Money Management

There’s no set-in-stone rule, but here’s how to figure out the right amount of coverage for you. Keep reading to find out the formula. [[{“value”:”

How much life insurance does a 40-year-old need? That’s a tougher question than you might think. It’s important to make sure that your family is provided for in the event that something happens to you, and that any debts you have don’t get passed to your loved ones. To help get you started, here’s a quick discussion to help determine how much coverage you need and what type of life insurance is best for you.

A basic rule of thumb for life insurance

As we already said, the primary reasons a 40-year-old might need life insurance are to make sure loved ones are provided for in the event that anything happens to you, and to make sure other people don’t inherit your debts. So, assuming you need life insurance based on these principles, we can start with a basic rule of thumb.

One popular strategy used is to simply base life insurance needs on your future earnings power. Most 40-year-olds are 20 to 30 years away from retirement, so you can simply multiply your income by this factor. In other words, if you have a salary of $80,000 and aim to retire in 25 years, multiplying these two numbers shows an ideal life insurance amount of $2 million.

Other important factors to consider

Of course, this is just a baseline number to get the conversation started. It doesn’t consider any of your personal circumstances, so it might not be right for you. While it’s impossible to list every potential “what-if” scenario, here are some of the important things you might want to consider.

Does your spouse earn income? If you are the sole earner in the household, your insurance needs could be significantly higher than if your spouse earns a significant amount of the household income.How much money do you already have in retirement accounts, investments, and other places? As an example, if you have several million dollars in brokerage accounts, do you need as much life insurance as if you didn’t have any significant savings?How many kids do you have and how old are they? If you’re 40 years old and are the parent of three kids aged 5 and under, you might need more coverage than a 40-year-old who has one teenager who will be out of the house in a few years.How much debt do you have? The last thing you want if you die is for your loved ones to inherit a bunch of debt to deal with. A simple strategy is to figure out how much life insurance you’ll need to make sure your loved ones’ financial needs are met, and then add your outstanding debts (excluding your mortgage) to the total.

Term life or whole life?

The debate of whether you should get term life or whole life insurance is a bit too complex to thoroughly discuss in a short article. But here’s the basic idea.

Term life insurance is the cheapest and most basic form of coverage. You’ll get a policy with a certain term length (10, 20, and 30 years are common). If you die during the term, your beneficiaries receive the amount of money stated in the policy. If you don’t, the policy expires and has no intrinsic value.

On the other hand, whole life insurance doesn’t have a set expiration date. You make your monthly payments, and if something happens to you (at any point in your life), your heirs receive the stated death benefit. The caveat is that whole life premiums are usually far more expensive than term life; however, whole life policies build cash value as you go.

For most people, I’m a fan of term life insurance. This is what I have to protect my family. I got a 30-year term policy when I was in my early 30s, and this will cover my family if something happens to me before I’m 63 years old.

Here’s my rationale. By the time I’m in my mid-60s, I’ll have sufficient retirement assets and investments that if something happens to me, my wife won’t need a payout from insurance. Plus, my kids will (hopefully) have been out of the house for some time by that point, with college paid for. And as someone who likes to invest, I’m fine simply taking the difference between the cost of a term and whole life policy and adding it to my brokerage accounts.

Having said all of that, here’s the bottom line. Nothing in this article is intended to be personal financial advice. If you’re concerned that you don’t have enough life insurance or aren’t sure which type of life insurance is right for you, set up a meeting with a Certified Financial Planner™ (not an insurance salesperson — they sometimes use titles like “advisor”). They can point you in the right direction and make sure what you end up with is in your best interest.

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Travel credit cards can be beneficial for travelers. But do you know how much your card costs? Find out what could make your travel credit card more expensive. [[{“value”:”

If you like to travel the world, you may already use travel rewards credit cards to earn rewards on your spending and access helpful credit card perks. For many travelers, travel credit cards are valuable personal finance tools.

But ensure you continue getting good value from your credit cards. Your travel rewards credit card could be more expensive than you realize. Here’s what to consider to determine if you should continue using your favorite travel credit card or get rid of it.

Every fee adds up

Some of the more premium travel credit cards have high annual fees. However, some cardholders may be paying fees beyond the annual fee. If you carry a balance on your card, you’ll pay credit card interest fees. These fees can add up fast and lead to credit card debt. Paying your account balance in full every month will allow you to avoid interest charges.

Here’s another fee that could impact your checking account balance: foreign transaction fees. If you travel abroad and your credit card company charges foreign transaction fees, you’ll pay a fee for every purchase made in a foreign currency.

Credit card issuers typically charge a fee of 3% per transaction, so every charge adds up. The good news is you can avoid these fees by getting a credit card without foreign transaction fees.

These are just a couple of examples of additional fees that you may be paying to use your card. Avoiding unnecessary fees can make using your favorite rewards credit card more affordable.

Unused credit card rewards impact your wallet

Another way your travel credit card could cost you more money than you realize is by letting your points or miles sit unused. Some travelers hoard their credit card rewards while they continue earning more points or miles, or until they find the perfect redemption.

But hoarding your points or miles could cost you. Credit card issuers can change rewards programs anytime, meaning your points or miles could become less valuable with time. You may plan to use your rewards a certain way and later find out that redemption option no longer exists.

Even without program changes, letting your points or miles sit could cost you. As you continue paying an annual fee, you’ll pay more money without receiving the intended perks. The best strategy is to use your points and miles sooner rather than later to maximize their value.

Unused benefits = wasted money

Many travel credit cards include plentiful card benefits. Not every benefit will appeal to every person, and that’s OK. But make sure you’re getting good value from the benefits offered. If you have a travel credit card with an annual fee and you’re not using the perks provided, it may be time to explore other card options. Otherwise, you’ll waste money on unused benefits.

Get the most from your credit cards

If you use credit cards of any kind, ensure you’re getting good value from them. If you pay additional fees, hoard your unused rewards, or don’t use most of the benefits offered, you may be paying more than you realize to use your cards. Check out our list of the best travel rewards credit cards to learn more about other cards that are a good fit for travelers like you.

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

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There are ways to save on child care without sacrificing quality. Read on to learn more about financial aid and flexible options. [[{“value”:”

As parents, facing the steep costs of child care can feel like dealing with a second mortgage, especially when the average weekly daycare cost hits $321 (Care.com’s 2024 report tells us so). But there’s light at the end of the tunnel with clever strategies to soften the financial hit without skimping on quality care for our kiddos. Here are a few budgeting tips for parents needing child care.

1. Tap into financial aid and government support

Venturing into the world of financial aid and government support can be like finding hidden treasures for many families. Take Early Head Start, for example — not only does it offer invaluable early childhood education, but it also wraps a whole array of services around young kids from families watching every penny.

And then there’s the cherry on top: some states offer free pre-kindergarten programs, lightening the financial load like you wouldn’t believe. Every state gets federal funds to support child care assistance, often referred to by names like vouchers or subsidies. These programs enable qualifying families to afford child care while they work or study.

To check your eligibility, visit your state’s child care assistance website. Also, Head Start offers comprehensive developmental support and is available nationwide, in territories, and many tribal communities.

It’s absolutely worth deep diving into these options, as they can slash your out-of-pocket child care expenses, making top-notch care a reality for a broader circle of families.

2. Embrace the perks of Employer-Sponsored Dependent Care

For working parents, tapping into employer-sponsored benefits such as the Dependent Care Flexible Spending Account (DCFSA) is like wielding a financial shield. Picture this: you can stash away up to $5,000 of your income before the IRS gets its hands on it (lowering your taxable income), earmarked for eligible care expenses.

This isn’t just pocket change we’re talking about — the U.S. Office of Personnel Management suggests you could see savings of around 30% on dependent care. From daycare to summer camp, this account covers many services, making it an incredibly flexible and powerful tool in your arsenal to keep child care costs manageable.

3. Use the Child and Dependent Care Credit

Another powerful tool is the Child and Dependent Care Credit. This isn’t a direct discount on daycare, but it can significantly lower your tax bill, reflecting the expenses you’ve poured into child care. It feels like receiving a year-end bonus, but this one directly offsets your child care costs. The credit amount hinges on your spending on eligible child care services and your income, with the 2023 Child Tax Credit offering $2,000 for each qualifying child when filing taxes in 2024. This credit can be a substantial boon come tax season.

4. Consider a nanny share

The thought of hiring a full-time nanny may seem financially out of reach, but what about sharing one? A nanny share, where two or more families employ the same nanny to care for their children, can cut costs significantly. This arrangement halves the average $31,000 nanny bill and provides personalized care and flexibility. Just establish clear agreements and expectations with the other family and nanny from the get-go.

5. Explore co-op daycares

Co-op daycares operate on a unique model — think of it as a community garden where everyone chips in and enjoys the harvest. Parents work together to provide care, often rotating duties to manage and run the daycare. This not only slashes costs, but also fosters a close-knit community, ensuring personalized care for your children while building lasting relationships. Beyond financial benefits, co-op daycares offer a sense of belonging and mutual support.

6. Look into in-home daycare

In-home daycare presents a blend of affordability and a personalized touch. Typically operating in a provider’s home, these settings cater to fewer children than traditional centers, leading to lower overhead and more reasonable rates for parents. But lower costs don’t mean sacrificing quality. It’s crucial to vet any in-home daycare thoroughly, ensuring they meet all safety and quality standards. To properly run an at-home daycare, there are a ton of licensing and training requirements you have to complete through the state.

7. Ask about flexible scheduling options

Lastly, working with your daycare provider on flexible scheduling can unlock significant savings. Some centers offer part-time or drop-in care, perfect for families with irregular child care needs. Rather than paying for a whole week, you might only need to cover the days or hours you use. This approach demands clear communication and some flexibility in your schedule, but can lead to meaningful financial relief over time.

Ultimately, it’s all about finding those clever hacks and hidden doorways that lead us to save on child care without compromising on the care our kids receive. Whether turning tax codes into art, creating a mini-community of shared nanny responsibilities, or transforming our homes into the next best thing since sliced bread with in-home daycare, the possibilities are as vast as our creativity.

Remember, navigating the child care cost maze is a shared journey — so let’s keep swapping stories, tips, and victories, no matter how big or small. Here’s to making child care a bit more manageable, one savvy move 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 a disclosure policy.

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Credit card debt can be an expensive problem to have. Watch out for these mistakes that could keep you in debt even longer and cost you more money. [[{“value”:”

It’s easy to get into credit card debt. The fact that U.S. credit card debt recently reached $1.129 trillion is evidence of that. Unfortunately, it’s not nearly as easy to get out of credit card debt. Some people spend years or even decades paying it off.

That’s not ideal. The longer you’re in debt, the more it costs you in credit card interest. So it’s important to avoid any mistakes that keep you in debt longer, and there are several common ones that people make.

1. Continuing to use your credit cards

When you’re in credit card debt, you’re fighting a battle on two fronts. You need to pay down your card’s balance, and you need to pay the interest charges coming in every month. These can be expensive — credit cards have an average interest rate of 21.59%, according to the Federal Reserve.

It’s already challenging enough. It will be even more difficult if you’re still using your credit cards and adding to the amount you owe. And when you’re paying an interest rate of 20% or higher, it doesn’t make sense to take on even more debt at that rate.

When you have credit card debt, stop using your credit cards. Stick to your debit card and cash. You’ll only be able to spend what you can afford, and you won’t be taking on more debt that adds to your interest charges.

2. Making minimum payments

The minimum payments on a credit card are a tiny fraction of the total balance. With some card issuers, the minimum payment amount is just 1% of the balance plus interest charges.

Because minimum payments are so small, if that’s all you pay, you’ll barely make a dent in your debt. Let’s say you have $5,000 in debt at a 20% APR. If you make minimum payments, it will take you over 23 years to pay off your balance. During that time, you’ll pay $7,723 in interest.

Make sure you’re paying more than the minimum. Adding $100 or $200 to your payment amount could cut years off how long it takes to become debt-free.

3. Telling yourself you’ll “pay what you can”

People often take this approach when paying off debt, and it rarely works out well. They’ll see what’s left over at the end of the month, and then use that to pay down their debt. Except what usually happens is that there isn’t much, if any, money left over.

Instead of doing this, commit to an amount you can afford to pay on your credit cards every month. Go over your income and expenses to see what works for you. Then make that payment as soon as you get paid. Don’t give yourself time to spend that money on nonessentials.

Keep in mind that you can pay more if you have the money. If you committed to paying $500 per month, but you have an extra $200, you can certainly add that. Contributing more to your debt payoff is never a bad idea.

4. Relying on balance transfer offers

Balance transfer credit cards can be a useful tool for paying off debt. These cards have a 0% intro APR on balance transfers. You can bring over balances from credit cards with high interest rates and get some time to pay them down interest-free. Depending on the balance transfer card you get, the 0% APR period could last 15 months or longer.

The problem is when people focus more on playing the balance transfer game than actually paying off their debt. They stop paying as much as they can because their debt isn’t costing them interest anymore. When it’s getting close to the end of the intro period, they start looking for another balance transfer card to do it all over again.

Remember that the goal is to get out of credit card debt. A balance transfer card can help you do that because you can use it to avoid interest charges. But it’s still important to aggressively pay down your balance so you’re not stuck with the same amount of debt two years later.

Having credit card debt is a tough situation, but you can get rid of it if you follow a good plan. Start by switching to your debit card and cash for the time being — no more credit card purchases. Calculate an amount you can afford to pay, and make sure to pay it every month. If you want to use a balance transfer card to save on interest, you can, but don’t use that as an excuse to pay less.

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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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