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How to Raise a Kid You Won’t Have to Cut Off in 20 Years

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Today’s young people are more likely than previous generations to live with their parents, according to a 2017 analysis from the Pew Research Center. In 2016, 15 percent of 25- to 35-year-olds lived in their parents’ home, compared to 10 percent of Gen Xers in 2000.

Even when kids move out, it’s not uncommon for them to receive financial support from their parents. In fact, 62 percent of Americans age 50 and older gave a relative money in the last five years, with the largest sums often going to adult children, according to a 2017 Merrill Lynch retirement study.

Parents may not find those statistics encouraging, but the good news is there are ways to teach kids how to be financially responsible, and it involves raising the bar by asking kids to do more in the way of financial responsibilities. Studies have shown that when more is expected of a child (or anyone), they actually perform to that level of expectation. The same can be said of how they deal with money.

Don Roork, a Certified Financial Planner at AssetDynamics Wealth Management, has noticed a pattern with kids, adults and money. “Kids learn good money habits from just watching and being around their parents,” says Roork.

Roork also points out that money lessons aren’t always explicit verbal lectures on finance. “Kids watch mom and dad making good financial decisions, and voilà — the kids’ money behavior matches their parents’,” says Roork.

So when it comes to raising financially independent adults, it becomes clear that it’s important to start when they are kids. Here are some ways personal finance experts recommend easing your children — gently and kindly — into financial adulthood by weaning them from the family wallet.

Set expectations

As soon as your child begins asking for things like toys, restaurant meals or trips to the movie theater, they are ready to learn about the money it takes to support these wants. When a child expresses a desire for something beyond the basics, start the conversation then and there about how they’ll soon be responsible for these “luxury items.”

Of course, you don’t have to start charging them rent (not a bad idea, though), but you will want to follow up your expectations with actions.

For example, if your family goes out to eat, your child can pay for their meal or contribute to a portion of the bill. These expenses can be age appropriate and should increase over time as your child earns more money. They can start with things like snacks at the movies and move up to cellphone bills and car insurance.

Financial adviser Jamie Pomeroy of Financial Gusto says this should all start with communication: “Sitting down with your child and having a clear and frank conversation about who’s paying for what, can pay huge dividends.”

Another good exercise would be to show them prices on things they’ll need as adults, like a home or a car. Molding their expectations around what it takes to live will only help them down the road.

To drive this point home, Pomeroy suggests laying out a real plan designed to increase financial responsibility. “Make sure that you and your child are on the same page about what expenses they are responsible for, what you’ll continue to pay for (for now), and then introduce them to a budget to help them manage those expenses,” he says.

Create a reward system

Get-out-of-debt guru Dave Ramsey warns against giving kids an allowance and instead recommends that money given to a child should be tied to actions, like completing chores or other household projects. The idea is to get kids ready for the real world by emulating it with a system of compensation tied to work.

CFP Jeff Rose of Good Financial Cents says, “One of the first steps in teaching your kids financial independence is giving them responsibilities around the home that are both paid and unpaid.”

Ramsey is also a proponent of giving children the opportunity to earn more money in “commissions” when they find extra things to do or take initiative in solving problems around the house.

Teach them personal finance

Many kids are shocked when they get into the real world and finally begin grasping the finite nature of money. Mom and Dad spring for everything, so why would money ever run out?

Clint Haynes, CFP of NextGen Wealth, says there’s a fix for this. “Make it a point to sit down with your kids and show them what your budget looks like, how it works, and why it truly is the foundation to personal finance,” he says.

When your child asks for candy at the store, don’t deflect them with, “We don’t have the money.” Instead, let them know that the money you have available isn’t earmarked for candy, showing them how a budget works in real life.

Other lessons you can teach early on include those around saving, compound interest and even giving.

Brian Hanks, a CFP out of Idaho, has an experiment he urges his clients to conduct with their children once they are high school seniors. He suggests parents hand over their checkbook and have their kid cover all the family’s expenses for the entire school year.

“Paying a family’s bills is eye-opening, and your teen starts to develop new money habits,” Hanks says.

Let them earn real money

You can start by giving your kids an allowance that is tied to performance: completing chores, excelling in school, and having a good attitude can factor into their “compensation.” Be sure to enforce the association between what they do and how they are compensated. Once they can work legally, you can taper off their allowance.

Ed Snyder, CFP at Oaktree Financial Advisors, says children who have jobs will be more thoughtful about their spending and better with money in general. “Working will help them think through their spending and hopefully be more responsible,” he says.

Keep in mind kids don’t always have to wait until they are 16 to get a job. They can start a business or participate in gigs that allow kids under 16 to work with a permit, like modeling or acting.

Challenge them

Not only should your kids be responsible for expenses and make their own money, Eric Jansen of AspenCross Wealth Management says kids should be challenged in their money habits.

“Set up 90-day savings and spending challenges as a fun way to help them better understand and manage the trade-offs between spending money on what they want and what they need,” Jansen says.

No-spend or savings challenges are great ways to teach lessons about money while showing your child what they are capable of if they focus on their goals.

You can even create competitions among siblings, like seeing who can save the most money.

Trust the process

Sound like a lot of work? It is! Financial independence doesn’t happen overnight.

“Some of these [money] lessons may click sooner in some kids than in others — even within the same family,” says Snyder. “Don’t give up hope. … Just keep showing them good examples and teaching them good old-fashioned financial lessons.”

Be patient, be kind, and be confident that the lessons you are teaching them will serve them well into adulthood.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Featured, Personal Loans, Reviews

Marcus by Goldman Sachs Review: GS Bank Takes on Online Savings, CDs, and Personal Loans

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Marcus by Goldman Sachs savings account

A very high interest rate and no fees make this one of the best savings accounts out there.

APY

Minimum Balance Amount

1.30%

None

  • Minimum opening deposit: None. However, you’ll need to deposit at least $1.00 if you want to earn any interest
  • Monthly account maintenance fee: None
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: None

This is a great account for almost anyone. However, before you click that “Learn More” button below, there are a couple of things to know.

No ATMs. First, Marcus by Goldman Sachs doesn’t offer ATM access to your savings account. You’ll either need to deposit or withdraw money by sending in a physical check, setting up direct deposits, or by moving the money to and from your other bank accounts via ACH or wire transfer.

No checking account. Second, Marcus does’t offer a corresponding checking account. That means you can only use this account as an external place to park your cash from your everyday money flow.

Keeping a separate savings account does have its benefits. For example, it’s harder to tempt yourself to withdraw the cash if you’re a chronic over-spender. But, it also means that there might be a delay of a few days if you need to transfer the money out of your Goldman Sachs online savings account and into your other checking account.

How to open a Goldman Sachs online savings account

It’s really easy to open an online savings account with Marcus by Goldman Sachs. You can do it online or over the phone as long as you’re 18 years or older, have a physical street address, and a Social Security Number or Individual Taxpayer Identification Number.

You’ll be required to sign a form which you can do online, or by mail if you’re opening the account over the phone.

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How their online savings account compares

Marcus’ online savings account can easily be described with one word: outstanding.

You’ll get a relatively high interest rate with this account, which is among the best online savings account rates you’ll find today. In fact, these rates are currently over seven times higher than the average savings account interest rate.

Even better, this account won’t charge you any fees for the privilege of keeping your money stashed there. It’s a tall order to find another bank that offers these high interest rates with terms this good.

Marcus by Goldman Sachs CD rates

Sky-high CD rates, but watch out for early withdrawal limitations.

Term

APY

Minimum Deposit Amount

6 months

0.60%

$500

9 months

0.70%

$500

12 months

1.30%

$500

18 months

1.30%

$500

24 months

1.30%

$500

3 years

1.30%

$500

4 years

1.30%

$500

5 years

1.35%

$500

6 years

1.35%

$500

  • Minimum opening deposit: $500
  • Minimum balance amount to earn APY: $500
  • Early withdrawal penalty:
    • For CDs under 12 months, 90 days’ worth of interest
    • For CDs of 12 months to 5 years, 270 days’ worth of interest
    • For CDs of 5 years or over, 365 days’ worth of interest

Marcus’ CDs work a little differently from other CDs. Rather than having to set up and fund your account all at once, Goldman Sachs will give you 30 days to fully fund your account.

Once open, your interest will be tallied up and credited to your CD account each month. You can withdraw the interest earned at any time without paying an early withdrawal penalty, but heads up: If you withdraw the interest, your returns will be lower than the stated APY when you opened your account.

If you need to withdraw the money from your CD, you can only do so by pulling out the entire CD balance and paying the required early withdrawal penalty. There is no option for partial withdrawals of your cash.

Finally, once your CD has fully matured, you’ll have a 10-day grace period to withdraw the money, add more funds, and/or switch to a different CD term. If you don’t do anything, Marcus will automatically roll over your CD into another one of the same type, but with the current interest rate of the day.

How to open a Goldman Sachs CD

Marcus has made it super simple to open up a CD. First, you’ll need to be at least 18 years old, and have either a Social Security Number or an Individual Taxpayer Identification Number.

You can open an account easily online, or call them up by phone. You’ll need to sign an account opening form, which you can do online or via a hard-copy mailed form. Then, simply fund your CD account within 30 days, and you’re all set.

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How their CDs compare

The interest rates that Marcus offers on their CDs are top-notch. In fact, a few of their CD terms are among the current contenders for the best CD rates.

If you’re interested in pursuing a CD ladder approach, Marcus is one of our top picks because each of their CD terms offer above-average rates. This means you can rest easy that you’ll get the best rates for your CD ladder without having to complicate things by spreading out all of your CDs among a handful of different banks.

The only downside to these CDs compared with many other banks is that you can’t withdraw a portion of your cash if you need it. It’s either all-in, or all-out. However, once out, you’re still free to open a new CD with the surplus cash, as long as it’s at least the $500 minimum deposit size.

Marcus by Goldman Sachs personal loan

Personal loans offered by Marcus have low APRs, flexible terms, and no fees.

Terms

APR

Credit Required

Fees

Max Loan Amount

36 to 72 months

6.99%-19.99%

Not specified

None

$40,000

Marcus by Goldman Sachs® personal loans can be used for just about anything, from consolidating debt to financing a large home improvement project. They offer some of the best rates available, with APRs as low as 6.99%, and you’ll not only be able to choose between a range of loan terms, but you can also choose the specific day of the month when you want to make your loan payments.

While there are no specific credit requirements to get a loan through Marcus, the company does try to target those that have “prime” credit, which is usually those with a FICO score higher than 660. Even with a less than excellent credit score, you may be able to qualify for a personal loan from Marcus, though, those that have recent, negative marks on their credit report, such as missed payments, will likely be rejected.

Applicants must be over 18 (19 in Alabama and Nebraska, 21 in Mississippi and Puerto Rico) and have a valid U.S. bank account. You are also required to have a Social Security or Individual Tax I.D. Number.

No fees. Marcus charges no extra fees for their personal loans. There is No origination fee associated with getting a loan, but there are also no late fees associated with missing payments. Those missed payments simply accrue more interest and your loan will be extended.

Defer payments. Once you have made on-time payments for a full year, you will have the ability to defer a payment. This means that if an unexpected expense or lost job hurts your budget one month, you can push that payment back by a month without negatively impacting your credit report.

How to apply for a Marcus personal loan

Marcus by Goldman Sachs offers a process that is completely online, allowing you to apply, choose the loan you want, submit all of your documents, and get approved without having to leave home. Here are the steps that you will complete to get a personal loan from Marcus:

  1. Fill out the information that is required in the online application, including your basic personal and financial information, as well as how much you would like to borrow and what you will use the money for.
  2. After a soft pull on your credit, and if you qualify, you will be presented a list of different loan options that may include different rates and terms.
  3. Once you have chosen the loan you want, you will need to provide additional information to verify your identity. You may also be asked for information that can be used to verify your income and you will need to provide your bank account information so that the money can be distributed.
  4. Many Marcus customers receive funds in as little as 5 days.

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How their personal loans compare

Marcus offers low APRs and flexible terms with their personal loans, but their main feature is that they have no fees. If you are looking for a straightforward lending experience with no hidden fees or costs, Marcus will be perfect for you since you won’t even have to worry about late fees if you happen to miss a payment.

While Marcus offers some great perks, you may be able to get a lower rate if you choose to go with another lender, such as LightStream or SoFi. Both of these lenders offer lower APR ranges and they don’t charge origination fees, though, LightStream will do a hard pull on your credit to preapprove you.

LendingClub and Peerform both have lower credit requirements than Marcus, but they also charge origination fees and, being P2P lending platforms, you will need to wait for your loan to be funded and you run the risk that other users might not fund your loan.

Overall review of Marcus by Goldman Sachs‘ products

Marcus has really hit it out of the park with their personal loans, online savings, and CD accounts. Each of these accounts offers some of the best features available on the market, while shrinking the fees down to a minuscule, or even nonexistent, amount. Their website is also slick and easy to use for online-savvy people.

The only thing we can find to complain about with Marcus is that they don’t offer an equally-awesome checking account to accompany their other deposit products. Indeed, it seems like Marcus has turned their former hoity-toity image around: Today, they’re a bank that we’d recommend to anyone, even blue-collar folks.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Credit Cards, Featured, News

Average U.S. Credit Card Debt in 2020

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Credit card balances are at all-time highs, and absent any other relief, the recent rate cuts by the Federal Reserve will do little to slow down growth in total balances that borrowers carry month to month. And while it’s still too early to know for certain, the cash crunch many households are experiencing in 2020 due to the COVID-19 pandemic may mean even greater average monthly balance increases than in recent years.

We’ve updated our statistics on credit card debt in America to illustrate how much consumers are now taking on.

  • Americans paid banks $121 billion in credit card interest in 2019. That’s up 7% from $113 billion in interest paid in 2018, and up 56% since 2014.
  • In February 2020, the average APR on credit card accounts assessed interest was 16.61%. Although the Federal Reserve has cut the key Federal Funds rate by two percentage points since mid-2019, the more recent cuts aren’t yet reflected in lower interest assessed to balances carried from month to month.
  • Total revolving credit balances are $1.05 trillion, as of February 2020. The vast amount of this balance is from spending on credit cards from banks and retailers, while $83 billion comes from revolving balances, such as overdraft lines of credit.
  • Americans carry $687 billion in credit card debt that isn’t paid in full each month. This estimate includes people paying interest, as well as those carrying a balance on a card with a 0% intro rate.
  • 43.2% of credit card accounts aren’t paid in full each month. Those who don’t pay in full tend to have higher balances, which is why the percentage of balances not paid in full (71%) is higher than the percentage of accounts not paid in full (43.2%).
  • The average credit card balance in 2019 was $6,194 for individuals with a credit card. That’s an increase from $6,040 in 2018.

Credit card use

  • Number of Americans who actively use credit cards: 184 million as of 2019, according to TransUnion.
  • Number of Americans who carry credit card debt month to month: 77 million.
    • We estimate 42% of active card users carry debt month to month, based on the Fed’s Survey of Consumer Finances.

Credit card debt

  • Total credit card debt in the U.S. (not paid in full each month): $687 billion
  • Average APR: 16.61% (also excludes those with a 0% promotional rate for a balance transfer or purchases). This estimate comes from the Federal Reserve’s monthly reporting of APRs on accounts assessed interest by banks.

The above estimates only include the credit card balances of those who carry credit card debt from month to month — they exclude balances of those who pay in full each month.

Credit card balances

  • Total credit card balances: $1.05 trillion as of February 2020, an increase of 3.3% from February 2019. This includes credit and retail cards, and a small amount of overdraft line of credit balances.
  • Average number of credit cards per consumer: 3.1, according to Experian. This doesn’t include an average of 2.5 retail credit cards.
  • Average credit card balance: $6,194. The average consumer has $1,155 in balances on retail cards.

The above figures include the credit card statement balances of all credit card users, including those who pay their bill in full each month.

Who pays off their credit card bills?

In 2019, fewer accounts were paid in full than accounts with a balance carried from month to month. According to the American Bankers Association:

  • Revolvers (carry debt month to month): 43.2% of credit card accounts
  • Transactors (use card, but pay in full): 31.1% of credit card accounts
  • Dormant (have a card, but don’t use it actively): 25.6% of credit card accounts

Delinquency rates

Delinquency rates peaked in 2009 at nearly 7%, but in 2019 delinquency rates were 2.6%, historically well below the long-term average.

Credit card debt becomes delinquent when a bank reports a missed payment to the major credit reporting bureaus. Banks typically don’t report a missed payment until a person is at least 30 days late in paying. When a consumer doesn’t pay for at least 90 days, the credit card balance becomes seriously delinquent. Banks are very likely to take a total loss on seriously delinquent balances.

Debt burden by income

Those with the highest credit card debts aren’t necessarily the most financially insecure. According to the 2016 Survey of Consumer Finances (the most recent data available), the top 10% of income earners who carried credit card debt had nearly twice as much debt than the average borrower.

However, people with lower incomes have more burdensome credit card debt loads. Consumers in the lowest earning quintile had an average credit card debt of $2,100. However, their debt-to-income ratio was 13.9%. On the high end, earners in the top decile had an average of $12,500 in credit card debt, though their debt-to-income ratio was just 4.8%.

A look at American incomes and credit card debt

Income percentileMedian incomeAverage credit card debtCredit card debt-to-income ratio
0%-20%$15,100$2,10013.9%
20%-40%$31,400$3,80012.1%
40%-60%$52,700$4,4008.3%
60%-80%$86,100$6,8007.9%
80%-90%$136,000$8,7006.4%
90%-100%$260,200$12,5004.8%

Source: 2016 Survey of Consumer Finances data

Although high-income earners have more manageable credit card debt loads on average, they aren’t taking steps to pay off the debt faster than lower-income debt carriers. If an economic recession leads to job losses at all wage levels, we could see high levels of credit card debt in default.

Generational differences in credit card use

In Q2 2019, Generation X cardholders had the highest credit card balances. The average cardholder from this generation had a balance of $8,215, according to Experian. Baby boomers held an average balance of $6,949, comparatively.

At the other end of the spectrum, millennials — who are often characterized as frivolous spenders — held significantly lower credit card balances, at $4,889. They also carry fewer (3.2) of credit cards in their wallets. Generation X carry 4.3 credit cards and baby boomers have 4.8 credit cards, on average.

How does your state compare?

Using data from Experian, as well as data from the Federal Reserve Bank of New York Consumer Credit Panel and Equifax, you can compare average credit card balances by state.

Differences in credit card debt by generation

In 2019, Generation X had more credit card debt, on average, than baby boomers, as those in their mid-40s typically have the largest amount of expenses relative to both younger and older consumers.

Methodology

In February 2020, MagnifyMoney collected and analyzed credit card data from government and industry sources, including the American Bankers Association, Federal Reserve, the Federal Deposit Insurance Corp., Experian, TransUnion and Equifax, to determine average credit card balances, interest rates, usage and delinquency rates.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.