Here’s How Much the Average Rich Person Has in the Bank
By: Kailey Hagen |
– First published on Nov. 1, 2023
The general pattern isn’t surprising. A higher income makes it a lot easier to stash money in the bank. What is surprising is how much more the richest 10% have saved compared to the bottom 20%. The wealthiest 10% earn about seven times more than the bottom 20%, yet their savings are 124 times higher. That’s quite the difference.How to start growing your savingsI won’t sit here and pretend you can penny-pinch your way to a six-figure bank account balance if you’re currently in the bottom 20% with $900 or less in your checking account. It’s probably not going to happen. But there are a few things you can try that could help you get your personal finances on a firmer footing.First, choose the right accounts for your money. A lot of brick-and-mortar banks have maintenance fees and they don’t pay you a lot in interest. That’s bad news for anyone, but especially those who don’t have a ton of extra cash.Online banks, on the other hand, are known for offering high interest rates on savings accounts and some offer interest on checking accounts as well. Most don’t charge maintenance fees or have minimum balance requirements either. Switching to one of these could potentially put more money in your pocket because you’ll be able to ditch any monthly bank fees you’re paying now, and you could earn more in interest.You could also look into community and government programs, like Supplemental Nutrition Assistance Program (SNAP) benefits, that help low-income families with their everyday expenses. This could potentially free up a little extra cash you could put into savings.And if cutting your expenses back isn’t possible, see if you can find ways to boost your income. You could try a side hustle if you have some spare time. Or see if you’re able to negotiate a higher salary at your current job.Saving regularly is ideal, but if you’re not able to do this, set aside money when you can. Even if it’s just $5 or $10 here and there, it adds up. Over time, you can work toward an emergency fund that can help you avoid major financial setbacks when unexpected costs come up. Once you’ve got that taken care of, you can start working toward some of your longer-term goals.
Does Your Emergency Fund Belong in a CD?
By: Christy Bieber |
– First published on Nov. 3, 2023
It’s a good idea to have an emergency fund with three to six months’ worth of living expenses available to you. Having emergency savings means you’ll be prepared for unexpected expenses and won’t have to go into debt or face financial stress as you figure out how to cover them. But this often means you’ll end up with a small fortune you need saved for emergencies. With so much money set aside, you may wonder whether you should put your emergency savings into an investment that can help you earn decent returns.Since certificates of deposit (CDs) often allow you to earn a better return on investment than a savings account would, and they are FDIC insured, sticking your emergency savings into a CD could seem like a strategic choice. But is this really a good idea?Does your emergency savings belong in a CD? There’s a simple problem with putting your money into a CD. The issue is that CDs typically require you to tie up your money for a period. While there are some “liquid” CDs that don’t impose a penalty if you withdraw your money ahead of your planned schedule, these aren’t as common and often don’t provide the best rate. In most cases, the minimum CD term even for short-term CDs still lasts for a few months — especially if you want a competitive rate.And, the problem is, you don’t know when you are going to have an emergency. You don’t want to lock up your cash in a 3-month or a 6-month CD and then face a huge surprise expense in two weeks. You could find yourself forced to choose between going into debt to cover it or taking your money out of a CD and getting hit with a big penalty that reduces how much you have available to you. Your emergency savings is not an investmentThe reality is, your emergency savings is not supposed to be an investment. The money is supposed to be there and ready for you when you need it so you can access it without worrying about paying additional costs when you experience a financial emergency.There’s nothing wrong with shopping around to find the best savings account offering the most competitive rates to put your emergency savings into. But you do not want to do anything with this money that reduces its liquidity or makes it more difficult or undesirable to take cash out of the fund when you need it.Since a CD ties up your cash, it’s simply not worth risking big losses due to an unplanned early withdrawal to get a slightly better rate than a savings account would offer. And you definitely do not want to put your emergency fund into a riskier investment, like a brokerage account you buy stocks in. Your emergency fund should be there to help you if and when something goes wrong — so leave it in a safe bank account and find other money to invest to earn generous returns.
Do You Have a Bank of America Savings Account? Here’s Why You Should Switch
By: Lyle Daly |
– First published on Nov. 4, 2023
Even after a year, you’ll have less than $1 in earnings with Bank of America, compared to $404 with CIT. Over 10 years, sticking with Bank of America costs you over $5,000.Now, this is only an example, and it’s worth mentioning that interest rates on savings accounts fluctuate. CIT won’t offer a 5.05% APY for 10 years straight. That rate will go up and down depending on the federal funds rate. But it’s a safe bet that high-yield savings accounts like this one will consistently offer much more than Bank of America.Are there any downsides or risks with high-yield savings accounts?You might be wondering what the catch is with high-yield savings accounts. After all, there must be a reason why they offer so much more than big banks.The savings accounts that pay the most are typically offered by online banks. These are much smaller than big banks. Online banks can afford to pay more interest because they don’t have the overhead costs that come with operating bank branches throughout the country. They also need to offer higher interest rates to attract clients, whereas big banks with established customer bases don’t.Banking is different with online banks, but it’s just as safe. If you haven’t used an online bank before, here’s what you should know about it:Online banks can be FDIC insured just like big banks. FDIC insurance covers up to $250,000 per depositor, per account in the event of a bank failure. Quality online banks have this, and you can confirm if a bank is FDIC insured by checking its website or looking it up using the FDIC’s BankFind Suite tool.You won’t have access to physical bank branches. Brick-and-mortar banks can be more convenient, because you can visit in person to make deposits and withdrawals. With online banks, you do almost everything from your bank’s web platform or mobile app.You can get cash at ATMs in your bank’s network. Most online banks have ATM networks that their clients can use for fee-free withdrawals. Some have larger networks than others, so it’s worth checking what different online banks have available in your area.Online banks have fewer fees and other requirements. You can find online banks with no monthly fees or minimum balance requirements, including online banks with high APYs. Many brick-and-mortar banks charge a monthly maintenance fee that they waive if you complete certain requirements, such as maintaining a minimum balance.If you’re not sure about doing all your banking online, you can always have accounts at both a traditional bank and an online bank. You’ll still be able to bank in person this way at a brick-and-mortar bank. But for your savings, an online bank is a much better option.
Ask Yourself These Essential Questions Before Opening a CD This Year
By: Maurie Backman |
– First published on Nov. 8, 2023
One benefit of putting money into a CD versus a regular savings account is that you might get an opportunity to earn more interest on your parked cash. CD rates are often higher than the rate you’ll get in a savings account. Also, when you open a CD, your interest rate is guaranteed throughout its term, whereas with a savings account, you might start with a higher rate only to see it fall weeks or months later.Now, it just so happens that CDs are paying pretty generously these days. But before you rush to open one, make sure to address these important questions.1. Am I sure I don’t need the money for something else?When you put money into a CD, you’re making a commitment. You can technically cash out a CD at any time, but if you do so before the end of its term, you’ll face a penalty (the exact amount of which will depend on the length of your CD and your bank). So it’s best to only tie up money in a CD that you’re certain you won’t need for its duration.To that end, think about your upcoming financial needs. The holidays will be here soon. Are you sure you won’t need the cash you’re thinking of putting into a CD to buy gifts? This is just one example, but the point is to make certain you can really afford to part with your cash for six months, 12 months, or however long your CD term is.2. Am I planning any large purchases for 2024?You may not have many larger purchases planned in the near term. But what are your plans for the new year?If you’re thinking of opening a 6- or 12-month CD at some point this year, it means that money will be restricted for a good part of 2024, too. So if you’re thinking of renovating your home or you have reason to believe that you might need a new car, you may want to hold off.3. Do I think rates will be more favorable down the line?Right now, CD rates are high thanks to a string of interest rate hikes implemented by the Federal Reserve. On Nov. 1, the Federal Reserve announced it would pause its interest rate hikes — something it did back in September as well.But the Fed still has one meeting left this year scheduled for mid-December. And if the central bank opts to raise interest rates at that point, it could result in higher interest rates for CDs as well.Of course, that’s a big “if.” Some economists are confident that the Fed is done raising interest rates. But you may want to wait until December to open a CD in case another rate hike happens.Putting money into a CD is a good way to earn extra interest on cash you’d like to leave in the bank. Just make sure it’s the right time to open a CD before diving in.
Is Your Income Above Average for Your Age?
By: Lyle Daly |
– First published on Oct. 30, 2023
Your income isn’t everything, but it’s definitely important. If you earn an above average income, that makes it much easier to manage your personal finances. You’ll have more money to pay your bills, save, and treat yourself on occasion.The median U.S. income is $70,300, according to the latest Survey of Consumer Finances (by the Federal Reserve). But income also varies by age. To get an accurate idea of how your income compares, you can look at the average for your age range.The average income by ageHere are the median incomes in the United States, broken down by age range:Less than 35: $60,50035 to 44: $85,90045 to 54: $91,90055 to 64: $81,90065 to 74: $60,90075 or older: $49,100On average, people earn less as young adults in their 20s and early 30s. At that age range, most are starting the process of building their careers and don’t have too much extra money to fill out their bank accounts.By the mid-30s to the 40s, incomes go up significantly. The 45-to-54 range is when the average worker is at their earnings peak. The average income declines from there as people work less and eventually rely on money from their retirement accounts once they’re done working.Keep in mind that these are just averages, and everyone’s career path is different. For example, if you make a mid-life career change, then your income might peak later in life. There’s nothing wrong with that. If you’re in the NFL, there’s a good chance your income peaks in your 20s, not your 40s (unless you’re Tom Brady).What can you do to increase your income?If you’re not quite earning an average income for your age, or even if you are, you may be interested in increasing it. This can be one of the best ways to improve your financial situation.There are lots of ways to earn more money. Some of them only require small adjustments to your lifestyle, while others involve more serious changes. For starters, here are a few of the easier ways to boost your income:Increase your hours. Even working an extra 30 minutes per day adds up. For example, if you earn $40 an hour, then working another 30 minutes per day will make you an extra $100 per week.Raise your rates. You could talk to your employer about a raise if you have a full-time job or let your clients know you’ll be increasing your rates if you’re a freelancer.Improve your productivity. If you’re paid per job, then finding ways to work more efficiently will help you earn more. Better time management often makes a big difference — you may want to try strategies like time blocking.In some cases, the best option could be to make a more drastic change. For example, if you’re not satisfied with your current job and don’t see much room for advancement, then working a little more or asking for a raise probably aren’t the right options. You may want to consider one or more of the following:Make a career change. Your profession plays a big role in how much you earn. Think about what skills you have that you could leverage into a higher-paying job.Build your skillset. If you can’t think of any skills you can use to earn more, dedicate some time to building one. You could start taking courses in web design, copywriting, or digital marketing, to give a few examples, and then use what you learn to get a new job.Start a new business or a side hustle. Striking out on your own could make a big difference in your earning potential. I know from experience — I would’ve never earned as much money working as an employee compared to what I make now as a freelancer.The key ingredients to raising your income are hard work and patience. If you’re willing to put in the time, and you understand that results usually don’t happen overnight, you should be able to grow your earnings.