Tag: savings

Earning Interest

Best Money Market Rates & Accounts – April 2017

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Traditional banks are paying very low interest rates on money market accounts. For example, Bank of America pays between 0.03% and 0.06% APY. Fortunately, you do not need to settle for such ridiculously low rates. You can easily find the best money market rates at internet banks paying 1.05% or more. If you put $50,000 into Bank of America’s account at 0.03%, you will only earn $15 of interest over one year. That same money in an account paying 1.05% would earn you $525 of interest. And you can typically open and fund an online money market account in less than 10 minutes.

MagnifyMoney has searched for money market accounts paying the highest interest rates – and this list gets updated monthly. Here are the best rates for April 2017:

1. Top Choice: Sallie Mae – 1.05% APY, no minimum balance and checks available

If you have student loan debt, you probably are not very excited to see Sallie Mae at the top of this list. However, many people are unaware that Sallie Mae also operates an internet-only FDIC-insured bank with some of the best interest rates in the country. You can earn 1.05% APY, compounded daily and paid monthly. There is no minimum balance and no monthly maintenance fees. You will have check-writing capabilities (although the standard money market limit of six per month applies to this account). The easiest (and best) way to fund and access your funds is via electronic transfer from your existing checking account.

2. Highest Rate: United Bank – 1.25% APY, $2,500 minimum to avoid a fee, restricted to 25 states

 Unless you are from New England, you have probably never heard of United Bank. Formerly RockVille Bank (which originally opened in 1858), United has more than $5 billion of assets and started growing very rapidly over the last few years. Its lending portfolio has been growing faster than its deposits – which is why United started looking for deposits online. You do not need to live in New England to open this money market account. However there are some important restrictions. You need to deposit at least $500 to open the account. If your balance ever falls below $2,500 you will be charged a monthly fee of $15. You can fund and access your deposits electronically. An ATM card is also provided, but you would be charged $2 for every withdrawal outside of the ATM network (which is the AllPoint ATM network). If you live in one of the 25 states and have at least $2,500 – this deal is hard to beat.

Available States: CA, CT, DE, FL, GA, KS, KY, LA, MA, MD, ME, MO, NC, NE, NH, NJ, NY, OK, PA, RI, SC, TX, UT, VA, WA.

3. Excellent Rate: EverBank – 1.11% APY, $5,000 minimum deposit (1-year intro APY)

EverBank, recently acquired by TIAA-Cref, is a rapidly growing bank that conducts most of its business online (even though it is based in Florida). In 2017, EverBank has become very aggressive on interest rates. Its products have regularly made our list of best CD rates, and – not surprisingly – it also appears on the best money market list. This is a great product, but you should be aware of a few pieces of fine print. The APY is only valid for one year. EverBank does promise that the rate, after the first year, will “never stray from the top 5% of competitive accounts.” Just be prepared for a lower rate after 12 months. You need at least $5,000 to open the account. There is no monthly account fee.

4. Good Rate for Big Deposits: Capital One 360 – 1.00% APY on balances above $10,000 (0.60% on balances below)

Capital One has become more aggressive in recent months on the rate that it pays for online CDs and money market accounts. Capital One is focused on big balances: if you don’t have a lot of money, you can get much better deals elsewhere. But if you have a lot of cash and want another FDIC-insured account, Capital One is a strong option. You earn 0.60% APY on the first $9,999.99 that you deposit. You will then earn 1.00% APY on deposits from $10,000 up to $250,000. There is no monthly fee associated with the account.

5. Favorite Online Package: Ally – 0.85% APY, no minimum deposit, and link to free checking

Ally Bank is a very popular internet-only bank. Although the interest rate on the money market account is not the highest, Ally does offer a very competitive overall package – particularly if you link the account to an Ally checking account. The checking account has no minimum balance and no monthly fee. You can link your money market account to your checking account to provide overdraft protection. Money would be transferred to your checking account with no transaction fee if you ever made a mistake. You would be able to access your money market account with your Ally ATM card, which has free AllPoint access and up to $10 of non-Ally ATM fees reimbursed every month. This money market account is a nice way to provide yourself with overdraft protection while earning interest. If you don’t need check-writing capabilities on your savings, you would still be better off with Ally’s savings account.

3 Questions To Ask Before Opening A Money Market Account

1. Should I open a savings account or a money market account?

Many years ago, money market accounts were higher risk and paid higher returns. The financial crisis of 2008 changed all of that. Money market accounts are now FDIC-insured up to the legal maximum ($250,000 per institution per individual). Interest rates are now very similar – and there is no material difference. In other words – choose whichever account you want.

In general, you tend to get slightly lower interest rates on money market accounts because you have check-writing capabilities. The best savings accounts have rates between 1.00% and up to 1.25% APY – very similar to the rates on this page. But at Ally, for example, you can get 1.00 APY on a savings account (no check-writing) and 0.85% on the money market account (with check writing).   

We have written a full explanation of the difference between money market and savings accounts here.

2. Am I willing to make a longer term commitment? 

Savings accounts and money market accounts pay much lower interest rates than CDs. Right now you can easily get a 1-year CD paying 1.35% APY (with only a $2,000 minimum). You can find the best CD rates here. If you build a CD ladder, you can take advantage of 5-year rates that are now as high as 2.30%.

Money market accounts are great places to keep money that you might need immediately. But the interest rate on a money market account can change right away, at the bank’s discretion. To lock in a higher interest rate, you should consider a CD. If you need to get access to your CD early, would forfeit interest (typically from 3-6 months). In most circumstances, putting more of your money into CDs can really help boost your returns.

3. Is a money market account the same as a money market fund? 

No, money market accounts (offered by FDIC-insured banks) are not the same as money market funds (most likely sold by your broker). In fact, we really don’t know why people even buy money market funds in the current environment.

For example, Vanguard offers the Prime Money Market Fund. Like other money market funds, this one “invests in short-term, high-quality securities.” Its objective is to keep the fund trading at $1 and generate a decent return. Right now that return is 0.89% – a bit lower than the returns you see from the money market accounts listed in this article. However, money market funds do not have FDIC insurance.

Most people compare the return of a money market fund (sold by their broker) to the interest rate paid by a traditional bank (0.03%, sold by their local bank teller). As a result, they are willing to take the risk of a money market fund. However, as you can see from the best money market accounts in this article, you can get FDIC insurance and beat the return of most funds. Why earn 0.89% with no FDIC-insurance when you can easily earn 1.05% and have FDIC insurance.

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Featured

Cats vs. Dogs — Which Pet Is More Affordable?

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So you think you’re ready to bring a fluffy bundle of joy home, but you can’t decide between getting a cat or a dog?

MagnifyMoney might be able to help, at least where your budget is concerned. We broke down the costs of owning a cat and a dog, so you can decide which of the most popular pets in the U.S. you’d like to bring home next.

We didn’t just stop at determining the annual cost of kibble or Fancy Feast.

We looked at how much a dog and cat costs in the first year of ownership — and how much each pet costs over their lifetime.

Check out our findings below.

Upfront Costs

These are the initial start-up costs of getting a cat or a dog — adoption fees; accessories like leashes and food dishes; and veterinary services like spaying/neutering and vaccinations. To get these estimates, we used the latest data from Petfinder.com

UpfrontCosts (1)

The Winner: Cats

Your first-year expenses as a cat or dog owner could range anywhere from $125 to a little more than $1,000 depending on the size, breed, and accommodations your new pet would require, according to Petfinder.

Overall, you’d shell out less for a cat up front — as little as a $125 if you take advantage of savings during adoption, shop around to save on your initial veterinary costs, and use coupons when buying accessories or toys for your furball. On the high end, if your kitty is an expensive breed or you simply like to splurge on your feline companion, you’d spend around $635 during the first year.

Recurring Annual Costs

The costs don’t end after you bring Fido (or Fluffy) home. You should budget about $1,125 yearly on vet visits, food, boarding, toys, and grooming for a cat, and about $1,641 on a dog, according to the American Pet Products Association’s most recent National Pet Owners Survey.

RecurringCosts (2)

THE OVERALL WINNER: CATS

If the decision came down to your wallet, cats are significantly cheaper than dogs, costing about $13,625 to $17,510 in a lifetime, compared to dogs at $16,607 to $22,423.

We based the lifetime costs on the average lifespan of dogs (10-13 years) and cats (12-15 years).

But even though cats typically live two to three years longer than dogs, they still come out more affordable in the end.

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Featured

Use the $20 Rule to Break Your Credit Card Addiction

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Credit Cards

If you’re trying to break your credit card addiction, try this simple rule of thumb: Anytime your purchase is less than $20, pay cash, not credit.

This simple technique helped save more than 6,000 people over $100 on their credit card bills, according to a joint study by the Urban Institute, Arizona Federal Credit Union and the Doorways to Dreams Fund, a nonprofit financial services organization.

Carrying credit card debt can be one of the most harmful financial habits out there, yet 41.7 percent of Americans carry balances from month to month, according to the American Bankers Association. When you carry a balance from month to month, not only are you stuck paying additional interest charges but it can also be harmful to your credit score.

These groups sought to figure out if people were less likely to carry a balance if they tried one of two strategies: Either they were reminded not to use credit for any purchases under $20, or they received alerts warning them that carrying a balance can add an additional 20% to their purchases with interest.

For the study participants, the researchers chose over 14,000 consumers who carried a balance for at least two months within a six month period. Then they split them into three test groups: one group used the $20 rule; one group received the warnings about accruing interest on debt; and the last group did nothing differently.

The second strategy (warnings about revolving debt consequences) wasn’t as successful, creating no significant changes in spending behavior.

But the first strategy — the $20 rule — made a real impact.

Over 6,100 people used the $20 rule for six months. Over that time, they reduced their balance by an average of $104.20.

The trick to why the $20 rule worked is that it helped people change their spending behavior, said study author Brett Theodos, a lead researcher at Urban Institute. The point of the rule, he added, was to reduce frivolous spending among consumers, rather than focusing on encouraging them to make monthly payments.

It’s those spending patterns — using credit for everything from a pack of gum to a flight to L.A. — that result in high revolving credit balances over time.

“The [$20 rule] was more actionable. It was a very clear target,”  Theodos said.

Both rules worked better with consumers under age 40 and for consumers who used their credit card most often (10 or more times a month). Theodos said it’s possible that the groups were “more tech-engaged and took more advantage of the emails and web banners in particular.”

The under-40 consumers who tried the $20 rule reduced their revolving debt by $173 on average over six months. Overall, they reduced their debt by up to 5%, according to the study. When using the second strategy (those frequent alerts and notifications) they shaved $160 off their average revolving debt. Study participants in the 40 to 60 age range didn’t see a significant change in balance reduction, however those over 60 did cut back debt by roughly 3 percent.

The key takeaway: Using action-oriented strategies may be a smart way to work your way out of credit debt. It’s certainly worked successfully for savings. For example, the $5 savings method involves on a similar strategy. The idea is to begin saving every $5 bill that you receive. It helped one woman save thousands of dollars over several years.

“Rules, tips reminders, nudges, are really the wave of the future,” Theodos said.

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News

Is It Possible to Earn Interest On Your Money These Days? Maybe.

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Man Paying Bills With Laptop

When it comes to earning interest on your cash, for the most part you won’t get a whole lot of return without involving yourself in at least a little (and sometimes a lot) of risk. The question then becomes — just how much risk are you willing to take … and is it smart to do so?

Unfortunately, these days you’ll be hard-pressed to find a product that will provide you with a large return on your investment, whether there’s a large amount of risk involved or not. The following are some ways you may be able to grow your money, along with what type of return you could be looking at and how much risk you’ll need to be willing to take.

Remember — always do your research before investing your money, and depending on where you decide to put your cash, you may need to be willing to part with it for many years in order to reap the rewards.

Option 1: A high-yield checking account

Risk: Low
Yield potential: Low
The facts: If you’re interested in earning interest on your money, a checking account really isn’t where you’ll find the biggest rewards, but you’re also not going to find any risk, since a checking account with your bank will be FDIC insured. In actuality, it’s probably not worth wasting your time trying to earn money with a checking account, since most that offer interest ask for higher deposits to start off with, and the amount you’ll end up paying is almost never worth it. Still, if you’re interested in earning some extra money while your cash sits around, check out this link to compare checking account options.


Option 2: A high-yield savings account

Risk: Low
Yield potential: Low
The facts: Although interest potential is low for a high-yield savings account as well, you should be able to find a savings account that will provide you with higher dividends then you’d find with a traditional checking account. A couple things you’ll want to keep in mind when looking for a good savings account are that you stick within the realms of your account being FDIC insured (all US bank deposits are insured up to $250,000; if you deposit more, then open accounts at multiple banks not multiple accounts at one bank), that the interest compounds daily and that you follow the rules for withdrawals so as to not get caught paying extra fees. Check out this link for some smart savings account options.


Option 3: A myRA account

Risk: Low
Yield potential: Low
The facts: Traditionally this type of account has only been available to government employees, but in 2015 it was made available to the general public, as well. Any money you put into your myRA has a guaranteed rate of return backed by the Federal Government, so your risk is low, and you’ll can earn interest at rates more than double what you’ll find with even the best savings accounts these days (last years’ rate of return, for example, was 2.31%). As far as investments go, however, you’ll be able to find accounts that traditionally yield higher interest, but you’ll be starting to get into riskier territory. However, you may not be eligible based on your income. Click here for more information about the myRA.

Option 4: Treasury bonds

Risk: Low
Yield potential: Low
The facts: A treasury bond is a fixed-interest government bond issued by the U.S. Treasury, traditionally with a maturity of over 10 years. There are a few different ways of expressing how much a bond might return, but in general, the total return on a bond will include all the money its holder earns off the bond, to include annual interest and the gain or loss in market value, if there was any. In other words, when it comes to bonds, if you’re looking for a low-risk investment on money that you can hold off on cashing in on for at least 10-30 years, then treasury bonds might be worthwhile. You can click here for the average interest rates on bonds based on the month. (For example, returns in April on Treasury Bonds were at 4.543%.) 

Option 5: Lending Club

Risk: High
Yield potential: High
The facts: With median returns hanging out around 6.9%, you might think dipping your feet into funding people’s loans on Lending Club is a smart idea, but there’s plenty to consider before doing so. For starters, there’s no secondary market, says Nick Clements, a former banker and MagnifyMoney co-founder. “Once you buy a loan, you have to hold it until term,” he said. “There is limited performance data, too — losses will accelerate in a credit cycle or downturn, and it’s not clear how well the assets will perform.” In addition, you’d generally need to invest in at least 100 notes to get decent diversification, and you should probably invest even more if you expect high returns. 

Option 6: Index funds that target High Dividend Yields

Risk: High
Yield potential: Medium
The facts: Any time you invest your money in the market, you’ll be looking at dealing with the volatility that comes with those types of moves. Where there’s market risk, says Clements, you need to be willing to accept the fact that the price of your shares might decline. “You also need to be aware of dividend payouts,” Clements added. “In other words the company can reduce or eliminate the dividend at any time.” If you do decide to go this route, though, you could be looking at high dividend SEC yields of 3.17%.

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News

5 Options For Where to Stash Your Emergency Fund Money

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Male hand putting coin into a piggy bank

Ah, emergency funds. Depending on your age and salary, you may think either:

  1. “I’ll never need that,” or
  2. “I’ll never be able to fund that.”

Of course both of those statements are false. While we all hope that we’ll never need to dip into our emergency savings, the very definition of the word “emergency” conjures up the image of surprise, which is exactly what your emergency fund is meant to help you out with — surprise costs. In terms of funding one, on the other hand, while that may take a little maneuvering on your part of determine how to best fit it into your budget, consider an investment in your emergency fund an investment in yourself … now doesn’t that make it sound so much more important?

Whatever you have to tell yourself to get to the point where you finally understand that you need an emergency fund, remember that experts suggest saving three to six months of your take-home pay in an easily accessible account. Before you let that number scare you off, remember that eventually you’ll hope to have that amount saved — for now your first step is to start saving at all.

Baby steps.

So where exactly should you start saving once you’ve determined that you actually are going to start saving? A few of the more common places people keep their savings include:

  1. Checking accounts: These types of accounts are convenient and easy to access, sure, but you’ll be hard-pressed to find a checking account that will score you any interest (or at least any interest worth considering), so we’d suggest keeping this as a last resort.
  2. Savings accounts: With higher interest rates than checking accounts and an FDIC backing of up to $250,000, savings accounts make a solid savings option. Check here to compare different savings account options, and here for five great online savings account options.
  3. Money markets: If you’re looking for something that’s insured and offers competitive interest rates, you can look into a money market, but these types of accounts will still offer lower rates than some other options.
  4. Certificate of deposit (or CDs): CDs are insured accounts with fixed interest rates (meaning if rates go up in general, yours won’t), and there is generally a minimum deposit required and penalties for early withdrawals. CDs don’t necessarily make the best options for an emergency account because of those penalties, since the point of an emergency fund is that it should be easy to access for free.
  5. Money market mutual funds: Although these accounts aren’t insured, there’s limited risk because of the short maturity of your investment, and they usually offer some checking privileges as well. Keep in mind most also usually come with minimal balance requirements, typically around $500 to $1,000 to start.

For more on the ins and outs of emergency funds, how to get started and some other options on where to keep your cash, check out this in depth piece about the ultimate guide for handling your emergency fund.

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News

5 Ways to Buy Furniture on the Cheap

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Buy Furniture on the Cheap

Whether it’s an upgrade here and there or a full-on brand new apartment or house you’re looking to furnish, buying new furniture can be a daunting (and expensive) task. With so many shopping options available these days, it can be easy to get sucked into a spending hole — but you don’t have to. Check out some of these suggestions for smart and easy ways to save some cash and still furnish your new abode exactly as you envision.

1. Buy used

We all know Craigslist and eBay as old standbys for finding used goods, but those aren’t your only options. AptDeco, for example, handles pick up and delivery of buying and selling used furniture, and Krrb helps locals find gently used items near them, while Chairish offers pieces that design-lovers will go crazy for. (Note that the hard-to-find goods at Chairish are a bit more expensive than what you’d find on some of the other places mentioned, but they’re definitely cheaper than you’d find in an actual antique store.) Also consider yard and estate sales for pieces.

2. Shop at the right time

If you have enough stuff to hold you over for a short time, consider holding off on buying new furniture until you can time it with spectacular sales. The holidays obviously offer savings opportunities (think of outside-the-box holidays, as well, like Memorial and Independence Day), but since new furniture designs tend to debut in the spring, experts recommend February as a good time to go furniture shopping, as store owners try to clear out their showrooms to make room for the new products.

3. Be smart about using cards

While we’d never advocate for frivolous spending on credit cards (in fact, check out this piece about why store credit cards tend to be the worst), if you’re smart about it, opening a store card to purchase all of your furniture at once and receiving a big ole’ discount is actually a great idea, as long as you can pay off your card immediately and not use it again. (Bonus points if you can combine using a store credit card discount with a big sale.)

4. Think simple

If you can stand it, consider going for smaller, more neutral large items (like chairs and couches), since these tend to cost less, and use additional accessories (like artwork, throw pillows and lamps) to spice up the overall look with accent colors.

5. Never purchase without haggling

Even if asking for a discount isn’t your favorite thing, consider the fact that brushing up on your haggling skills could save you tons of cash, depending on how much furniture you’ll be buying. If you’re buying multiple items, ask if there’s a discount for that. Ask if there’s wiggle room with the delivery fee or if the price that’s listed is the absolute lowest they can go. Even if you love the piece and will buy it no matter what, at least you’ll have done your due diligence in trying to get the piece for less.

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College Students and Recent Grads, Life Events

Financial Accounts You Should Know About After Graduation

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Financial Accounts You Should Know About After Graduation

As a new graduate, you may be dealing with a dizzying number of new responsibilities, many of which involve money. There are helpful financial checklists aimed at graduates that recommend money-related habits or management tips. However, to put many of these lessons and ideas into practice, you also need to understand how different types of financial accounts work.

With simple explanations for each, here are several of the financial accounts you may encounter.

Non-Student Checking Accounts

You may have a student checking account that doesn’t have a minimum balance requirement or monthly fee. After graduating, your account could automatically switch to a standard checking account.

With many checking accounts, you’ll need to pay a monthly fee unless you meet a requirement, often a minimum balance or direct deposit each month. You may want to consider switching to a new non-fee checking account if you can’t meet the requirements.

Employer-Sponsored Retirement Accounts

According to the American Benefits Council, most full-time workers at large companies have access to an employer-sponsored retirement account, such as a 401k. If you work for a non-profit, educational institution, or government organization you may have, a 403b or 457 plan rather than a 401k. You can use these accounts to save for retirement, and get tax advantages for doing so.

You can generally choose to contribute a particular dollar amount, or a percentage of your pay, from each paycheck to your 401k account. You also may need to decide where the money gets invested once it’s in the account. You’ll likely be able to choose from a list of different mutual funds, and can ask your 401k manager or look online for guidance.

Your employer’s 401k plan doesn’t necessarily offer the best investment options or lowest fees, but many organizations offer a company match that can significantly increase your savings. The company might match a portion of the amount you contribute, up to a percentage of your annual salary. For example, the company may deposit 50 cents for each $1 you contribute, until they add the equivalent of six percent of your annual pay.

During 2016, you can contribute up to $18,000 ($24,000 for those that are 50 or older) into a 401k, 403b, or 457 plan, not counting the employer’s matching. Your contributions are tax-deferred, meaning you don’t have to pay income taxes on the money this year. In practice, you’ll get a deduction equal to your contribution. You do have to pay income taxes on the money when you withdraw it, unless it’s a Roth account.

You may have to pay a 10-percent penalty for withdrawing money from your 401k before you’re 59 and a half, but there are exceptions to help pay for medical, home, and educational expenses.

Independent Retirement Agreements

If your employer sponsors a retirement account and offers matching, it may be best to start saving for retirement with that account. But, if you don’t have access to an employer-sponsored account, max out your contribution and want to save more, or want more control of where you invest your money you can save money for retirement in an Individual Retirement Agreement (IRA). They’re also often referred to as individual retirement accounts.

There are several types of IRAs, but unless you run your own business, you’ll likely want to use either a Traditional IRA or a Roth IRA. There are differences, but both accounts offers tax advantages.

  • Traditional IRA – Contributions are post-tax, meaning you don’t pay income taxes now (you get a tax deduction), but will need to pay taxes when you withdraw the money. Aside from special circumstances, you’ll pay a penalty for withdrawing the money before you’re 59 and a half.
  • Roth IRA – Contributions are pre-tax, meaning you pay taxes on the money before making contributions (no deduction). You can withdraw your contributions at any time, but a few special circumstances aside you’ll pay a penalty if you withdraw earnings before you’re 59 and a half.

With either IRA, you can contribute up to $5,500 in 2016. Those that are 50 or older can contribute $6,500. As with employer-sponsored retirement accounts, you may need to decide where to invest your money once it’s in an IRA. There are income phase-outs on the tax deductions depending on how much you earn and if you already have access to a retirement plan at work.

myRA Accounts

The government-sponsored myRA account is a type of a Roth IRA. Intended for beginner investors that don’t have access to an employer-sponsored plan, myRA accounts don’t have fees or minimum funding requirements and guarantee a return on your investment without loss of principal.

The return on an investment in a myRA was 1.75-percent APR during April 2016, higher than you’ll get in most checking or savings accounts account but lower than what you might get by making riskier investments. However, if you’re able to just go ahead with a Roth IRA, then it probably makes more sense in many cases.

Brokerage Accounts

If you want to try your hand at investing without using a tax-advantaged retirement account, you can open a brokerage account. There are many brokerage account providers, including major financial services firms such as Fidelity, Merrill Lynch, Charles Schwab, and Vanguard, as well as online discount brokers like TradeKing and RobinHood.

You can deposit money into your brokerage account and then buy stocks or funds with it. You’ll likely be able to buy the same investments no matter where you open an account, but the fee to make a trade depends on the broker. Funds that aren’t invested often stay in a money market account, a bit like an interest-bearing holding account.

Flexible Spending Accounts

A flexible spending account (FSA) allows you to use tax-free money to pay for some medical expenses. FSA accounts must be set up by your employer, and you can only put up to $2,550 into the account per employer. However, that may be more than enough, because if you don’t use the money within the year, you have to forfeit it. Some employers let you rollover $500 to the following year and/or give you a two-and-a-half-month grace period at the beginning of the next year.

Health Savings Accounts

A health savings account (HSA) is medical savings account that you can have access to if you’re enrolled in an HSA-qualified high-deductible health plan. In some cases, your employer may make contributions to your HSA. Unlike the FSA, your HSA funds never expire. You can invest the funds and use them in retirement if you’d like. In 2016, the contribution limits for HSAs are $3,350 for individuals and $6,750 for families.

Insurance Policies

As a new graduate, there may also be several types of insurance you should consider purchasing.

  • You can stay on a parent’s health insurance policy until you turn 26. If this isn’t an option, you may want to buy coverage because there’s a penalty if you don’t have health insurance. Depending on your income and where you live, you may qualify for assistance paying for health insurance.
  • Auto: If you own a vehicle, you’re required to have auto insurance to drive it. Minimum insurance requirements vary by state, and the price can vary by provider.
  • Renters: Renters insurance can help protect you if your apartment is damaged or destroyed, someone gets hurts while visiting you, or your property is stolen (sometimes even if it’s stolen when you’re outside the home).

There may be discounts on auto or renters insurance that are fairly easy to get. For example, the one-time cost associated with buying a fire extinguisher for your apartment, or an anti-theft device like a steering-wheel lock for your car, could result in lower premium payments. You also may get a discount for buying multiple forms of insurance through the same provider.

What Now?

While the details of each account or insurance policies can be tricky to understand, the basic function is often straightforward. Keep this guide handy as you may have a reason to open, or use, one or more of these accounts or policies in the coming months.

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College Students and Recent Grads, Pay Down My Debt, Student Loan ReFi

Should I Drain My Emergency Fund to Pay Off Student Loans?

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Depressed man slumped on the desk with his hands holding credit card and currency

When Michelle Schroeder-Gardner graduated with an MBA in finance in 2012, she had $40,000 in student loan debt. But by the middle of 2013, she was happily debt-free. “To pay it off in that time frame, I side hustled like crazy,” says Schroeder-Gardner, 26, who writes at MakingSenseofCents.com. “I was a freelance writer, mystery shopper, eBay seller, survey taker and more. I was working 100-hour weeks between my day job and my side jobs.”

In her final push to pay off her loans, Schroeder-Gardner and her husband used about $10,000 from their emergency fund—almost all of it—to pay off the balance. “It made us a little nervous, but we knew that we would still be fine due to our low budget and high income,” she says. “I didn’t want my student loans hanging over my head for years to come.”

Although it’s admirable—amazing, even—that Schroeder-Gardner eliminated $40,000 in student loan debt in less than a year, experts might disagree with her technique. Draining your emergency fund under circumstances that aren’t an emergency isn’t something they typically recommend.

When should you do this?

“Some of it has to do with life stage,” says Wes Brown, a financial planner in Knoxville, TN. “If you’re living at home in your parents’ basement, and other liabilities are at a minimum, and there’s a safety net, then I could see supporting this.”

In other words, if you’re not saddled with a variety of fixed expenses that would be at risk if you lost your job or needed to replace your roof, you’re a better candidate for wiping out your emergency fund to pay down debt.

You also may be in the clear if you have access to other kinds of liquidity, such as a home equity line of credit, or the Bank of Mom and Dad. “It could be that you have family members or friends who are willing to lend to you, or that you have good silver you could pawn or sell,” says Larry Luxenberg, a financial planner in New City, NY. “But whatever it is, you may need money in an emergency, so you need to be prepared for all sorts of contingencies.”

James Bryan, a financial planner in Edina, MN, agrees. “This isn’t a bad route in certain situations,” he says. “For example, if you’re 26, you live in an apartment, you have a pretty steady job and you don’t have a big car payment. But you have to make darn sure that you have excellent job security and you’re healthy and not at risk of any disability.”

When shouldn’t you do this?

“If you don’t have any liquidity resources, I would say that’s a bad idea,” Luxenberg says. “A lot of things in your personal finances require patience and balancing things. Too much debt can be a bad thing, but a reasonable amount of debt for the right purposes can be a good thing.”

That’s because of all the debt you could have, student loan debt is one of the more favorable types. It’s typically lower cost than consumer debt, you get a tax break on the interest paid, and there’s often flexibility in payment plans if you fall on hard times. “The worst case scenario is where you use up your emergency fund to pay off student loan debt, and then you find yourself in a bind,” Brown says. “So you have to borrow from another line of credit to cover that, and you’re swapping a more favorable kind of debt for a less favorable kind.”

It’s also not a great plan to wipe out your emergency reserve if you’re carrying a mortgage. You could be one mortgage payment away from owning your home outright, but if you miss it because you lose your job and have no back-up cash, you could still be foreclosed on. And of course, there’s always unexpected maintenance. “A home is a massive responsibility,” Bryan says. “A roof, a new furnace, they cost a lot of money and they don’t give you a 12-month warning.”

What’s the best approach?

For most it will be keep that emergency reserve and address your debt the old-fashioned way—by paying it down paycheck by paycheck. If you have no emergency reserve, consider splitting your discretionary funds between savings and debt every time you get paid. That way you can achieve two goals at once. “You could use a simple equation like 70% toward debt and 30% toward savings,” says Nev Persaud, a financial planner in Atlanta. “You have to be wise in creating a balance.”

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7 Ideas for What to Do With Your Tax Refund

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Tax return check

If you’ll be getting a refund on your taxes from 2015, you might consider this one of the best times of the year.

A tax refund can make it all too easy to take what feels like a windfall and spend it haphazardly. Now, if you’ve been scrimping and saving throughout the year, we’re all for using some of your hard-earned cash to tactfully splurge every now and again, but with even just a little bit of a plan, you can probably figure out the best way to spend that tax refund money that won’t leave you feeling like it was a complete waste.

Here are some ideas.

1.Restock your emergency fund

Particularly if your emergency fund took a hit this past year for whatever reason, or if you’ve not yet started one at all, using some — if not all — of your tax refund to get a leg-up on rebuilding it is a great idea. Think of this plan as having multiple benefits. For starters, it’ll provide you with piece of mind that if something happens that’s out of your control (your car breaks down, the roof starts leaking or you end up with hospital bills outside of your health insurance coverage), you’ll be able to pay for it, and even more than that, taking care of it won’t require you to go into credit card debt to do so, because you’ll have the cash on hand to pay. Remember, this money should be easily accessible in a savings account, and now is a great time to set one up. Check out this piece for some of the best online savings account options right now, and this one for how you can earn even more money by opening a high interest savings account.

2. Put it into your retirement account

Whether it’s your 401(k), your Roth or a Traditional IRA, putting your tax refund into your retirement account is a great way to grow your money. Just make sure you stay on top of contribution limits for the year so you don’t get penalized. Check out this page for more info on what the IRA contribution limits are for 2016.

3. Pay off debt

Whether or not you’re already on a path to pay down debt, every little bit that can help you reach that goal more quickly should be taken advantage of. If putting even a small tax refund towards your credit card debt will help you pay it off in a shorter amount of time, that would definitely be money well spent in our book. Check out this article for three ridiculously simple methods to pay off debt.

4. Paint your house (or invest in that new front door, get those new kitchen cabinets, upgrade those bathroom fixtures, etc.)

If you’ve been holding out for the perfect time to do a little home improving, your tax refund might be just the incentive to get moving. Not only is spring the perfect time to take on a few projects (it’s ripe for home sellers, and the weather’s perfect for all those DIYers out there), but investing your tax refund into upgrading your house will help you enjoy it for however much longer you live there plus it could seriously help with the resale value of your home whenever you do decide to sell. Just be sure you know when to stop funneling cash into home improvements.

5. Plan a vacation that you can pay for

If you’ve always had to put your vacations on a credit card before, use your tax refund as an opportunity to actually start saving now for the vacation you deserve, that way when the time arrives you can really relax, knowing you haven’t put yourself into more debt to get away for a couple days. Use this article to figure out some big ways to save on travel.

6. Invest in your career

Whether it’s that coding class you’ve been itching to take, the leadership seminar you’ve wanted to attend or the totally out-there, pie-in-the-sky children’s book writing intensive that you’ve had your eye on, investing in classes, seminars, talks and hobbies that will help further your career (or the career you want to have) is almost always a good idea. While we’re at it, here are five other things that it’s almost always worth spending a little extra money on.

7. Put it into your child’s college fund

If you have kids, one of the best things you can start doing for their future today is to begin putting money into a college savings fund for them. While it doesn’t have to be a 529 plan, exactly (although it could be – check out this story about three things you might not have known about 529 college savings plans, and this one about three alternatives to 529 college savings plans) every little bit you can start putting away today will really help them in the future when it comes to determining just what colleges they can afford to attend.

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