the money. Do you plan to access the funds later this year? If you think you might need to use the money for an emergency, you may want to keep it in a high-yield savings account. But if it’s money that you don’t intend to touch for a few years, a CD may be a great option.

Some savers move a portion of their extra money to a CD to benefit from the rate lock, and then they keep the rest of their savings in a high-yield savings account so they can access it quickly without worrying about penalty fees. This could be a good strategy if you have a sizable amount of savings.

No matter what you decide, it’s wise to carefully research banks and bank account options to choose the right product for your needs. If you’re considering a CD, review our list of the best CD rates to learn more.

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If you have credit card debt, taking advantage of a balance transfer offer could save you money on interest. Find out what you should do. [[{“value”:”

If you owe $1,000 on a credit card, you’re probably paying a lot of interest on that card. This is all money that you’re wasting making your credit card company richer. But there’s something you might be able to do to save some of your hard-earned cash even if you can’t just write a check to pay off your card.

This money-saving move could leave you with far lower interest costs

If you want to drastically reduce the interest you’re paying on your credit card, you could opt to take advantage of a balance transfer offer.

A balance transfer offer is an offer by a card company to entice you to transfer your balance. For example, you could get an offer that allows you to pay 0% interest on transferred balances for 12 or 15 months.

Now, there’s usually an upfront balance transfer fee that ranges from around 3% to 5%. But you could still save a lot even after the fee because dropping your rate down to 0% makes a huge impact.

How much would a balance transfer save you if you owe $1,000?

The specific amount that a balance transfer would save you depends on a few factors, including how high your interest rate is right now and what you’re currently paying on your credit card.

The table below shows what you might be able to save if your card charges the average interest rate of 21.59% now and you make a 2% minimum payment required by your card issuer.

And this table shows your potential savings if you pay $69 per month (around the amount you’d need to pay to end up with a $0 balance by the time a 15-month promotional 0% rate expires).

As you can see, whether you’re making only the minimum payment or you’re paying enough to become debt-free by the end of the balance transfer period, transferring your balance to a new card can save you a lot of money.

In fact, if you’re making minimum payments alone, you’d save $213.53 on interest charges by switching to the balance transfer card. Even after accounting for the $30 transfer fee, you’d have avoided $183.53 in unnecessary credit card financing costs.

Should you do a balance transfer?

Moving forward with a balance transfer may seem like an easy call. After all, why wouldn’t you want to drop your rate from upward of 20% down to 0%, even if you have to pay a small fee to do it?

There are a couple of caveats:

Ideally, you should pay off the balance in full by the time the promotional period ends. Otherwise, your rate will jump up to the standard rate on that card. If the balance transfer card has a higher rate than your current card and you’ll still owe a lot when the 0% rate ends, you could theoretically end up paying more over time.You don’t want to feel as if you’re making progress when you aren’t. Transferring a balance doesn’t solve your debt problem; only paying off your balance can do that. You can’t use balance transfers as a substitute for a real, concrete plan to become debt-free ASAP.

Keeping these caveats in mind, here’s what you should consider doing if you owe money on your cards.

Find a balance transfer off with a long 0% APR period and a low transfer fee. You can check out your options on The Motley Fool Ascent’s list of the best balance transfer offers).Calculate how much you’d have to pay each month to repay your full transferred balance. If you owe $1,000 and have a 15-month offer, you’d have to pay around $69 a month.Work that amount (or as close to that amount as possible) into your budget so you can become debt-free by the time the 0% rate ends. Consider automating your payments so you don’t miss one.

A balance transfer isn’t a substitute for a debt payoff plan, but it is a powerful tool that can make debt payoff easier. If you owe $1,000, or any amount on your credit cards, try to take these steps today to benefit from interest savings and become debt-free more easily.

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Discover how busy moms creatively tackle debt! Read on for a few strategies to help you achieve financial freedom. [[{“value”:”

For many moms, juggling child-rearing, work, and household management is tough enough without the added burden of debt. Yet debt is a reality for many. In fact, in 2023, the typical American held $21,800 in personal debt, not including mortgage loans. Here, we explore innovative strategies some busy moms have used to manage and eliminate their debt, proving that a little creativity and determination can go a long way toward managing your personal finances.

1. Take on a side hustle

Chris Roy, who was once burdened by a whopping $30,000 in credit card debt, found herself reassessing her finances following a health scare. Realizing the precarious nature of her situation, Roy took action by engaging in family-friendly side hustles like evening and weekend daycare, yard work, and gardening, where her kids could tag along. This proactive approach not only brought in extra income but also involved her family in her financial journey, reinforcing valuable lessons about money.

2. Use a 0% interest balance transfer credit card

Credit card debt is daunting due to high interest rates, but savvy moms can turn these financial tools to their advantage. Moms like Darcy Zalewski, who had $20,000 worth of debt, used 0% APR balance transfer cards to pay it off. Balance transfer credit cards allow debt to be moved over from a high-interest card to one with no interest, and the interest-free period can last a year or longer. Using this strategy can save you significant money on credit card interest, making it easier to pay down the principal balance faster.

3. Simplify your bank accounts

Simplifying your finances can lead to significant savings. Zalewski, for instance, streamlined her bank accounts to just one checking and one savings account and set up auto-scheduled payments to her credit cards to avoid late fees. This straightforward approach made it easier to keep track of her funds and reduced the risk of missing a payment.

By consolidating her accounts, she could better monitor her spending and savings, making financial planning much more manageable. Automating her payments meant she never had to worry about incurring extra charges due to forgetfulness or mismanagement. Simplifying your banking this way can streamline your financial life, making it less stressful and more efficient.

4. Use cash for spending

Adopting a strict budget and cutting out new debt were other key strategies for Zalewski. By using cash for transactions, she avoided the temptation to overspend. Saying no to costly social outings and explaining budgetary constraints as a lifestyle choice rather than a temporary state (“That’s not in my budget” vs. “I’m broke”) also helped her stay on track financially.

5. Try the debt snowball method

Both Chris Roy and Dyana King, who tackled $34,907 in debt, employed debt reduction strategies that involved paying off smaller balances first to quickly reduce the number of creditors owed money. This is known as the debt snowball method. This psychological win provided the motivation needed to continue the challenging journey of debt reduction. King also emphasizes the importance of patience and consistency, recognizing that escaping debt is a marathon, not a sprint.

6. Use social media for support and accountability

King also tapped into the power of social media to connect with others in similar situations and to maintain accountability. By sharing her journey online, she not only received support but also provided inspiration to other moms facing similar challenges. Her platform (called Money. Boss. Mama) has become a resource for single mothers seeking to take control of their financial futures.

7. Shop around for the best rates

Zalewski really took charge of her finances by getting into the nitty-gritty of her monthly expenses. She reviewed and shopped around for services like insurance and cellphone plans, thereby ensuring she was getting the best deals, further reducing her expenses. It wasn’t just about pinching pennies — it was about making smart, informed choices that really aligned with her financial goals.

This savvy approach helped her cut down on costs significantly, boosting her savings and giving her that extra peace of mind. It’s like she turned budgeting into a superpower, giving her the financial flexibility to plan for a brighter, more secure future.

Getting out of debt is no easy feat, but as these incredible moms have shown, it’s definitely doable with some smart tactics and solid backup. Whether it’s getting savvy with financial tools, trimming down daily expenses, or leaning on a supportive community, everyone’s path to wiping out debt is unique but equally motivating. Every little step forward not only brings a sigh of relief but also sets a strong example for our kids. It’s all about moving closer to that sweet spot of financial freedom, one day at a time.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Using a credit card for nearly every purchase can save you money. Read on to learn why most people would benefit from trying this. [[{“value”:”

Credit cards get a lot of bad press, some of it warranted. After all, credit card companies are merciless in the interest they charge to borrow money. After a credit card’s grace period, high purchase APRs usually apply to any unpaid balances, making it harder for cardholders to pay off what they originally borrowed.

But credit cards do have advantages. In fact, so long as a cardholder pays off their card’s balance each month, they are one of the best ways to make purchases. If you’re on the fence about credit cards, here are three benefits to buying (nearly) everything with one.

1. Earn rewards

Many credit cards earn rewards on every purchase. For instance, the best cash back credit cards give you a percentage of your purchases back, sometimes as much as 5% to 6%. Meanwhile, rewards credit cards let you earn points, which can have high valuations if you redeem them in the right way.

To give you an idea of how much you could earn, let’s say you spend $35,000 annually on non-mortgage or rent expenses. Let’s also assume this spending is on necessary expenses, too, like food, gas, clothing, and insurance. If you have a credit card that earns a flat 2% back, you would earn $700 annually in cash back. This money is not taxable, so the full $700 could go straight to your bank account.

Of course, there’s no such thing as free lunch, and credit card rewards can cost you in other ways. For instance, if credit cards encourage you to spend more than you can pay back, you might rack up credit card debt. Likewise, there’s a big debate over whether credit card processing fees hurt small businesses and result in higher prices for consumer goods.

While you should be mindful of these factors, credit card rewards are still a viable way to save money just by choosing your payment method wisely. Consider getting multiple credit cards that earn rewards on different spending categories, so you can maximize rewards on every purchase.

2. Free insurance

Many of the best credit cards come with travel and shopping protection that becomes active when you use the card to cover an eligible purchase.

For example, some cards have an extended warranty that can double the manufacturer’s warranty. Others come with purchase protection that can reimburse you for products that are stolen or damaged shortly after you purchase them. Some even have cellphone protection, which will repair or replace your phone if it’s damaged or stolen (you often need to pay the bill with the card to be eligible).

Then, there’s travel insurance. Many travel credit cards offer coverage for trip interruptions or cancellations. Some will even cover baggage delay, loss, or theft, while still others have rental car collision waivers and emergency evacuation coverage. Again, this is free travel insurance. If you’re already paying for travel insurance, this could save you some money on premiums, though check the coverage limits as you might still need to buy extra.

3. Build credit

Credit cards are one of the best — if not the best — way to build credit.

Credit card companies report your activities to credit bureaus, who then distill the information into a credit score. Over time, as you make payments in full and by the due date, making sure not to use too much credit at once, you should notice a gradual increase in your credit score.

No matter where you fall on the credit score spectrum, there’s a credit card designed for you. Have no credit score? Get a starter credit card. Have bad credit? Get a credit card for bad credit. Have average credit? You guessed it — there are plenty of credit cards for average credit. Even if you don’t want to be the primary holder on a credit card, you can still benefit from one by becoming an authorized user.

Again, if you’re paying your balances off regularly, these cards can help you improve your credit, which can then help you qualify for apartments and mortgages, and sometimes even lower insurance rates.

All things considered, buying nearly everything with a credit card can save you money over the long run by helping you earn rewards, covering your tracks with insurance, and helping you build credit. While using debit cards and cash could come in handy for some purchases — gas prices are sometimes slightly cheaper when you pay in cash, for example — credit cards leave you with more to be gained. Take a look at the best credit cards on the market today and see what benefits you can snag.

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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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Most CDs charge penalty fees on early withdrawals. Read on to find out how much it might cost you. [[{“value”:”

Many investors have considered opening a certificate of deposit (CD) because the rates are favorable. For example, you can find a 12-month CD rate of over 5% right now.

While CDs can be a great place to stash extra money, they aren’t for everyone. One big drawback is that when you put your money into a CD, you agree to keep it there for a certain period. If you take your money out early, you can be penalized.

Here’s what happens if you withdraw $1,000 from a CD six months early.

You’ll pay a penalty

CDs charge a fee if you withdraw your money before the term is up. For CDs with terms of 24 months or less, you’ll pay a penalty of 90 days of simple interest on the amount you withdraw early. If your CD term is longer than 24 months, the penalty is 180 days of simple interest on the amount withdrawn.

The amount you pay for a CD penalty depends on the CD rate, the interest penalty your bank charges, and how much you withdraw.

How much an early withdrawal of $1,000 will cost you

Let’s assume you invest $1,000 into a 12-month CD paying 5% interest, and your bank charges 90 days simple interest on the early withdrawal amount. If you withdraw the entire $1,000 after just six months, you’ll owe about $12.20 in penalties.

If your CD term is longer, you may be charged 180 days of simple interest. For example, if you invest $1,000 into a 5-year CD paying 5% interest and withdraw the entire $1,000 six months before the CD term ends, your early withdrawal penalty fee will be $24.40.

How to avoid paying CD fees

The easiest way to avoid paying an early withdrawal fee is to not invest any money in a CD you think you might need for anything else. The money you invest in CDs shouldn’t be a part of your emergency fund.

Investing in a no-penalty CD is another way to avoid early withdrawal fees. A no-penalty CD works the same way as a regular CD, but you can usually withdraw money penalty-free after about six days. However, keep in mind that getting your money out of a no-penalty CD usually takes longer than transferring money from a checking or savings account and they often have lower interest rates and shorter term lengths.

When taking money out of a CD makes sense

Sometimes, there are good reasons to take your money out of CDs early, even if you have to pay fees. Here are a few times it may make sense for you.

You can get a better rate elsewhere

If you learn about a CD option with a much higher rate, calculate your penalty on your existing CD to determine whether moving that money into a higher-yield CD may be worth the fee.

Your financial goals have shifted

Let’s say you invested $15,000 in a 5-year CD one year ago. But now you’re buying a house and need that money to help with a down payment. Paying a fee to withdraw the money from the CD may be a wise option.

You’ve had a financial emergency

While you shouldn’t put money into a CD you may need for emergencies, sometimes life throws you bigger curve balls than you expect. If you’re deciding between taking your money out of a CD early or racking up credit card debt to pay for the emergency, breaking the CD term early may be the better option.

CDs can be a good investment option, but they’re far more restrictive than a savings or checking account. If you want to invest in a CD, think about how much cash you will be willing to part with over the term. If you are uncomfortable with the idea of locking up your money, opt for a high-yield savings account or a no-penalty CD.

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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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Are you worried about saving for retirement? The average American believes they’ll need $1.46 million to retire comfortably. Learn how this could impact you. [[{“value”:”

During recent times of high inflation, the price of eggs at the grocery store became shockingly high — and now the typical American’s retirement “nest egg” goal is getting more expensive, too. According to a new survey from Northwestern Mutual, Americans now believe that they will need $1.46 million to retire comfortably, up from $1.27 million last year.

Let’s see what this “nest egg inflation” means for your retirement investments, and how you can put yourself in a stronger position to build wealth and retire.

Future retirement dreams are getting more expensive

If you want to have a higher income in retirement, along with Social Security or employer pensions, that means you need a bigger amount of retirement savings in your 401(k), IRAs, or other investment accounts. Having a bigger retirement nest egg gives you the ability to withdraw 3% or 4% of your savings per year from your retirement accounts for the rest of your life, without depleting your nest egg.

There’s no one right answer for how much cash you need to save to retire. But some Americans refer to this retirement target amount as their “magic number.” As the cost of living goes up, it’s understandable that most Americans also expect that their “magic number” for future retirement will need to get bigger. Northwestern Mutual’s 2024 Planning & Progress Study found that Americans’ retirement magic number has increased 15% since last year, and 53% since 2020.

Americans need to save more money for retirement

Most Americans unfortunately are not saving and investing anywhere near enough money to actually make retiring with $1.46 million a reality. The Northwestern Mutual study also found that the average American has only $88,400 saved for retirement in 2024 (down from $89,300 in 2023).

Looking at a breakdown of retirement savings by age, the survey also found that different generations have different magic numbers. For example, baby boomers (who are closest to retirement) believe that they need a nest egg of about $990,000 on average, while the youngest Gen Z cohort thinks they’ll need a nest egg of $1.63 million. The survey also found that older generations tend to have more money saved for retirement on average — but it’s still not enough.

Every generation is still facing a big gap between people’s actual retirement savings and their preferred “magic number.” Here’s a breakdown from the Northwestern Mutual study:

How to improve your chances of a comfortable retirement

The Northwestern Mutual study is a worrisome sign for many Americans’ retirement savings. Social Security income alone is likely not enough to live comfortably in retirement. Unless you have a generous pension from an employer, most Americans need to save and invest significant amounts of money so they have an additional source of wealth to generate income in retirement.

But if you’re still at the early or middle stages of your career, you still have time. Use your 401(k) or other employer retirement plan if you have one, and contribute enough to get your full employer match if it’s offered. Open IRA accounts — traditional IRA and Roth IRA if you qualify. Use a taxable brokerage account to buy stocks and ETFs to invest in the future growth of a diversified mix of the world’s most successful companies.

Let’s say that you’re 40 years old in 2024, and you want to retire in 25 years. Even if you don’t have a dollar saved for retirement, if you start today, you still have time to build up a significant nest egg.

If you save $500 per month ($6,000 per year), and bump up your retirement savings by 1% per year, and you invest your money in a diversified mix of stock and bond ETFs that deliver an average annual return of 8%, after 25 years you’ll have $515,257. If you save $1,000 per month ($12,000 per year) and increase your annual contributions by 1%, after 25 years you’ll have $1,030,513.

Bottom line

There are no easy answers to the big “retirement gap” between Americans’ dream nest eggs and the reality of Americans’ poorly funded retirement savings accounts. Social Security benefits only replace about 40% of the average worker’s pre-retirement income, and as of January 2024, the average Social Security retirement benefit check was about $1,907 per month.

Unless you can live comfortably on $1,907 per month (or less), Americans need to save more money for their own retirements. Fortunately, there are excellent ways to save for retirement at work and on your own with traditional IRAs, Roth IRAs, and taxable brokerage accounts. Don’t worry too much about a “magic number.” Instead, make a long-term plan to buy stocks and invest for your 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.
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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