Why I’m Not Opening Any CDs in 2024 — Even Though Rates Are Up to 5.5%

By: Ben Gran |
Updated
Jan. 26, 2024 – First published on Jan. 26, 2024

Have you seen how high the APYs have gotten on certificates of deposit (CDs)? As of Jan. 21, 2024, some of the offers on our best CDs list were offering rates of up to 5.51% APY! With the Fed (possibly) getting ready to cut interest rates, now could be a good chance to lock in a high yield on a CD.But even though the APYs are tempting, I’m not convinced that opening a CD is the right move for my personal finances. And CDs might not be the right option for you, either.Here are a few reasons why I’m not opening any CDs in 2024.1. I don’t want to lock up my money in a CDWith my cash savings, I like to keep my options open. Putting money in a CD requires you to commit that cash for a certain length of time — a short CD term might only be three months, but you can’t take the money out. If you do need to pull money out of a CD before the term is up, you will owe an early withdrawal penalty.Instead of a CD, putting your cash savings in a bank or credit union savings account gives you flexibility for using that cash. What if you have an emergency expense? What if you need to replace your car, and you need cash for a down payment? What if you find a can’t-miss deal on an affordable winter vacation, or find some other investment that you want to make with that money? None of these financial moves are possible when your money is locked up in a CD.This lack of flexibility means that I don’t consider CDs to be the best place for your emergency fund. And if you’re saving for short-term or medium-term goals, like a down payment on a house, I don’t believe CDs are the best fit for that either — because the higher APY of a CD isn’t always worth the financial freedom and flexibility that you lose by locking up your money.2. The best high-yield savings accounts pay high APYs tooCDs aren’t the only game in town if you want to earn a better yield on your savings. The best high-yield savings accounts (as of Jan. 21, 2024) are also paying yields of 5% or higher — the best savings account on our list offers 5.32% APY!Is earning an extra 0.19% APY on your savings worth the inconvenience of a CD? Maybe if you have $250,000 to put into a CD, but even then, that difference in APY only amounts to an extra $475 in one year. I would rather have the flexibility of a savings account or money market account.With a high-yield savings account, you get:APYs almost as high as (and sometimes higher than) the best CDsThe freedom to withdraw your cash at any timeNo early withdrawal penaltiesIt’s true that if interest rates go down in 2024, savings account APYs will go down too. I could be missing out on a chance to lock in a higher APY on a longer-term CD. But I don’t try to time the market with stocks, or with savings account APYs. No one knows what the future holds, and no one knows what the Fed will do at their next meeting.Even if interest rates (and savings account APYs) go down by 1% by the end of 2024, that’s a risk I’m willing to take and a price I’m willing to pay. My savings account will be earning a pretty good interest rate during all that time, and I’ll have complete flexibility for how to use my cash.3. CDs aren’t a good long-term investmentSome CD investors like to get long-term CDs (like 3-year or 5-year CDs) so they can lock in a high APY for a longer duration of time. But these long-term CDs are also not a good fit for my personal finances. If I’m reluctant to lock up cash for 12 months or six months, why would I want to lock up that cash for several years?I’m still at an age and stage of life where I basically think about investing in terms of two buckets: I like to have one bucket of short-term cash, with plenty of emergency savings and money for short-term goals like vacations and home repairs. And then everything else that’s not short-term cash goes in the bucket of long-term investments.Based on my age, investment time horizon, and risk tolerance, most of my long-term investments are in stocks. So the idea of buying a 5-year CD doesn’t make sense to me. If I’m investing for five years from now, I’m going to buy stocks. If I need cash for something that’s shorter term, I want the flexibility of a highly liquid, immediately accessible savings account.Your life stage, risk tolerance, time horizon, and overall personal finances and investment goals might be totally different from mine, and that’s totally OK! If you’re a retiree who needs fixed income, maybe buying CDs should be part of your strategy. But if you’re still trying to grow your wealth with long-term investments, buying stocks is likely to be a better strategy.Bottom line: I’m not opening a CD in 2024 because I value the flexibility of a savings account. I don’t want to commit my money to a CD that charges early withdrawal penalties, and the best high-yield savings accounts offer similarly high APYs. My philosophy on CDs is: don’t lock up your emergency savings in a CD, and don’t use CDs as long-term investments. Flexible access to cash in the bank can provide priceless peace of mind.

How to Grow a $1,000 Emergency Fund Into $3,000 in 2024

By: Maurie Backman |
Updated
Jan. 27, 2024 – First published on Jan. 27, 2024

You need money available in an emergency fund at all times. You never know when you might lose a job, get stuck with a huge medical bill, or face a car repair your regular paycheck can’t cover.Recent SecureSave data finds that 63% of Americans can’t cover an unplanned $500 expense by dipping into their savings. So if you have a cool $1,000 sitting in your savings account, consider yourself to be in better shape than the typical U.S. adult.However, an ideal emergency fund is one that has enough money to cover three months of essential expenses. Chances are, $1,000 isn’t enough to do that unless you happen to have extremely low expenses (maybe you’re a recent college grad who lives at home).Getting from a $1,000 emergency fund to having enough savings for three months of bills can be challenging. And it may have to be a multi-year process. But it may be possible to grow your $1,000 emergency fund to $3,000 in 2024 alone — especially if you make these moves.1. Cut one small expense and send that sum into savings automaticallyTo save $2,000 during the year, you basically need to bank $167 a month. You can probably do that if you cut out all of the fun things in your budget, but that’s really no way to live. So instead, cut one expense. And you don’t even have to cut it completely — just somewhat.Let’s say you cancel one streaming service but keep a second one you have. If that move saves you $16 a month, so be it. That’s almost $200 in savings, or 10% of your goal.However, don’t just cut an expense and call it a day. Set up an automatic transfer so that specific amount leaves your checking account at the start of the month and lands in your savings. You don’t want to accidentally take your $16 or so in Netflix savings and blow it at Starbucks by popping in a couple of times a month.2. Join the gig economyWorking a second job may be a tall order for you if your main job is demanding and you have a lot of obligations outside of the office, like caring for young children or pets. But perhaps it’s feasible to earn an extra $100 to $200 a month doing gig work, which could put you at your savings goal for the year.One thing you may want to focus on is a job that allows you to set your own hours, like driving for a ride-hailing service. That way, you can take advantage of slower periods at work or in your personal life and work more hours then, but scale back when things are busy.3. Take a less expensive vacationPacaso says that in 2023, the average vacation cost $1,919 per week, per person. As such, it’s conceivable that skipping out on a 2024 vacation entirely might basically get you to your $2,000 savings goal.But let’s be real — we all deserve a getaway that allows us to recharge and experience new things. So a more realistic approach may be to see if you can spend more like $1,000 on a 2024 vacation if you’d normally be inclined to spend double. You can then put the sum you aren’t spending on things like airfare and lodging in the bank.Another thing to consider is a staycation. The upside there is that you still get a break from work and you still get new experiences. But not paying to get places (other than perhaps some gas or train fare) or for lodging could save you a lot.Tripling your emergency fund could put you in a much better position by the end of the year. Make these moves to give your savings a boost — and to enjoy the peace of mind that comes with it.

Is $10,000 Too Much to Keep in a Savings Account?

By: Kailey Hagen |
Updated
Feb. 1, 2024 – First published on Feb. 1, 2024

Saving $10,000 is a huge milestone, and it’s worth celebrating. That kind of money can solve a lot of problems. But it also raises some important questions, like where’s the best place to keep that kind of cash?A savings account might seem like the obvious option, but it’s not always the best move. Here’s what you need to know to decide if it’s right for your money.Benefits of keeping your $10,000 in a savings accountFirst things first: There’s nothing wrong with keeping $10,000 in a savings account. If you’re working with a reputable bank, your money will have Federal Deposit Insurance Corporation (FDIC) insurance up to $250,000 per person per account ($500,000 for joint accounts). This protects your money even if the bank fails. So there’s no risk of loss as long as you protect your personal and banking information.Keeping your money in a savings account can also help you earn interest over time. Interest rates vary depending on economic conditions. Currently, they’re pretty high, with some of the best high-yield savings accounts offering rates exceeding 4.50%. That could earn you $450 or more in a year with a $10,000 initial deposit.Using a savings account keeps your money accessible as well. This is extremely important if that $10,000 is part of your emergency fund or is for a large purchase you plan to make in the next couple of years. You usually don’t want to invest this money because markets can be unpredictable in the short term. If you need to withdraw your cash when your investments are down, you’d have to settle for a loss. A savings account enables you to withdraw your money worry-free at any time.The drawback to keeping your $10,000 in a savings accountThough savings account interest rates are high right now, they aren’t guaranteed to stay that way. And even the best savings accounts probably won’t earn you as much as investing would over the long term.A certificate of deposit (CD) might be a better choice if you’re worried about savings account interest rates falling throughout 2024. CDs give you a guaranteed interest rate for the entire term, which could be anywhere from a few months to several years, depending on the CD you choose. If you lock in a high CD rate now, you could potentially earn more in interest with one of these accounts than you could with a savings account over the next few years.But you should note that you typically cannot touch money in a CD until the end of the CD term. If you access yours early, you’ll usually pay a penalty equal to several months of lost interest. So it’s not the right place for your emergency fund or cash you plan to use before the CD term ends.Investing your savings is another option, but as mentioned above, market volatility makes this a poor choice for the money you plan to use soon. It can be a great option, though, for money you don’t expect to use for years. The S&P 500 — one of the most popular market indexes — has a compound average annual growth rate of 10.7% over the past 30 years.If you invested your $10,000 and it earned about 10% per year over the next 10 years, you’d wind up with close to $26,000. No savings account will earn you that much over that time.It doesn’t have to be all or nothingThere are pros and cons to all of the above options. If you’re not comfortable putting all your eggs in one basket, consider spreading your money around. Keep some in a savings account and put the rest in a CD, brokerage account, or retirement account. This can help you earn higher yields while also keeping some of your cash readily accessible. Think through all your options and go with the approach that you’re most comfortable with.

My Brother Won a Car on The Price Is Right. Here’s What It Cost Him

By: Maurie Backman |
Updated
Dec. 7, 2023 – First published on Dec. 6, 2023

When my brother got tickets to be in the audience of The Price Is Right, he figured it would simply be an entertaining way to spend a day off. He didn’t imagine his name would actually be called during the show’s opening round.But lo and behold, my brother was one of the first four contestants asked to come on down and participate in the iconic show that has you guessing at prices of various consumer goods. And as luck would have it, my brother was able to out-bid his competitors and move on for a chance at a new car — a car he won through savvy guessing, but also, a nice amount of luck.My brother was ecstatic to have won such an awesome and valuable prize. But that prize wound up being a bit of a mixed bag.Taking the money and runningMy brother won a Hyundai Elantra with an estimated value of $25,415. He was happy to have won the car, but there was a problem — he already had a vehicle and didn’t need a second one. And he certainly didn’t want to have to bear the cost of auto insurance for a vehicle to largely just sit in his driveway.Thankfully, my brother was able to work something out with the dealership. Instead of keeping the Elantra, he was able to use the roughly $25,000 credit he got to buy a used car from them and then sell it back for $21,000, which he took as cash. This route was worth it for him because sales tax and registration for a new Elantra would’ve been about $4,000. And now, my brother has a pile of cash he can add to his savings account instead of a car he doesn’t actually need.Gearing up for a giant tax billMy brother won two prizes on The Price Is Right — a grill package worth about $1,400 and the Hyundai Elantra. All told, it’s more than $26,000 in winnings.But now, my brother is going to be looking at a pretty hefty tax bill on his prizes. And it doesn’t matter that he took cash for the car. He’s looking at paying that tax either way.The exact amount will hinge on his total tax situation. What’ll probably happen is that my brother will receive a tax form from the game show summarizing the value of his winnings, and he’ll need to work with his accountant to figure out what it will cost him.As a very basic example, let’s say you win $20,000 on a game show and fall into the 24% tax bracket based on your income. You might, in that case, end up having to pay as much as $4,800 on your winnings. If that $20,000 is a cash prize, you could simply reserve some of it for your tax bill. But what if you win a $20,000 vacation package, or $20,000 in furniture? It’s not like you can send the IRS a dining room chair or a loveseat and call things even.So be very careful when you’re looking at taking home any sort of game show prize. You may even want to meet with an accountant before applying to be on a game show to get some advice.The good news is that my brother stands to gain something financially either way. But imagine you were to receive a $26,000 bonus from work. That’s a great thing. But you’ll likely end up losing a large chunk of that $26,000 when you account for the portion you owe the IRS.All told, my brother is grateful for his experience and now has a really fun story to tell. But if you’re planning to audition for a game show in the hopes of walking away with a huge amount of cash or a set of prizes, do know that winnings like that are considered taxable income. And it might take the input of a very seasoned accountant to help you reconcile your tax bill after coming away with that sort of haul.

5 Best Winter Deals at Sam’s Club Right Now

By: Brittney Myers |
Updated
Jan. 26, 2024 – First published on Jan. 26, 2024

A Sam’s Club membership makes the most financial sense when you maximize it all year long. Here are a few wintertime deals you’ll find at Sam’s Club right now.1. Winter tiresWinter tires outperform most all-season and all-terrain tires for snow and ice, making them safer for folks driving through months of winter weather. They can definitely be worth the investment — but an investment it is.The Sam’s Club tire centers offer competitive prices on winter tires, and you can get an extra $100 off when you buy a full set (through July). The best deal comes from paying a bit more to have them installed, however. For $20 a tire, you’ll get a host of perks such as lifetime balance and rotation, road hazard protection, and free flat repairs. Sam Club even throws in access to roadside assistance.Pro tip: If you’re going to plonk down the big bucks for a set of new tires, consider opening a new rewards card first. A good welcome bonus could net you $200 with a single large purchase.2. Winter wearWinter weather wear can be expensive, especially if you’re buying specialty clothing like ski pants. But Sam’s Club offers very affordable ski pants for men and women, currently on sale for just $19.98.While these probably aren’t the thing to buy if you’re an avid skier and hit the slopes every weekend, reviewers say they’re decent quality (especially for the price). They’d be a good pick if you want to try snowsports for the first time. It might also be a good pick for something you can throw on while shoveling the driveway.Sam’s Club also has a very reasonably priced array of winter jackets — none of those $200-and-up price tags. It’s not off-brands, either; options include several popular names like Columbia, Marmot, and Eddie Bauer.3. Space heatersI love space heaters for keeping my energy bills down. Instead of heating the whole house, we can tuck these efficient little heaters into bedrooms and offices to keep things cozy.Sam’s Club has a variety of types and sizes, from ceramic tower heaters perfect for bedrooms, to propane-powered outdoor heaters that make your porch more family-friendly during the winter.Prices are comparable to other retailers, if not better, especially the models currently on sale. (And you get Sam’s Club’s awesome return policy should any of your heaters kick the bucket over the summer.)4. Hot drinksSure, we all love our legal addictive stimulants any time of year. But there’s something about that first cuppa on a cold day that really sets the mood.Member’s Mark coffees are very well-rated, averaging about 4.7 out of 5 stars from thousands of reviewers. It’s also very well priced, with single-serve pods ranging from $0.28 to $0.31 per pod, and bags of ground coffee just $0.32 to $0.44 per ounce.You can also find other toasty beverages for a good price. If the family loves Swiss Miss hot chocolate, for instance, you can buy it in bulk for much less than the grocery store. And while I can’t recommend Sam’s Club for tea snobs — it’s not the place to get quality loose-leaf — you can get great prices on bulk bags of Bigelow green.5. Soup (premade or DIY)You can get great deals on multi-can packs of a number of popular canned soups, from classic Campbell’s to Panera to PhoLicious. Or give Sam’s Club’s own brand a try: Several varieties of Member’s Mark premade soup are on sale through the end of January for $1 off.If you prefer to make your own soup, Sam’s Club can be a fantastic place to pick up your ingredients. Normally, I’d say stay away from buying wholesale club produce; unless you have a very big family, it’s almost impossible to go through bulk produce before it spoils.Soup is the exception. You can pack a ton of veggies into a good soup, make it by the cauldron, then freeze it for easy, delicious dinners all winter long.Don’t forget Scan & Go!A lot of Sam’s Club perks can save you money. (Heck, a Sam’s Club Mastercard can pay for your membership in rewards alone.) But my all-time favorite Sam’s Club perk doesn’t save me a dime. Instead, it saves me something more valuable than money: time.That’s right, I’m talking about Scan & Go, perhaps the single greatest use of a mobile store app I have yet seen. This feature lets you scan items as you shop, right in the Sam’s Club app. Then, when you’re ready to check out, you can pay and get your receipt in the app. No need to even look at a checkout line.Shaving that five or 10 minutes off the end of my Sam’s Club trip — when I’m already tired of battling other shoppers and their giant carts — makes the entire trip better. It’s the perfect way to improve any Sam’s Club experience. (Plus, it gives me valuable time to chuck a few snowballs at the neighborhood kids when I get home!)