Money Management

Used car prices peaked and fell, which means many people owe more than their car is now worth. Here’s what this means for auto insurance. [[{“value”:”

Buying a car is one of the biggest purchases many people make during their lifetimes. Since a car is a really valuable asset, it’s important that every motorist who owns one has the right auto insurance coverage to protect it.

For those who purchased a vehicle recently, and who got a car loan to do it, there’s one particular type of insurance that may be especially essential. Here’s what it is — along with some details about why buying this kind of coverage could be so necessary right now.

Drivers who bought vehicles in the last few years could be in a negative equity situation

Ideally, every motorist would pay for their vehicle out of their bank account to avoid interest charges. But in reality, most people can’t do that, and instead take out an auto loan to purchase a vehicle.

This can become a problem if vehicle prices fall quickly and they have long-term car loans or they make low down payments. A driver who didn’t put much down on a car, or one who is paying off the loan very slowly over time, doesn’t have much equity in the vehicle. Equity is the part of the car owned by the driver, rather than by the auto loan lender.

If a driver doesn’t have equity, they may owe more on the loan than the car is worth. This is called having negative equity. And many people who bought recently are faced with this situation because of past and current market conditions.

See, during the heart of the COVID-19 pandemic, new and used car prices surged due, in part, to supply chain disruptions and issues with semiconductors. So, anyone who had to buy a car then had to pay a lot of money for it. Then, used car values fell about 16% from pre-pandemic highs, which means many borrowers who essentially overpaid during the pandemic shortages may now find their car not worth nearly as much as they owe on it.

This helps to explain why new car buyers have actually had a surge in negative equity, with those turning in their vehicles owing $5,820 more than the car is worth on average, according to Bloomberg. Those who bought cars in recent years and who are keeping them, rather than trading them in, may also be underwater on their car loan (owing more than it’s worth) by a similar amount.

Drivers with negative equity need gap insurance

Any driver who owes more than their car is worth could face a big problem if they are involved in a motor vehicle accident that results in the car being declared a total loss. They could also have a problem if their car is stolen and not recovered or is otherwise damaged beyond repair.

The issue is, when an insurer has to pay for a car that needs to be replaced because it can’t be repaired, the insurer only pays the fair market value of the vehicle. But the full amount of the car loan has to be repaid. A driver who bought a car recently when prices peaked could owe a lot more than the current market price, so they could find themselves stuck paying thousands off on a car loan for a vehicle they don’t even have any more.

Gap insurance, which is an optional add-on from most insurers, helps motorists avoid this fate. When purchased before a covered loss, this kind of add-on policy will pay the difference between what’s owed and what the insurer pays based on what the car is worth.

Some lenders require gap insurance, so many motorists may already have coverage. But those who don’t — especially if they purchased a car in the recent past — should get gap insurance if there’s even a chance that they could get less than the current loan balance paid out after a claim.

Adding this coverage is usually as simple as making a phone call to the insurance company to request it, and paying the extra premiums, which could be as low as $36 annually. Call today before an accident happens or a car is stolen and it’s too late.

Our best car insurance companies for 2024

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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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Not everyone needs life insurance. Keep reading to learn why one writer has opted out of coverage. [[{“value”:”

Life insurance is an important part of many people’s financial puzzle. It’s intended to soften the blow of losing a loved one — it can’t replace the person, but receiving a policy payout can make it easier for the people left behind to pay the bills, cover remaining debts, and adjust to life with a new financial reality.

I just turned 40 a few months ago, and it feels like a serious age. It’s also come with some big money moves — for example, I’m buying a house for myself this year. You might expect a 40-year-old to also have life insurance. But while I used to have a policy, I don’t now. Here’s why.

I used to have a term life policy

I had a life insurance policy for a couple years, but it was when my life circumstances were different — namely, I was married. When I combined auto insurance with my ex, I also signed up for a low-cost term life insurance policy, to protect my spouse in case I passed away.

I hung onto this policy until a year after we split up, and I didn’t take the time to change the policy beneficiary (don’t do this — if you get divorced, remove your ex from your life insurance policy ASAP). Then, when COVID-19 hit in 2020, I went looking for ways to save money when I was faced with losing my income (my old career wasn’t pandemic-friendly). At that point, I canceled the old term life policy, and didn’t replace it.

Here’s why I no longer have life insurance

These days, I am without life insurance for a big reason. I’m not single, but my finances are. This means that my money is independent — I pay all my own bills, I don’t live with any other people, and no one is depending on my income to get by. I do have pets, however — three adopted cats who are the best companions in the world.

While I could get a life insurance policy for the express purpose of providing for their care in the event of my untimely demise, I haven’t done so. Instead, I named them in my will and any money I leave behind will go to pay for their care (after satisfying any other expenses). I also lined up someone to care for them, as well as a back-up choice, just in case. I hope the cats remain with me for the entirety of their lives, but no one can see the future. That’s why we plan — and sometimes buy life insurance.

How can you save on life insurance?

Just because I don’t need life insurance doesn’t mean you don’t — unless, of course, you are like me and are without human dependents. If you’ve reached the ripe old age of 40 and have a spouse, children, or both, the odds are good you should have a life insurance policy. People are likely reliant on your income — and even if you don’t have one, you likely take care of a home or children (or both). Here are a few tips to find and save on life insurance coverage:

Lean on term life: Whole life insurance is expensive, because it’ll cover you for your whole life. But what are the odds you’ll need life insurance for your entire life? Instead, consider a term life policy that covers you for long enough to pay off your home or see your kids head off to college.Start early: The younger you are when you get a life insurance policy, the cheaper it is likely to be. I was just 30 when I got the policy I had, and it was quite reasonable — just a few dollars per month.Shop around: Talk to a range of insurers to see what kind of deal you can get on a policy. Some life insurance companies make it easy to get quotes on their websites.Make yourself more insurable, if you can: For example, if you’re a smoker, consider stopping — you’ll save on life insurance, save money, and likely live longer.

Life insurance isn’t necessarily appropriate for every person in every situation — but it absolutely pays to get the best deal on it you can, if it’s necessary for you.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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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CDs and T-bills keep your money safe and pay high interest rates. Decide where to put your savings with this comparison of CD and T-bill rates for April 2024. [[{“value”:”

Certificates of deposit (CDs) and Treasury bills are popular fixed-income investments. They guarantee a fixed interest rate over a set time period, both of which depend on the CD or T-bill you choose.

It’s a great time to open one of these, because interest rates are high right now. If you have money you don’t mind locking up in return for a solid payout, you could do that with a CD or T-bill.

With this type of investment, rates are one of the most important factors. To help you decide between them, here’s a look at the top CD rates and recent rates from T-bill auctions.

CD rates vs. T-bill rates in April 2024

T-bills are available with terms ranging from four to 52 weeks. The table below has the highest CD rates I could find after reviewing dozens of options, as well as T-bill rates for approximately the same term.

Keep in mind that T-bill rates change at each auction, and you must bid before the auction. If you buy T-bills this way through Treasury Direct, you won’t know the exact rate you’ll get until after the auction ends. If you don’t want to go through the auction process, you can also buy them through the secondary market with a stock broker.

CD and T-bill rates are close, which is often the case. You may get a better deal on a T-bill if you want a six-month term. But 1-year CDs are currently paying more than one-year T-bills.

CD rates vs. T-note rates

In addition to T-bills, the U.S. Treasury also sells Treasury notes and Treasury bonds, which have longer terms. T-notes have terms ranging from two to 10 years, so they also provide an alternative to CDs. T-bonds are available with 20- and 30-year terms.

Most banks don’t offer CDs for longer than 10 years. So if you want a fixed-income investment that will last decades, you’ll need to go with T-bonds. If you’re looking for something in the two- to 10-year range, here’s how CDs and T-notes compare.

For terms of two, three, and five years, CDs are paying more. T-notes have the edge for 10-year terms. To be fair, 10-year T-notes are only offered every four weeks. Rates could be higher or lower at the next auction. But CD rates can change at any time, too (until you open one and lock in the current rate).

CDs vs. T-bills: Other factors to consider

Interest income from CDs and T-bills is considered taxable income on your federal tax return. However, T-bills (and other Treasuries) are exempt from state income taxes. CDs aren’t. So if your state has income taxes, it could be better to invest in T-bills over CDs, as long as rates are similar.

T-bills also offer more flexibility. If you need to get your cash before the maturity date, you can sell your T-bill on the secondary market. With CDs, you’ll pay an early withdrawal penalty if you need your money before the end of the term. There are ways to avoid this, though — some banks offer no-penalty CDs, and many stock brokers offer brokered CDs that can be sold on a secondary market.

At their current rates, you can’t go wrong with CDs or T-bills. But if you want to maximize your return, first figure out how long of a term you want. Once you know that, you can see whether CDs or T-bills are offering higher rates over that time period.

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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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Gen Zers who need help with saving money and budgeting should reconsider one big spending category. Keep reading to find out more. [[{“value”:”

Gen Z is often known for being gloomy about their personal finances, and the younger generations have been unfairly criticized for spending too much money on “avocado toast.” I don’t want to sound like an annoying personal finance guru who scolds people for spending money; I want people to enjoy their money. And many members of Gen Z were hit hard by the pandemic, by high inflation, and by expensive housing — they have legit reasons to be unhappy.

But according to a new survey from Empower, Gen Z is spending a surprisingly large amount of money on one little item in their budgets: food. Specifically, dining out. The Empower survey found that Gen Z goes out to eat more than any other age cohort. In fact, Gen Zers dine out for 26% of all their meals!

Let’s look at how Gen Zers can save money on food — and why cooking at home could become the next hot TikTok personal finance trend.

Gen Z dines out 26% of the time

A recent survey from Empower on Americans’ daily spending habits found that Americans aren’t cooking a lot of meals for themselves: Americans dine out 20% of the time, and Gen Z dines out even more frequently: 26% of the time, or more than one in four meals. So that means in a typical seven-day week, assuming three meals per day, Gen Zers are eating out five times (or more).

There’s nothing wrong with going out to eat. It’s delicious, it’s convenient, it saves you time, it gives you a chance to hang out with friends and loved ones. Food delivery apps have become part of the fabric of everyday life in America. But if you’re spending so much money on restaurant meals and takeout that your monthly budget is going down the tubes, it’s time to re-evaluate.

Gen Z has the lowest average food budget

Even though Gen Zers dine out most often, they seem to be more frugal with their per-meal spending. The Empower survey found that Gen Zers spent the least on food of all generations, with an average Gen Z food budget of $123 per week. This calculates out to $6,396 per year or $533 per month.

However, it’s possible that Gen Zers are spending more money than that. The Empower survey data on food spending was a bit lower than other official research recently, which showed that (as of 2022), Americans were spending a total of $778 per month or $9,336 per year, on food.

Even if Gen Zers are spending $245 less per month on food than the national average, young people also tend to have lower incomes. At the early stage of your career, it can be hard to stretch each paycheck further. If you’re a Gen Zer who’s concerned about living paycheck to paycheck, try to cut back on restaurant meals. Even if you only save $50 or $100 a month on restaurants, that could help you build up your emergency savings and strengthen your financial foundation.

How to save money on restaurant meals

Unless you want to move home with your parents, or eat all your meals at the Costco food court, there’s an obvious answer for how to save money on dining out. You’re going to have to cook more meals at home.

Cooking shouldn’t feel like a punishment. Cooking is an adventure! It’s a chance to be more creative with your meal planning. Check out some chefs and foodie influencers on TikTok and YouTube; look for fun recipes, try to recreate your favorite cuisines at home. Shopping for special ingredients can become a fun treasure hunt at the grocery store, especially if you use cash back apps to find extra discounts and cash rewards.

And cooking at home doesn’t have to be lonely! It should be the opposite: turn your home cooking into a party. Have friends over to cook together and split costs of ingredients. This is how people used to socialize in the “old days,” before TikTok: preparing meals, having a drink, telling stories, sharing a laugh, living life in community in real time.

Bottom line

There are a lot of good things that come from spending money at restaurants, especially for young people. Going out for dinner (and other meals) can help you socialize, meet new people, build career connections, and otherwise save time and effort on cooking.

But if you’re serious about wanting to save money, looking at your food budget is a good place to start. Cooking more meals at home can give you new creative recipes to try, and fun occasions to socialize (have a friends’ dinner party or a potluck) while keeping more money in your bank account.

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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 Costco Wholesale. The Motley Fool has a disclosure policy.

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