Money Management

Need a home for your extra money? Read on to see what your best options look like this month. [[{“value”:”

In 2023, Americans saved an average of about $6,138, according to New York Life. If you also have extra money at your disposal this year, you may be wondering where to put it to keep it safe and help it grow. And in that regard, you have choices. Here are three of the best homes you might find for your money today.

1. A savings account

If you want to set aside extra funds for emergency expenses, or if you’re putting money away for a short-term goal, then a savings account is the place you want to turn to. But it especially pays to put money into a savings account right now.

The Federal Reserve spent a good part of 2022 and 2023 raising interest rates to help slow the pace of inflation. And now, banks are paying generously as a result.

These days, you can earn upward of 4% interest in a savings account, especially if you opt for an online bank, as opposed to a brick-and-mortar one. And the best part? There’s no commitment involved. You can remove your money at any time as you please. But while your cash is in the bank, you get to earn more.

2. A CD

It’s true that savings accounts are paying generously these days, and that they require no commitment. With a CD, you do need to make more of a commitment because you’re tying up your money for a preset term. And if you withdraw your money before your CD comes due, you risk a penalty, the amount of which will depend on your bank and the number of months your CD is for.

Still, the benefit of going the CD route is that CD rates, like savings account rates, are high right now. While a savings account might give you 4% on your money, a CD might give you more like 5%. And unlike a savings account, where your rate could fluctuate, with a CD, you’re promised a given rate for the duration of the term you sign up for.

In fact, you may want to open a longer-term CD now — such as a CD with a term of 48 or 60 months. If you go that route, you may not get as high an interest rate as you will with a shorter-term CD — for example, one that covers 12 months or less.

But remember, the CD rates we’re seeing today may not be around beyond 2024 since interest rates are expected to fall in the not-too-distant future. So if you’re saving for a longer-term goal, a 48- or 60-month CD could be a good home for your money.

3. An IRA

A longer-term CD might benefit you now if you’re saving for a goal that’s somewhat far off. But even though today’s CD rates are quite impressive, they still pale in comparison to the stock market’s average annual return of 10% over the past 50 years. If you have money you really want to earmark for a far-off goal, like retirement, then an IRA is a good bet, as that account will allow you to invest in stocks.

Let’s say you have $6,000 you’re looking to use in the future. With a CD paying 4% over the next 25 years (which is unlikely because rates probably won’t stay that high), your $10,000 will be worth about $16,000. With a stock portfolio paying 10%, you’re looking at more like $65,000.

Also, the nice thing about traditional IRAs is that they shield some of your income from taxes. If you’re putting money into a CD or saving account separately, the interest you earn there will add to your tax burden. So it could be a good idea to offset that by contributing some funds to an IRA.

Clearly, you have choices when putting your money to good use. Weigh these three carefully to see what best aligns with your goals.

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CD rates are up and let you lock in a rate for the duration of the account’s term. Learn why CDs can be a good option for retirees. [[{“value”:”

Retirees must be a lot more careful with their money than people who are still working and who have the time to recover from financial problems. That’s why it’s especially important for seniors to be smart about what they invest in.

Financial guru Suze Orman has a suggestion for retirees for a safe investment: CDs. In fact, she said seniors should put a good amount of money into certificates of deposit. But, is that really a good idea?

Here’s why Suze Orman believes retirees should put some money into CDs

Orman has long urged retirees to have “safe” money that they keep outside of their brokerage accounts. She suggests having about three to five years of living expenses (beyond an emergency fund) in savings, so it’s accessible

This is good advice. Market downturns can happen any time. Retirees won’t want to pull money out of the stock market when a crash has recently happened. That could mean locking in their losses. They’ll need some money they can live off as they wait for the market to recover.

Now, though, Orman suggests putting some of this “safe” money into CDs.

“Because you won’t need to use all that money right now (that’s what your emergency savings is for) you could put this retirement savings account in CDs that will pay you even more than a regular savings account,” Orman advised.

Is Orman right about this?

So, should you listen to Orman? Maybe.

The reality is, there are lots of CDs paying rates above 5.00% right now (just check out The Ascent’s list of the highest CD rates today). While there are also savings accounts paying upward of 5.00%, the CD rate is guaranteed to last for the duration of the CD term. The savings account rates aren’t guaranteed to last, as they are variable and subject to change at any time.

If the Federal Reserve lowers interest rates (which is widely expected to happen soon once inflation cools a bit further), the high yields that savings accounts are currently offering will fall. But seniors who have opened a CD at a competitive rate can keep that rate for the rest of the term — whether it’s one year or five.

For retirees on a fixed income, getting a guaranteed great rate on “safe” investments is really attractive. Especially since you can’t usually lose money on a CD since they are FDIC insured. There’s a big caveat, though.

Buying a CD isn’t right for all seniors

Here’s the problem. You have to agree to leave your money invested until the CD matures. This could take anywhere from three months to five years with most CDs. If you don’t, you’ll get hit with penalties. This actually could lead to losses in your principal if you withdraw your funds early before you’ve earned enough interest to cover the penalty.

Because of this penalty, retirees who might need to access their “safe” money soon absolutely should not open CDs with it. So, you should only consider following Orman’s advice if you actually have multiple years of living expenses and an emergency fund available to you right now.

Sadly, for many retirees, this isn’t the reality. If you have only enough in cash to cover a few months, or even a year or so of expenses, you don’t want to tie it up in CDs. That’s especially true because the economy is really uncertain right now. You don’t want to be stuck having to pay a CD penalty or withdraw money from your investment accounts because things go south.

So, what should you do?

The bottom line is this:

If you are retired and have three to five years of living expenses in cash (plus an emergency fund for big surprise costs), keep around one to two years of that safe money in a savings account where you can access it any time and invest the rest in a CD that matures in one to two years. This way, you’ll always have accessible cash.If you don’t have that much liquid cash, keep any that you do have in savings. You’ll earn a competitive rate right now, and probably for months in the future, but won’t risk a penalty if the economy goes south and you need to use your funds.

This means listening to Orman can make sense, but only for the limited number of seniors who’ve also followed her advice on having lots of liquid cash.

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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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Credit cards can be useful financial tools. Learn why one type of card in particular is perfect if you’ve just closed on a mortgage. [[{“value”:”

Credit cards can improve your life and finances in a few crucial ways, despite the bad rap they often get. Yes, it’s true that it can be easy to let your spending get out of hand if you have access to a credit card, and the interest rates they charge are often ruinous and can cause an unpaid balance to spiral upward.

But using credit cards responsibly can help you earn cash back, rewards points, or airline miles, which you can translate into lower cost travel, cash to invest, or even just lower credit card bills every month if you redeem cash as a statement credit.

There’s one type of credit card in particular that’s worth considering for a brand-new homeowner. I’m about to become one myself, and I’m already planning to apply for one of these cards after my mortgage has closed (this is extremely important — more on why below). Here’s why new homeowners should look at opening a 0% APR credit card.

A 0% APR intro offer can come in handy

The go-to interest rate on any given credit card is overwhelmingly likely to be quite high — like, 20% or higher. According to the Federal Reserve Bank of St. Louis, the average rate on credit cards assessed interest in February 2024 was a whopping 22.63%. But there are some great credit cards that come with a period of 0% APR when you first open the account. This could be anywhere from six months to as long as 21 months.

This means you won’t be charged any interest on purchases made on these cards until after the 0% APR period is over. Let’s say that you move into your house, and the refrigerator decides that it no longer wants to keep your food cold. Now you’ve got to replace it, and you might not have the cash at the ready.

With a 0% APR credit card, you can charge the cost of your new fridge and pay down your balance gradually. If your new fridge costs $1,000, and you’ve got a 15-month period with 0% interest, that means you can pay $67 a month and have it paid off before you’re charged interest. Plus, if the card rewards you with cash back, perhaps at a rate of 2%, you’ll earn $20 back on the fridge!

Remember, buying a home means taking on all kinds of unplanned expenses, and having more time to pay them off without accruing interest can be a big help.

You need to make those payments on time

Note that 0% APR doesn’t mean you can skip making payments, though. If you charge purchases to any credit card, you’ll still have to pay at least the minimum amount due every month. I’d urge you to do your own math, though, and ensure you’re paying enough every month to ensure you’ll actually have the purchases paid off before the 0% APR period ends.

If you’re late with a payment, you could find that the card issuer rescinds the intro APR, sticking you with the go-to rate — or even a penalty APR. To avoid this, make sure you’re making all payments on time.

Wait until AFTER your mortgage closes!

Here’s the other major caveat about opening a new card as a new homeowner. Do not apply for a new credit card while you’re waiting on your home loan to close. At this time, it’s absolutely crucial to leave your finances alone.

Your mortgage loan will be in underwriting, and your lender will check your credit during this time. If it sees that you’ve opened a new credit card (or made large purchases on an existing one), it could throw off your financial eligibility for the home loan by changing your debt-to-income ratio or credit score. Don’t risk it — you’ve waited too long for this. Just cool your jets, and once you’ve spent a few hours at the closing table, signing your life away, then you can apply.

A credit card with a generous 0% APR offer can make your financial life a bit easier as you’re adjusting to being a homeowner. And you’ve got enough to worry about with your new house, so wouldn’t it be nice to know you can cover a surprise expense and have plenty of time to pay it off without it costing you extra?

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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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Do you ever get the nagging suspicion that you could be earning more money for free? Keep reading to see how to get that money back. [[{“value”:”

There’s an old saying in economics that “there’s no such thing as a free lunch” — but in real life, there really is “free money.” Banks, retailers, credit card companies, and even Uncle Sam will give you free money if you make a few simple, smart financial moves.

Here are a few of the biggest ways in everyday life that you are probably missing out on free money right now.

1. Leaving money in a zero-interest checking account

If you have cash sitting in a zero-interest checking account, you are missing out on interest income, and you are actually losing money to inflation. The longer your money sits there, the more buying power you lose.

Any extra cash you have should be earning interest — aka “free money” that you don’t have to work for. Your bank (or other banks) should be paying you for letting it use your deposits. Find a better place to keep your cash than a zero-interest checking account.

2. Not using a high-yield savings account

The national average savings account interest rate is currently only 0.46%. You can do so much better than that! The best savings accounts and money market accounts right now are paying 5.00% APY or higher.

Don’t settle for the average bank’s unimpressive APY on your savings. Choose a high-yield savings account. And if the Fed keeps interest rates high for the rest of 2024 and into 2025, these high APYs will remain in place.

3. Not getting your employer match on your 401(k)

If you have a job with an employer-based retirement plan like a 401(k), you could be missing out on free money. Does your employer offer a matching contribution? If so, take it!

Many employer 401(k) matches are equal to a certain percentage of your salary. It varies by company, but for example, some employers might match 50% of the first 6% of salary that you contribute. So if you make $50,000 per year and contribute 6% of that to your 401(k) ($3,000), your employer will toss in an extra $1,500.

That’s not just “free money,” it’s free money you’ve actually earned. Don’t leave that money on the table. Not taking your 401(k) match is like not using your paid vacation days. Take it! Use them! Get the full compensation that you deserve!

4. Not investing in IRA accounts

Along with a 401(k) or other workplace retirement plan, many people can qualify to put money into another tax-advantaged retirement account called an individual retirement arrangement, or IRA. There are two types of IRAs — traditional and Roth.

The traditional IRA gives you “free money” in the form of a tax deduction for your contributions, similar to a 401(k). (There are some income limits for who can qualify for this traditional IRA tax break.) If you are in the 22% tax bracket and you put $7,000 into a traditional IRA for 2024, that means you’ll get about $1,540 of “free money” in reduced taxes.

The Roth IRA gives you “free money” in the future, in the form of tax-free withdrawals in retirement. You don’t get a tax break today, but your money is allowed to grow tax free for the rest of your life.

5. Not paying off high-interest debt

If you are carrying a balance on your credit card and paying interest each month, you are likely paying an annual rate of over 20% APR. If you can pay off credit card debt faster, that means “free money” in the form of interest that you don’t have to pay.

Unless you’re one of the best, luckiest investors in the world, it’s hard to find a higher return on investment (ROI) than 20%. Paying off high-interest credit card debt is almost always the first thing you should do with extra cash.

6. Not using a health savings account (HSA)

If you have a qualifying high-deductible health plan (HDHP), you are eligible to use a health savings account (HSA) to save money for healthcare expenses. Just like a traditional IRA or 401(k), the money you put into a HSA is tax deductible — free money!

For example, if you’re in the 22% tax bracket and you put $4,000 into a HSA for 2024, that means you get about $880 of “free money” off your federal income tax bill.

7. Not using cash back apps

Have you ever wanted to get “free money” just from shopping? Now you can. The best cash back apps reward you for shopping at your favorite stores and brands, online or in person. Some of these apps pay cash rewards of 1%, 2%, 5%, 10% or more. If you’re a savvy shopper and you enjoy finding good deals, using cash back apps could be well worth the time and effort.

8. Not using rewards credit cards

If you have good credit and aren’t vulnerable to overspending or forgetting about payment due dates, you can take your “free money” hunt to the next level with cash back rewards credit cards.

Some of the best cash back cards offer 1%-6% cash back on everyday spending or big purchases. Some also have welcome offers where you can get (for example) $200 of extra cash back by spending a certain amount within the first few months of opening your account.

Bottom line

You’re probably missing out on free money right now, by not getting tax breaks, interest income, and cash back rewards. With just a few simple strategies, you can get more of what you deserve from banks, retailers, employers, and the federal government.

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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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Discover how debt-free living boosts moms’ lives. Read on for the benefits and learn how to start your journey. [[{“value”:”

Let’s face it, managing debt is no picnic for anyone. It’s especially tough for busy moms who are often juggling family, work, and everything in between. Interestingly, while men hold about 2% more credit card debt than women, women find themselves carrying almost two-thirds of the country’s staggering $1.54 trillion educational debt.

But there’s a silver lining here. When you pay down or pay off debts, life can change in some pretty amazing ways for both your budget and your mental health. Let’s dive into what happens when busy moms conquer their debt.

1. Improved financial stability

One of the most immediate effects of paying off debt is enhanced financial stability. According to research, the average American household spends about 9% of its income on debt repayment, including credit cards, personal loans, and educational debt. When these debts are paid off, that money is freed up and can be redirected toward a savings account or investments, increasing a family’s financial security.

Moreover, debt-free moms often experience lower stress related to financial uncertainty. With extra funds, they can build an emergency fund equivalent to three to six months of living expenses, as recommended by financial experts. This buffer significantly reduces the panic that accompanies unexpected expenses like medical bills or home repairs.

2. Better credit scores and opportunities

Clearing debt can also lead to improved credit scores. Having a higher credit score is crucial because it affects your ability to secure favorable terms on future loans, including lower interest rates. For instance, someone with a credit score above 760 might be offered a mortgage rate that is noticeably lower than someone with a score below 700. This difference can add up to thousands of dollars saved over the life of a mortgage.

Plus, a good credit score opens up opportunities for better deals on insurance premiums and the potential for security deposits on utilities and rental properties to be waived. This financial leverage can be particularly beneficial for moms planning to upgrade their living situation or insure a new family car.

3. Increased mental and emotional well-being

The psychological benefits of paying off debt are profound. A study by Northwestern University found that high financial debt relative to available assets is associated with higher perceived stress and depression. Conversely, those who successfully manage to clear their debts report lower stress levels, better mental health, and improved cognitive functioning.

For busy moms, this mental relief can translate into more patience and presence with children, a more harmonious relationship with partners, and generally higher personal satisfaction. And achieving a debt-free status can boost self-esteem and provide a powerful example of financial management for children.

4. More opportunities for family investments

With debts out of the way, families often find themselves able to invest in experiences and assets that have long-term benefits. For example, the money that was previously going toward monthly credit card payments could fund a child’s education plan or family vacations that create lasting memories.

Plus, financial freedom allows moms to potentially explore career changes or educational advancements without the pressure of immediate earnings. This could mean pursuing a dream job that might pay less initially or taking a course to improve skills, thus leading to better job opportunities in the future.

5. Legacy of financial responsibility

Finally, one of the most lasting impacts of a mom becoming debt free is the ability to pass on healthy financial habits to her children. Moms who manage to get out of debt demonstrate resilience and smart financial planning, which are invaluable lessons for their kids.

Debt-free moms have more bandwidth to engage in conversations about money management, savings, and investing with their children, setting them up for their financial success. These discussions can cover practical budgeting techniques, the importance of saving, and the real cost of debt, all of which are essential for young people to learn early.

Paying off debt is a liberating journey that yields more than just financial benefits. For busy moms, it means greater stability, opportunities, and well-being for themselves and their families. The road to becoming debt free may be challenging, but the end result is undoubtedly worth the effort. Remember, every small step toward debt repayment is a step toward a more secure and fulfilling life.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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No financial move is right for every person at every stage of life. Learn why buying a house at the wrong time is one writer’s biggest money regret. [[{“value”:”

Owning a home is important to many people — according to research from Statista, in 2023, 65.7% of households in this country were owner occupied. After many years of renting, I’m preparing to become a homeowner again myself. My last trip down this road was easily my biggest financial misstep, so doing this again feels particularly fraught. This time, I’ve got something to prove.

When I last bought a house (14 years ago), I was a lot younger and less experienced with money matters than I am now. I only bought because I was tired of apartment living and I had financial help with the purchase from well-meaning relatives who encouraged me to buy because they assumed it was the best move for me.

I should have just rented a house, because ultimately, I ended up unable to afford my mortgage payments. The whole debacle ended with a short sale — and a big hit to my credit score. It’s important to buy a house for the right reasons and in the right circumstances — here’s why.

My job and finances weren’t suited to owning

The last time I bought a house, I was pretty new to my old career. Unfortunately, it wasn’t a well-compensated one (despite requiring an advanced degree), and while I didn’t know it at the time, I was then earning as much as I ever would until I changed careers in 2021. I lived paycheck to paycheck and had no savings, and while I could afford to make home loan payments while I was working, once I was laid off from my job, I was immediately in financial trouble.

Aside from the salary issues, my career wasn’t one that allowed for remote work — or the ability to easily find another job without relocating. When I got laid off, I found myself with a house I couldn’t afford and no way to stay in the same city. Oh, and I was going through a divorce, to boot.

This time around, I’m a fully remote worker and a freelancer — my job isn’t at all tied to location, and I can and do work from anywhere. I also really love my current city and have already lived here for almost three years, so the prospect of staying longer is appealing to me. Plus, I’ve been able to grow my earnings, and I’m deliberately buying less house than I could technically afford. And I am making the purchase alone and not relying on financial help from anyone.

I never want to be in a position of being unable to afford my housing ever again, because it was easily one of the worst feelings in the world.

I wasn’t ready to take on the responsibility

Aside from the money issues, I wasn’t prepared for all that owning a home entails. At the time, I kind of thought that the only thing that made it different from renting was that I was paying a mortgage lender instead of a landlord, and I could paint or make other changes if I wanted to. Both of these are true — but when you own a house, you’re also responsible for anything and everything that could go wrong with it.

This is the thought that keeps me up at night now — if my new home needs a new roof, a new water heater, or anything else, it’ll be on me to coordinate it and pay for it. I’ll have homeowners insurance in case of a covered peril, and I’m also getting a home warranty for the first year, but beyond that, it’s my responsibility.

It’s not all bad, though. The prospect of being able to paint and make other cosmetic changes to the house excites me — and it didn’t the last time I owned a home. I never felt the urge to paint a wall or change a cabinet in my last house. Definitely a red flag, in retrospect.

This time, I’m already dreaming of painting my half-bathroom a funky purple and trying to decide what shade of green my bedroom will be. Plus, now I have three cats, and I’m perhaps most looking forward to improving the house for them — they’re getting cat shelves, and I’m putting bird feeders in the back and front yards so they have on-demand “cat TV.”

What if you’re never ready?

If, like me, you were raised with the notion that renting is “throwing money away,” while owning is “the key to wealth,” you might be struggling to decide whether you actually want to buy a house or you’re just conforming to what’s expected of you. If you’re perfectly happy renting and enjoy the benefits that come with it (such as not having to worry about and pay for home repairs and maintenance), no sweat.

There are other ways to increase your net worth. One good one is to live below your means (meaning, don’t spend every dollar you earn if you’re fortunate enough to have a solid income). Another is to invest the money you’re saving by not having to pay for repairs, maintenance, property taxes, and all the other costs of owning a home. Over time, your invested dollars will grow — and you won’t have to sell a house to access those earnings.

As I write this, I’m waiting on my new mortgage to close. I’m nervous — but I’m also excited at the prospect of turning a house into a real home for myself. I’m hoping that buying this time turns out to be a move I don’t regret.

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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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