Money Management

CDs are red-hot right now, but they’re not the best fit for everyone. Learn why younger investors may struggle with CDs. [[{“value”:”

Certificates of deposit (CDs) are having a moment. Thanks to a higher-than-usual federal funds rate (intended to deal with inflation), rates on deposit bank accounts are up across the board. The average rate on CDs of all terms is under 2%, according to the FDIC — but some individual banks and credit unions are paying upward of 5% on CDs, especially those with terms of less than two years.

Despite this good news, CDs might not be the best fit for you if you’re a young investor. Let’s take a closer look at how these accounts work, as well as their biggest downside: a lack of flexibility.

How do CDs work?

CDs are fairly straightforward bank accounts, assuming you can remember the rules. You open a CD account and lock your money up for the duration of the CD’s term — often three months to five years. The money accrues interest at the same rate for the entire time, and this can be paid out monthly in some cases (or you can leave it in the account).

Once the term is up, you’ll usually get a grace period (often a week) to withdraw your funds. If you don’t, they’ll often roll into a new CD with the same term — but often a different rate, depending on market conditions and the bank.

CDs come with FDIC insurance, meaning you won’t be putting your money at risk by opening one. A variety of banks and other financial institutions offer them, sometimes without a minimum opening deposit, so you’re not required to lock away a big chunk of money to benefit from CDs.

A lack of flexibility can be a problem

If you’re just getting started with saving and investing, that lack of flexibility with a CD could work against you. When you open one, you start with a set amount of cash, and you generally won’t be allowed to add more money during the CD’s term. Let’s say you open a 1-year CD with $1,000 that pays an APY of 5%. Over the year, you can expect to earn $50 — not bad.

But if you find yourself with an unexpected windfall of $500 and you want to add that money to the CD, you won’t be able to. You could of course open a new CD with your $500, but what if the Federal Reserve has lowered the federal funds rate by that point, and now CD rates have also fallen? That would be a bummer.

The fact that you’re locking your money in for a set period can also pose a problem. If you’re a new investor, the odds are good that you don’t have a lot of cash at the ready that you can draw from in an emergency. I’d urge you to prioritize saving an emergency fund (honestly, even just having $1,000 in a savings account can help you sleep at night) before going too far down the investing road. That way, you don’t find yourself cashing out investments when an unplanned bill arrives.

If you’ve got that same $1,000 1-year CD and no emergency savings, you’d have no choice but to cash it out if you have a surprise expense. And depending on how long your money has been in the account, you might find yourself losing some of your $1,000 to penalties if you haven’t yet earned enough interest to cover them.

What should you do?

If you’re just getting started with investing and harbor a curiosity about CDs, this lack of flexibility doesn’t mean they have to be off the table entirely for you. In fact, if you already have a chunk of money saved up (after building an emergency fund) and want a guaranteed and predictable return on it, CDs are worth exploring.

That said, you can get a similar return on an account with more flexibility right now, like a savings or money market account. You won’t be able to lock in a high rate on one of these, but at least you’ll have access to your cash and can withdraw or deposit more.

Just take the time to evaluate all your options, as different financial institutions have different terms, minimum deposit requirements, and early withdrawal penalties. The Motley Fool Ascent’s list of the best CD rates is a great place to start your search.

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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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Buying household goods at Costco can save you money. For some shoppers, buying outdoor furniture there is worth it, too. Find out what you need to know. [[{“value”:”

Spring is here, so it’s the perfect time to make your outdoor space more comfortable and enjoyable for the warm weather ahead. If you have worn or outdated patio furniture, you might be thinking about investing in new pieces.

With your membership perks, you can get a good deal when buying outdoor furniture at Costco. But is it a good idea to purchase outdoor furniture at a warehouse club like Costco? Let’s find out.

Here’s what shoppers think about this Costco buy

Furniture for your patio or porch can be costly. One likely reason is that most outdoor furniture is made to be more durable to withstand outdoor conditions. But some people buy outdoor furniture at retailers like Costco to keep more money in their checking accounts.

According to Reddit reports from members, buying patio furniture at Costco can be worthwhile. But, like with anything, quality can vary by product and brand. So, remember that not every piece or set you see will be the same quality.

Many members shared that the furniture they purchased met quality standards similar to those at other retailers. Some shared that their furniture lasted many years. However, it’s wise to compare options so you purchase furniture that meets your needs and expectations.

Tips for best success when buying outdoor furniture at Costco

If you’re planning to take advantage of an outdoor furniture deal at Costco, here are some tips.

Check the reviews

Before buying outdoor furniture at Costco, take a few moments to read product reviews. This is especially important if you’re shopping in-club. You can use the Costco mobile app or website to check reviews for a particular product.

Remember the return policy

Costco is known for its generous return policy. While some specific items, like electronics, have more strict return policies, most purchases can be returned anytime. If you end up buying outdoor furniture that doesn’t meet your quality standards, you can make a return and get your money back.

Go to your local club

Shopping online is convenient, but it’s hard to get a feel for the quality of larger items like furniture. If you’re buying outdoor furniture, visiting your local Costco is recommended. You’ll be able to see and touch the furniture before you buy. You can call your local club to see what furniture it has on display.

Wait for a sale

If you’re not in a hurry, you may want to wait until the outdoor furniture pieces you like go on sale. You can get an even better deal and be prepared well in advance of warm weather next year. You can review sales on the Costco website and mobile app.

Is a Costco membership worth the cost?

If you’re not yet a Costco member, you may be wondering if it’s worthwhile to join. To become a member, you must pay $60 to $120 annually, depending on the membership type you choose (if you spring for the $120 Executive membership, you can earn 2% back on your purchases). It may be worth the investment to join if you have a club near your home and have enough storage space to store bulk goods.

But it’s important to review your personal finances before joining. You want to make sure you can afford the yearly fee and will get good use out of a membership. Before you join, you can browse available products on the Costco website to help you decide if it’s an investment that will work well for your household.

In addition to shopping at warehouse clubs, using credit cards to earn rewards is a popular strategy some people use to combat rising living costs. When shopping at Costco or any other retailer, you may consider using a cash back credit card as payment. You can earn cash back rewards when you swipe your card.

Top credit card to use at Costco (and everywhere else!)

If you’re shopping with a debit card, you could be missing out on hundreds or even thousands of dollars each year. These versatile credit cards offer huge rewards everywhere, including Costco, and are rated the best cards of 2024 by our experts because they offer hefty sign-up bonuses and outstanding cash rewards. Plus, you’ll save on credit card interest because all of these recommendations include a competitive 0% interest period.

Click here to read our expert recommendations for free!

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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Worried that you’ll never be able to retire? Here are five reasons to breathe easier. [[{“value”:”

Many Americans worry about saving for retirement. A recent survey from Northwestern Mutual found that the average American believes they will need $1.46 million to retire comfortably — but the average U.S. retirement savings is only about $88,400. This can feel like a huge, insurmountable gap between “how much you need to retire” and “how much you can easily save.”

But building retirement savings doesn’t have to happen overnight. And there’s some new data that shows many people aren’t in such bad shape for retirement, after all. Here are a few encouraging reasons why many Americans might turn out to be in surprisingly decent shape for retirement.

1. Depending on your age, you have plenty of time

The younger you are, the richer you are in time. Even if you have less money, you have more years ahead of you for your investments to grow. This is a priceless advantage! Don’t underestimate it.

Gen Z is known for being gloomy about their personal finances. Recent surveys have shown that 25% of Gen Zers believe they’ll never be able to retire. I sympathize with Gen Zers who have been hit hard by the pandemic and rising inflation — but they’re young! Gen Z has several decades to work, save, and invest.

Let’s say you’re a 25 year old who has $0 saved for retirement — you’re just getting started in your career. If you want to retire at age 67, you have 42 years left to invest and watch your nest egg grow. Let’s say that you make the following money moves:

You save $300 per month for retirement in an individual retirement account (IRA)You invest in a diversified portfolio of stock and bond ETFsYour investments earn about 8% per year on average

After 42 years, you’d have $1,095,277 saved for retirement! And that’s assuming that you never save more than $300 per month.

2. Your income could go up in the future — making it easier to save

When you’re young and just starting out in your career, you might be making the lowest salary that you’ll ever earn. Ideally, as you progress in your working life, you’ll become more valuable to employers, you’ll learn new skills, you’ll find new paths to get promoted and get pay raises. The money you make as a 22-year-old could be the lowest income you’ll ever have.

I don’t mean to be blasé about the challenges of lower-income workers. Some people really are stuck in a predicament where their paycheck never keeps up with the cost of living. But if you’re upwardly mobile in your career with valuable professional skills, you really could find that it’s easier to save significantly more money for retirement at age 40 than it was when you were in your 20s.

3. If you’re in an expensive stage of life, you can save more later

Life goes through many seasons. Right now, my family’s lifestyle is more expensive than ever. I’ve got two teenage kids, two cars, and lots of takeout dinners to pay for. But the thing is…I can afford it, and I’m grateful. Taking good care of my family brings me joy, even though it’s expensive. I’d rather have a house full of people and laughter than just a cold, joyless bank account balance. And someday when I’m an empty nester, my life will be less expensive.

I’m glad I took my kids on vacations when they were small, even if some personal finance gurus might have said that I couldn’t afford it at the time. I’m glad I bought my kids all those little after-school treats and toy Matchbox cars that they asked me for at the grocery store. Spend some money while you can on the people who are important in your life. There might be quieter, more frugal times ahead.

4. People tend to spend less as they get older

A 2022 study from the Rand Corporation found that once Americans turn 65, their spending declines. This happens at all levels of wealth; it’s not just a matter of some older adults having more or less money. There seems to be something about getting older that makes people spend less.

This means that your retirement might be less expensive than you think. You might not want or need to spend as much money in retirement as you do during your prime working, earning, and spending years. Being frugal in retirement might feel more satisfying.

5. You will have Social Security representing about 40% of your final paycheck

Too often, retirement savings advice is dismissive of Social Security. Over the years, I’ve heard too many affluent Business Guys say, “Don’t count on Social Security.” I don’t like this cynical attitude. Social Security will be there for us if we as Americans collectively decide that it should be. It’s one of the most successful, longest-lasting social programs in U.S. history.

And yes, Social Security has some funding issues, but they can be fixed. Even if future generations of retirees have to accept lower payments or a delayed retirement age, there are ways to make the numbers work. As of January 2024, the average Social Security retirement check was about $1,907. That’s real money! You don’t have to save every dollar for your retirement all by yourself.

Bottom line

Don’t get discouraged about saving for retirement. It’s easy to get hung up on “not being a millionaire yet,” but most Americans aren’t millionaires. Just keep saving, investing, and letting your money grow. Year after year, decade after decade, you can build significant wealth to help you have a comfortable retirement.

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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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