Money Management

Finding an affordable home is tough these days. But there’s one step you can take to help your offer stand out from others. [[{“value”:”

Warmer weather usually leads to an increase in people looking for a place to call their own. The low housing inventory of the last few years has made things challenging for would-be buyers as the homes on the market fetch high prices due to increased competition.

Things are starting to improve with housing inventory rising over the last few years, especially in the summer months. But bidding wars still happen. That’s why savvy buyers are already taking this step to prepare for prime home-shopping season.

How much home can you buy?

Most people don’t have enough cash to buy a home outright, so they need a mortgage. Mortgage lenders look at your income and credit history to decide how much they’re willing to lend to you. If the price of the home is greater than the mortgage you qualify for, you’ll either have to pay cash to make up the gap or look for something that better fits your budget.

This mortgage issue might seem like it’s mostly a problem for buyers, but it can create issues for sellers too. Someone might make a great offer, but if they don’t actually have the funds to back it up, the seller’s home will continue to sit on the market and they could miss out on other potential buyers.

That’s why it helps to get pre-approved for a mortgage before you even go looking for a home. This is where you have a bank evaluate your credit and finances to decide how much it would be willing to lend you if you found a home you wanted to buy.

The lender will give you a letter of pre-approval, which you can then show to the seller to prove you have the funds to back up your offer. This doesn’t mean they have to sell to you. But it could help set you apart from other buyers, especially if the seller wants to get rid of their house quickly.

It’s worth noting that a mortgage prequalification is not the same as a pre-approval. A prequalification is similar, but it’s less accurate because lenders don’t pull your credit history or look at your finances in as much depth. Whenever possible, a pre-approval is the way to go.

How do you get pre-approved for a mortgage?

First, you must gather all documents related to your income, assets, and financial history. This includes proof of income and details of your employment history for the last several years. You’ll also need to provide your Social Security number so the lender can check your credit and ID to prove you are who you say you are. Lenders may also request your tax returns from the last few years.

Next, you have to decide which lender you’d like to work with. You may want to compare mortgage rates from a few companies to see which offers you the most money or the lowest interest rate. If you plan to check out multiple banks, aim to get all your mortgage pre-approvals done within about a month of each other. Then, all the credit inquiries count as a single inquiry on your credit report.

The bank will review your application, which can take some time. If it decides to work with you, it will issue you a letter of pre-approval indicating the maximum amount it will lend you and the interest rate it would charge you. You can show this letter to home sellers to strengthen your offer.

Just note that mortgage pre-approvals don’t last forever. They’re usually only good for 60 to 90 days. If you haven’t found a home you like in that time, you can request an extension. Talk to your bank to learn how to do this, and don’t be afraid to reach out if you have other questions about your mortgage pre-approval.

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Did you know that your bank can help reduce carbon emissions? Learn how choosing a green bank can help divest from fossil fuels and support clean energy. [[{“value”:”

The world is getting hotter and hotter. For the past 10 months in a row, the planet has had record-high temperatures. If you ever get the feeling that winter is disappearing, spring is ominously warm, and summers are getting unbearably hot, you’re not alone — it really is getting hotter, and humanity needs to take action to stave off the worst-case scenarios of climate change.

Your choice of where to open a bank account can make a difference in the climate change battle. “Green banking” is a growing trend among eco-conscious bank customers who want to put their money into climate-friendly banks and investments.

In honor of Earth Day, April 22, 2024, let’s look at a few interesting banks that are taking action to fight climate change — and how your banking decisions can make a difference.

What is “green banking”?

Banks are not often thought of as heavily polluting, carbon-emitting businesses. After all, banks don’t have smokestacks and coal mines, and they don’t have oil wells by the ATMs. But banks often lend money to oil, gas, coal, and other carbon-intensive industries that are driving climate change.

You might not know it, but the money in your bank account could be getting used to help make loans to an oil company or a coal mine. Even if you personally care about the environment and are worried about climate change, no matter how many electric vehicles you buy or how rigorously you recycle, the money in your bank account might be working against your values.

But more people are demanding that banks stop investing in fossil fuels. So some banks and credit unions have made a specific commitment to not finance any fossil fuel activity, or make special loans that are dedicated to renewable energy and sustainability, like solar panels or electric vehicle chargers.

When you put your money into a green bank, you can help with the climate change fight by defunding fossil fuel projects and nudging the economy in a more climate-friendly direction. Here are a few of America’s top-rated “green banks.”

Amalgamated Bank

Amalgamated Bank was the first U.S. bank to publish its Net Zero Climate Targets, and it has pledged not to lend to fossil fuel companies. In fact, 32% of Amalgamated Bank’s loan portfolio is dedicated to climate solutions. Amalgamated Bank also offers investors a Fossil Fuel Free Portfolio, so you can put your money into companies that are developing renewable energy and reducing carbon emissions.

Aspiration

Aspiration is an eco-friendly fintech that offers banking services through its partner bank, Coastal Community Bank, member FDIC. With its unique Plant Your Change (PYC) program, Aspiration members can use their spare change to help plant a tree with every purchase they make. This program has helped plant over 27 million trees, the equivalent of removing 974,000 gas-burning cars from the road for a year.

When you use your Aspiration debit card at a business that belongs to the Conscience CoalitionTM, you can get up to 10% cash back. (Terms apply.) For investors, Aspiration offers the Aspiration Redwood Fund, an ESG investment fund that lets you buy stocks in a diversified portfolio of companies chosen for their sustainability practices.

Atmos Financial

Atmos Financial is another climate-friendly fintech that provides banking services through its partner bank, Five Star Bank in Warsaw, New York (member FDIC). Atmos offers a cash back rewards checking account that pays up to 5% cash back when you spend with sustainable brands and businesses.

The Atmos high-yield savings account pays 3.75% APY (as of April 14, 2024) when you make a monthly donation to a qualifying climate nonprofit. Want to put solar panels on your home? Atmos Financial also provides solar loans, and claims to offer up to 90% lower financing fees than a typical lender.

Clean Energy Credit Union

Clean Energy Credit Union is dedicated to helping its members finance clean energy. It offers an array of green banking loans, including electric vehicle loans, solar photovoltaic system loans, geothermal heat pump system loans, green home improvement loans, and more. This credit union even has Carbon Zero Teen Accounts for kids who want to use their money to fight climate change.

Climate First Bank

Based in Florida, Climate First Bank is a commercial bank dedicated to fighting climate change. It offers a range of climate-friendly loans, such as residential solar loans and electric and hybrid vehicle loans. Climate First Bank offers some intriguing options for high-yield savings accounts and checking accounts; its Choice Money Market and Choice Checking Account were both paying 5.34% APY as of April 14, 2024. This bank also offers no-penalty CDs.

Bottom line

There is still time to take action on the climate crisis, and banking can make a big difference. If you want to put your money where your mouth is, consider banking with a “green bank.” The site Bank.Green offers a list of banks and credit unions that rate highly for sustainability.

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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 positions in and recommends Target and U.S. Bancorp. The Motley Fool has a disclosure policy.

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Don’t assume you’ll save money on child care beyond the days of daycare. Read on to see why. [[{“value”:”

It’s hardly a secret that raising a child can be an expensive prospect. And a big part of that boils down to the cost of child care.

Of course, the cost there can vary based on the number of children you have, the hours you need care, and your geographic location. But all told, you might end up spending a lot of money just to be able to hold down a job.

When my kids were young and I was paying hefty tuition bills at my local daycare center, I kind of assumed that things would get better as they got older. But instead of seeing my child care costs decline, the opposite actually happened.

When you don’t end up saving as you expect

Care.com puts the average cost of a weekly daycare center at $321 for infants and $293 for toddlers. And although these are 2023 prices, they’re actually in line with what I was spending over a decade ago when my son was in daycare.

To be fair, I live in a somewhat high-cost area. So back then, the typical weekly cost of daycare was probably much less for a lot of people.

My daycare costs were so high that when I had twins when my son was three years old, I decided to stop working full-time and instead keep my kids at home and freelance when I could. For the following years, I cobbled together a child care setup that included babysitters and preschool with extended hours. By the time I added up all of my costs, I was paying a lot, though not the roughly $1,000 a week full-time daycare would’ve cost for three kids who weren’t yet old enough to go to school.

Back then, it was a tough situation because I was spending a lot on child care and my income was taking a beating. But I told myself it was only temporary.

Fast forward a good number of years, and I can tell you that things have actually gotten worse. That might seem like it doesn’t make sense, but I’m actually spending more on child care now than I did back then due to the exorbitant cost of summer camp.

The average cost of summer camp in the United States is around $87 a day, reports the American Camp Association. If you work full-time and therefore need five days of camp per week, you’re looking at $435, which is more than the cost of a week of daycare for a very young child. Such is the trap I’ve fallen into.

Now to cope with the expense of child care, my husband and I budget for it all year round and pay for camp on a payment plan over the course of 10 months. It’s important to do this, because coming up with all of that tuition money in a short time frame would be a burden.

How to cope with persistently high child care costs

Many people assume that child care gets less expensive once you’re past the toddler years. I’m here to unfortunately burst that bubble and tell you that may not be true. But I’m sharing this not to be a downer, but to help other parents save and prepare accordingly.

It’s also important to take advantage of some of the tax benefits you may be privy to as a parent who pays for child care. The Child and Dependent Care credit is one you may be eligible to claim on your taxes if you’re paying for care for children under the age of 13.

And if you have access to a flexible spending account through your workplace, there may be a child care component that’s available to you. Whether you’re single or married, you can contribute up to $5,000 to one of these accounts ($2,500 if married filing separately).

That money goes in tax free, so it at least exempts some of your earnings from taxes. If you contribute $5,000, for example, and you’re in the 22% tax bracket, you save yourself $1,100.

Even though I’m still spending a fortune on child care, the one thing that makes me feel a bit better is that the money is going toward camp, which my kids love. I’d rather spend the money on that than a daycare center.

But still, it’s hard juggling child care costs at any age. And it’s important that parents realize that those costs don’t necessarily go down with age.

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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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A CD offers safe and predictable returns, but the amount you make depends on your APY. Here’s where things stand right now. [[{“value”:”

If you’re putting money into a short-term CD, such as a 1-year CD with a 5.00% APY, it can be fairly easy to visualize what will happen — you’ll simply get a 5% return on the money you put in.

On the other hand, it can be a little more difficult to visualize how much your money can grow over longer periods of time, especially if you’re not familiar with the mathematics of compound interest. Don’t worry, I won’t turn this into a math lesson. But here’s what you can expect if you open a 5-year CD in the current interest rate environment.

5-year CD interest rates in April 2024

While CD rates are generally at their highest level in years, it’s important to realize that they can vary significantly from bank to bank. And it’s also worth noting that just because a bank offers the highest CD rates doesn’t necessarily mean it’s the right fit for you — it’s important to consider other factors, as well.

For example, if you open a CD with the same bank where your checking account is, it can be extremely easy to move money to checking as your CD matures. And some banks allow you to withdraw the interest paid as you go, while others make you wait until the end of the term to withdraw anything at all. And that’s not to mention that some banks have no minimum deposit requirements, while others might require as much as $2,500 to open a CD.

With that in mind, the rates offered by banks on our top 5-year CD rates list have APYs ranging from 3.75% to 4.30% as of this writing. There’s no such thing as a perfect bank for everyone (that’s why we have 10 different options on our list), so for the purposes of this discussion, we’ll use the average APY, which is roughly 4.00%.

How much will a $10,000 CD be worth in five years?

Let’s use the 4.00% APY as mentioned in the last section, keeping in mind that your 5-year CD may return more or less than in our example, depending on the particular interest rate you get.

If you deposit $10,000 into a 5-year CD and get an APY of 4.00%, this means that your money will earn $400 in the first year, giving you a year one balance of $10,400. So, you might think that if it earns $400 per year, you’ll have a total of $12,000 after five years. But it doesn’t exactly work this way.

CDs pay compound interest. In other words, since you ended the first year with $10,400, the second year will earn a 4.00% return on this new, larger balance (this is a good thing). Here’s how the entire five-year term would play out:

In the first year, you start with $10,000, and end with $10,400 as previously explained.In the second year, you start with $10,400 and earn 4% of this ($416), giving you $10,816.In the third year, you earn $432.64, making your balance $11,248.64.In the fourth year, you earn $449.95, giving you a balance of $11,698.59.Finally, in the fifth year you’ll earn $467.94, which produces an ending balance of $12,166.53.

If you don’t like math, don’t worry. The important thing to notice is that your interest gets larger every year, since there is more money in your account over time. Thanks to today’s elevated CD interest rates and the effects of compounding, our hypothetical 5-year CD earned $2,166.53 in the five-year period. Not bad for a risk-free investment.

Is a 5-year CD right for you?

A longer-term CD isn’t right for everyone. We’ve already discussed the advantages, including a guaranteed interest rate for half a decade, as well as the power of compound interest. But five years is also a long time to commit your money, so be sure that any money you put into a 5-year CD is money you truly won’t need for at least five years.

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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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Cryptocurrencies are volatile, and many investors lose money on them. Check out the rules I’ve followed to come out ahead with crypto. [[{“value”:”

The crypto market is an unforgiving place. A study by the Bank of International Settlements estimates that 73% to 81% of Bitcoin (BTC) investors have lost money on their initial investment.

Considering those odds, I’ve done reasonably well. My cryptocurrency portfolio is up about 45% from what I initially invested. I’m not exactly one of those crypto millionaires you hear about, but I’ve at least come out ahead so far.

That isn’t because I’m a master of picking cryptocurrencies. I just have three rules for investing in crypto that have helped me succeed. If you’re a current or future crypto investor, they could improve your odds, too.

1. Buy and hold for at least five years

Patience is a virtue, especially when you invest in crypto. It’s extremely volatile, and it often goes through bear markets (a lengthy drop in prices). With crypto, these bear markets can last for years.

Buying and holding is recommended with other types of investments, too. But it’s harder to stick to the plan with crypto, because it goes through larger price drops and for longer time periods. When your portfolio has lost 50% of its value and counting, with no end in sight, it’s understandable that you might want to just cut your losses.

When I buy cryptocurrency, I tell myself that I’ll hold it for at least five years. This has been crucial for me. My portfolio spent years in the red, but I didn’t sell, and prices eventually rebounded.

2. Focus on the largest cryptos

I’ve dabbled in smaller cryptocurrencies, but most of my portfolio is in the top two: Bitcoin and Ethereum (ETH). These have been the largest cryptocurrencies since 2016. They make up over 80% of my crypto portfolio.

I understand the appeal of less popular altcoins. Everyone wants to invest in one of those cryptocurrencies that explodes, turning $1,000 into $100,000 or more. But the overwhelming majority never do, and it’s impossible to know which ones will.

All cryptocurrencies are risky and highly volatile, but Bitcoin and Ethereum are the safest. They’ve shown the most staying power so far, and when the crypto market does well, they tend to do well.

While smaller cryptos may have more potential to go “to the moon,” they’re also more likely to lose 90% of their value — or disappear entirely. If you want the best odds of making money with crypto, I’d recommend putting the bulk of your portfolio in Bitcoin and Ethereum, in that order.

3. Don’t overcommit

Due to its volatility, crypto shouldn’t be a large part of your investment portfolio. A good rule of thumb is to put no more than 5% to 10% of your portfolio in crypto. The other 90% to 95% should be in more proven investments, such as stocks and real estate. So if you’re investing $100,000, don’t put more than $5,000 to $10,000 into crypto.

I follow this rule, and I accept from the beginning that my crypto investments could go to $0. I certainly hope that the cryptos I’ve invested in change the world and make me a ton of money in the process. But if I lose all the money I’ve invested in crypto, I’ll be fine.

This makes it much easier to handle the ups and downs of the crypto market. When prices drop, I’m not tempted to sell and salvage what I can of my money. Instead, I think, “Why would I want to sell now and lock in my losses?” Since I don’t need the money, I can wait and see what happens.

It’s always a good idea to have a plan as an investor. That’s especially true with crypto, where many investors make rash decisions. There’s no guarantee that you’ll make money, but if you follow these three rules, it’s more likely.

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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.Lyle Daly has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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Making a higher down payment on a home could leave you with smaller mortgage payments. But read on to see why you may not want to put down too much. [[{“value”:”

If you’re signing a conventional mortgage, it’s a great thing to be able to make a 20% down payment on your home, even though many lenders will accept less. Doing so allows you to avoid private mortgage insurance, a costly expense that’s typically tacked onto your monthly mortgage payments and makes your home more expensive to own.

For many people, coming up with 20% down is a challenge these days due to the state of the market. But what if you have a pile of cash to put into your home down payment, so much so that you’re able to pay for 50% of your home upfront?

At first, making a 50% down payment might seem like a good idea. But you should be aware of the drawbacks involved.

The upside of making a 50% down payment

There are two primary benefits to making a 50% down payment on a home. First, the more money you put down, the less you’ll pay each month, thereby making those payments fit more easily into your budget.

As of this writing, the average rate on a 30-year mortgage is 6.82%, says Freddie Mac. So let’s say you’re buying a $300,000 home. If you put down 20%, your monthly principal and interest payments will be $1,567. If you put down 50%, your monthly principal and interest payments will be $979. That frees up $588 a month for you to spend on other things, or just over $7,000 a year.

Furthermore, if you make a 50% down payment on your home, you’ll minimize the amount of mortgage interest you have to pay. In this example, putting down 50% leaves you paying a total of $202,613 in interest on your home loan, as opposed to $324,183 with 20% down. That’s a savings of $121,570.

The downside of making a 50% down payment

It’s easy to see why making a larger home down payment might appeal to you if you can swing it. But the problem with putting 50% down on a home is that you’re tying up a lot of money in an asset that isn’t very liquid. And that could cause problems if you end up needing cash down the line.

Let’s say you make a 50% down payment on a $300,000 home instead of 20%, thereby spending an extra $90,000 upfront. What if you wind up needing to take a full year off of work to recover from an injury or illness and need $90,000 to cover your family’s expenses during that time? What if your home ends up needing a series of very expensive repairs that amount to $90,000?

Suddenly, you’re looking at having to borrow to access the funds you need. And while a home equity loan may be an option, you might pay more interest on that than a mortgage.

Also, the idea of saving $121,570 in mortgage interest over 30 years might appeal to you. But you should know that the stock market’s average annual return over the past 50 years has been 10%. If you put $90,000 into a stock portfolio with that same return, in 30 years, it could be worth $1.57 million. So which would you rather do — save $121,570 in mortgage interest, or walk away with $1.57 million?

It’s definitely worth trying to make a 20% down payment on a home. Doing so could help you avoid the added expense of private mortgage insurance and help you keep your monthly payments to a reasonable level.

But proceed with caution if you’re considering putting 50% down on a home. Though there’s an upside to going this route, you might lose out financially after all’s said and done.

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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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