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How to Make Your Child’s Expensive Activity Fit Your Family Budget

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Every time the Olympics roll around, we hear stories about parents making significant financial sacrifices to raise elite athletes. But if you have kids, you don’t need to raise an Olympian to know that supporting a talented, passionate child can strain the family budget.

Roughly 40 percent of American families spend more than $1,000 a year on their children’s extracurricular activities, and 20 percent spend more than $2,500 annually, according to a January SunTrust survey of about 510 adults.

Some families spend a lot more.

MagnifyMoney spoke to three families with children who have exceptional interests or talents in sports, arts or cultural experiences to learn about the costs, decision-making processes and money-saving tips related to helping their children pursue their passions. While families have different priorities and values, they have one thing in common: They want the best for their children and have to make financial sacrifices to make it work.

Common obstacles

Deferring retirement savings

Peggy Chen and her daughter, Sophia, who is holding her trophies from piano competitions. (Courtesy of Peggy Chen)

Peggy Chen, 58, of East Brunswick, N.J., is a single mother who supported her daughter Sophia, now 32, and son Albert, 28, as they pursued their musical talents and passions growing up. The siblings eventually became professional musicians, one a pianist, and the other a violinist. But in order to focus on her children’s futures, Chen had to put hers on the back burner. She didn’t save for retirement while raising the kids.

The costs were high from the beginning. Growing up, Sophia played three pianos, including a Steinway grand piano the family bought for about $25,000 when Sophia was 9. She took an hourlong lesson with a top-notch piano instructor each week, who charged $70 an hour in the 1990s. If she was preparing for contests, the lesson would last 30 minutes longer. Chen herself accompanied Sophia to almost every single piano lesson and competition. The constant piano maintenance, tuning, travel and lodging for competitions also ate away a huge part of the family disposable income.

“There was no budget,” Chen said matter-of-factly. “We’d squeeze out however much money was needed to pay for her practices and performances.”

Chen’s then-husband took home about $25,000 a year as an accountant. Chen, a violin teacher, supplemented family income by giving lessons at home. Although barely scraping by, the couple wanted to give the best to their first child, developing her talent in any way they could.

When Sophia was in 8th grade, Chen and her husband divorced. Chen, a Taiwanese immigrant who had never worked in the U.S. and couldn’t even tell the difference between a checking and savings account at the time, had to work three jobs. Her top priority was making monthly mortgage payments to avoid being homeless.

Even at such a difficult time, Chen continued paying $70 for Sophia’s weekly piano lessons. Being extremely frugal allowed her to take care of the necessities and support her budding musicians.

“I’d be thrilled if I saw a penny on the ground, as if I won a lottery,” she said. “I didn’t dare to waste a nickel.”

Still, Chen said she had no financial planning. She only started saving for retirement a few years ago, when Sophia and Albert had both graduated from college.

Putting off paying down debt

The Rechkemmer family from Iowa has five children. It is not easy for the parents to financially support all the children’s extracurriculars. (Courtesy of Molly Rechkemmer)

Josh and Molly Rechkemmer live with their five children in a suburb outside of Iowa City, Iowa. He is an architect and she a part-time academic adviser and lecturer at the University of Iowa.

Their kids — Gracie,18; Sam, 16; Hannah, 13; Kate, 11; and Luke, 9 — are all involved in arts or athletic activities. Most days, each kid has two things going on after school.

The family is constantly in their minivan, traveling to different games, auditions, training sessions, competitions and rehearsals. The busy schedule has meant their finances are always tight.

Despite painstakingly budgeting and planning ahead for big payments, covering expenses for the kids’ extracurriculars have hampered the Rechkemmers’ ability to pay down debt quickly. The couple has credit card debt, a mortgage, car loans and student loan debt.

“Partly we try to do it wisely, and partly we just also know that we’re only going to have these kids in our house for what? Ten years,” Molly said. “And so we want to do things for them to help them develop.”

Prioritizing their children’s activities means spending thousands of dollars they could otherwise put toward their debt.

“I think almost a minimum per kid per year is easily $1,000 on the low end, and probably $3,000 to $4,000 on the high end,” Josh said.

Private sport teams with out-of-town competitions are particularly expensive. The parents have to pay for all of the uniforms, training and tournament fees and travel. Just for one season of one club sport, the cost for this big family easily adds up to at least $1,000.

Choosing what’s ‘fair’ when you have multiple kids

When there’s more than one child, it’s not always easy to decide who gets more resources from the family budget.

For the Rechkemmers, it could mean going with inexpensive recreational sports leagues instead of a club team, Molly said. But other times they would go for the more costly option, like the club teams, if they see a gift requiring a higher level of time and financial commitment.

“We’d love to say it’s always proactive, that we’ve intentionally made those decisions and thought it all through,” Molly said. “But a lot of the times it’s also reactive. An activity comes up and we have to make a decision whether or not they get to do it.”

Molly acknowledged that they haven’t always made the perfect decisions. There are things the family had heavily invested in, but the kids eventually lost interest. Retrospectively, they also realized that they might not have done enough for other kids.

Albert is playing the piano as his sister Sophia watches. (Courtesy of Peggy Chen)

Chen said she had never expected it would cost so much to develop Sophia’s piano talent. When it came to her second child, Albert, she downgraded the spending — she gave Albert violin lessons herself.

“I taught him myself, and he sat in the first chair,” Chen said. “I thought it was enough: no competitions, no anything else.”

Albert graduated from Northwestern University with a bachelor’s degree in political science and violin performance. He now studies at the San Francisco Conservatory of Music.

Making trade-offs

Emmeline dePillis and her family at the local Shichi Go San festival in 2008. Maria, then 7, is dressed in kimono on the right. (Courtesy of Emmeline dePillis)

Emmeline dePillis is a business professor at the University of Hawaii at Hilo, on the southernmost island of Hawaii where a large population of Japanese immigrants live.

Her older daughter, Maria, partly of Japanese descent, is passionate about Japanese language and culture. She is getting ready for her third extended trip to Japan.

For her last two trips, Maria went in a group where her school covered some expenses, but the family still had to pay more than $1,500 out of pocket each time. It cost less than if they had planned and paid for the trips themselves, dePillis said, but sending Maria on those trips meant putting off other purchases.

“Each time we were like, ‘Well, that’s a lot of money, but that’s a good deal,’” dePillis said. “And she loves it so much. It was like, ‘Well, maybe we can’t buy a new refrigerator this year, but it’s worth it because it’s such a good opportunity.’”

In the Rechkemmer family, a lot of other entertainment activities have to go: movies, concerts and short family vacations.

“Instead of planning a long weekend to take our family to Chicago and doing things like the planetarium, the aquarium and all those things, we might have a long weekend in Chicago where we spend most of the time at a baseball tournament,” Molly said.

How to make it work

Financial planners say plainly there are no perfect solutions to fund children’s expensive hobbies. But they stress that families need to take a holistic view of their finances, understand the level of risks and discuss with the entire family — yes, kids included — to make sure everyone understands the commitments and agrees on the sacrifices to be made.

To help families facing tough financial decisions around paying for kids’ activities, we gathered advice from parents and experts who have experienced these dilemmas firsthand:

1. Prioritize family values

dePillis said her family decided to fund their daughter’s Japan trips because her husband and her both value education highly.

“We see our daughter’s passion for Japanese culture as an educational thing,” dePillis said. “This is not just, ‘Oh, I’m going for fun.’ So if it’s ‘Let’s go to Disneyland’ versus ‘Let’s give Maria a chance to go to Japan for this educational experience,’ we would choose the educational experience for her.”

Prioritizing family values is the most important step to take in the decision-making process, experts say. There are no right or wrong decisions, but ultimately, the parents should thoroughly think why they are investing in the hobbies.

“The real way to be successful at this is to really identify what the family goals are, and then trying to balance out what their goals are for the future with what they think they can realistically provide for,” said John Rivers, a Clinton, N.J.-based financial planner at Newroads Financial Group.

2. Make a budget

In the Rechkemmer family, Josh, the father, tracks family spending almost religiously on spreadsheets, and he tries to budget for upcoming activities far ahead to make sure that they wouldn’t be hit by unexpected expenses.

The family budget for kids’ recreational and entertainment activities could go up to $10,000 a year. That translates to 10 percent of the family income.

Experts say there is no formula of how much should be spent on children’s hobbies that fits all families — again, it depends on family prioritization — but they do need to set a budget, look at the family finances holistically and trim expenses elsewhere.

3. Cut back on spending

When it comes to trimming expenses, pros say it’s more likely that the family’s lifestyle needs to change.

For example, when someone in the Rechkemmer family has a weekend sports tournament, they minimize the number of family members staying overnight in a hotel. For holidays and birthdays, Molly and Josh give practical presents for their kids, such as sports equipment, instead of the trendy electronic toys that their children long for.

Sam Rechkemmer plays baseball in May 2015. (Courtesy of Molly Rechkemmer)

For Chen, diligent saving on every single thing helped her get through the tough years. She barely had any expenses for herself.

“My life was pretty much bare-bones,” Chen recalled. “I’d always only buy food that passed expiration dates or was about to expire. You wouldn’t die eating it, anyway.”

Jude Boudreaux, founder of New Orleans-based Upperline Financial Planning, said the best strategy he’s seen is downsizing a family home. A client of his sold their big home and moved into a much smaller space — with no mortgage — to free up cash to pay for children’s activities.

Boudreaux said, typically, it’s easier to cut a family’s big-ticket expenses to make financial wiggle room. Parents need to make conscious decisions about whether or not to buy cars, or send their children to private schools if they also hope to develop their hobbies, he said.

But there is a bottom line: “Taxes must be paid. Utilities must be paid. Insurance must be paid,” said Lauren G. Lindsay, a financial adviser based in Covington, La.

After paying all the fixed bills and life necessities, families can look at the discretionary expenses and trim spending based on family priorities, Lindsay said.

4. Eliminate activities when needed

For the most part, the Rechkemmers try to stick to their budget, but there are moments when things get out of hand. The couple has periodically paused and reflected on the reasons they do all these activities.

“If it is to develop good friendships and stay active and be healthy and finding enjoyment in life, then that doesn’t need to come with the high burden of debt and so much stress,” Molly said. “If [the activities are] putting us into debt and causing so much stress, then it’s time to rethink if it’s all worth it and try to kind eliminate some things.”

5. Look for other resources or sources of income

Chen, the avid saver, said being thrifty wasn’t enough — she had to find other ways to earn more to support the family. Often she found herself participating in laboratory tests, earning $10 here and $20 there. Little things add up, she said.

At times, the mother and children all used their skills to support the family: Chen taught violin upstairs, Sophia taught piano downstairs and Albert went to students’ homes to tutor them in math.

You may be able to find outside help, too. For example, having Maria go on group educational trips allowed the dePillis family to save, as the school covered a large chunk of the expenses.

Lindsay encourages parents to explore financial aid opportunities before shelling out money for expensive extracurriculars, as some local camps and sports associations offer scholarships.

6. Talk to the children

Experts say the biggest “no no” when it comes to investing in children’s extracurricular activities is not consulting their opinions.

“Make sure it really is for them, not for us,” said Boudreaux, a parent himself. “Check our egos at the gate when we make the decisions.”

The kids need to be involved in the decision-making and understand the financial sacrifices the family is making, to make sure they will be as committed to the choice as parents are, Boudreaux said.

The dePillis family did that with Maria, and they worked out a plan together.

Maria is expected to enroll in the University of Hawaii at Hilo’s Japanese Studies program in the fall. She has made an agreement with her parents to stay in state for college. The in-state tuition is about $7,200 a year. Maria has also agreed to stay home during college so she could avoid taking out student loans.

“If she had gone to an out-of-state school, we would be paying $20,000 a year or more,” dePillis said. “I mean, imagine saving that kind of money. We feel like, ‘Oh, yeah, we will send you to Japan as much as you want.’”

7. Understand the consequences

The reason why these decisions are tough is that essentially, every spending choice is a trade-off, and it’s hard for parents to picture potential future risks, Boudreaux said.

Some trade-offs, such as deferring retirement or putting off paying debt can have severe consequences, experts say. In general, financial planners suggest parents put themselves and their futures first.

“Kids can get their own loans, and we can’t borrow for retirement down the road,” Rivers said.

However, in families where children are expected to support their parents in their old age, maybe it’s worth making those sacrifices now, experts say. In that case, parents should explicitly and appropriately communicate with their children about the expectations.

Chen said she has no regrets about putting off saving for her retirement.

“She was so good,” Chen said. “It would have been a pity if she had given up after a certain level.”

Sophia eventually studied piano performance and English at Oberlin College and Conservatory of Music. She became a journalist after graduation, but still keeps performing. “I am pleased that she has piano as a great lifelong companion,” Chen said.

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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Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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5 Financial Resolutions Even You Can’t Mess Up

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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As 2018 winds down, it’s time to start planning for a healthy and productive 2019. But instead of setting lofty financial resolutions that you’ll abandon faster than your gym membership, here are a few manageable goals to keep you on track in the new year.

Resolution #1: Top up your savings with automation.

Resolving to automate your savings in 2019 can make all the difference if you’re someone who has trouble stashing away cash. Financial institutions typically have an automatic transfer feature within an online account that lets you move money from checking to savings on a preset schedule.

How to make this resolution work

Choose a total dollar amount that you want to save by the end of the year. Divide that number by 12 months or the number of pay periods you have a year. This gives you the amount of money you need to save incrementally to meet your goal. Set up a monthly, semimonthly or biweekly transfer of this amount from checking to savings. The beauty of this strategy is that you don’t have to do anything to meet your goal besides making sure you have the money sitting in your checking account when the bank processes the transaction.

To help you along your savings journey, here are two additional savings tips from the pros:

  • Pro Saving Tip #1: Figure out your “why.” “It’s much easier to stay the financial course and to stay motivated when you [and your partner] are working toward goals that are aligned with your ‘why,’” said Frank Shields, a CFP based in Houston. Perhaps you’re saving because you want to travel more or retire early. Think back to what you value whenever you feel the urge to spend instead of save.
  • Pro Saving Tip #2: Give yourself an allowance. “Concerts, massages, weekend brunches and an occasional night out tend to be the first things people think to cut,” said Charles Adi, a CFP also based in Houston. Cutting out all excess spending is like going on a crash diet. You can get so frustrated with the lack of spending that you splurge and end up back at square one. Instead, Adi recommends setting up an “anything you want to fund” where you automatically deposit discretionary income. This account is what you can use monthly for fun stuff.

Resolution #2: Increase the contribution to your employer’s retirement plan.

If you’re getting a raise or you have some extra money to sock away, increase your retirement plan contributions. Make sure you read the fine print if you’re trying to max out the employer match. Some companies offer dollar-for-dollar matches while others have different conditions. “A common match formula is 50% of employee contributions up to 6% of their salary,” said Courtney Richardson, an attorney and tax professional based in Philadelphia.

According to Richardson, many people believe that they are taking full advantage of the match when they’re actually leaving some money on the table. If an employer matches 50 cents to your dollar, you may need to beef up your contribution to make the most of the match. In addition to your employer-sponsored plan, you may want to consider opening up your own Roth IRA or traditional IRA to squirrel away additional retirement savings.

How to make this resolution work

Get in contact with your human resources department if you have questions about the employer match. You don’t have to raise your contribution up to the max all at once. You could increase the contribution in small increments. Having more money taken out of each paycheck for retirement is another method of automatic saving with minimal effort from you.

Resolution #3: Use fintech apps to manage your dough.

If an Excel spreadsheet for your budget isn’t getting the job done, resolve to use financial technology (fintech for short) to get your financial life together. Many budgeting, investing, debt management and saving apps are available for free.

How to make this resolution work

Start downloading and trying a few money management apps. LendingTree, the company that owns MagnifyMoney, has a huge list of different money apps here. Below are some apps to get you started:

  • For basic budgeting, try EveryDollar. EveryDollar is a free app that helps you track your monthly spending so you can better manage your cash from day to day.
  • For wealth building, try Personal Capital. Personal Capital is a robust platform that helps you see the bigger picture. This app puts your asset accounts and debt accounts into one platform so you can view your net worth.
  • For automated savings, try Qapital. Qapital is an account that connects to your bank accounts and can save money automatically for you. You can set up fun savings conditions within the app like saving an amount whenever a celebrity tweets or according to the 52-week savings challenge.
  • For credit scores and debt solutions, try LendingTree: LendingTree’s app offers free credit monitoring and product offers that can save you money.

Resolution #4: Don’t take on new debt and do something about high interest rates.

Paying off all of your debt in one year can be a difficult undertaking for many people, said Adi. Rather than setting an unrealistic debt payoff goal, Adi suggests resolving to not take on any new debt in 2019, so you can work to pay down your current balances. Lowering your interest rates is another debt-related resolution you can set. Lowering interest rates on existing debt can help you get out of debt faster.

How to make this resolution work

The best approach for securing lower interest rates on your debt is shopping around. Many online lenders and some credit card companies will let you prequalify for competitive products without a hard pull. Here are a few methods you can use to lower your interest rates:

  • Try a balance transfer card with a low introductory starting deal: Some credit card products offer a 0% APR deal for a certain time frame when you open a new card and transfer the balance to it. The 0% APR can last for several months. Paying off your balance within the interest-free period may save you a bundle on interest charges. Check out our roundup of credit cards with the longest 0% introductory deals here.
  • Consolidate your debt with a personal loan: A debt consolidation loan is when you take out a new loan to pay off your other debts. Debt consolidation loans can have competitive interest rates when compared with credit cards and other high-interest debt products. LendingTree has a marketplace where you can shop for debt consolidation products.
  • Use a HELOC, home equity loan or cash-out refinance: For homeowners, borrowing from home equity via a HELOC or home equity loan could be a solution to consolidating your debt and lowering your interest rates. Another option is the cash-out refinance. A cash-out refinance is when you refinance your mortgage for an amount that’s higher than your current loan balance and you take cash out of the deal. Learn more about the benefits and risks of HELOCs, home equity loans and cash-out refinances here.

Resolution #5: Start tracking your credit score regularly.

Speaking of interest rates — improving your credit in 2019 can help you qualify for the best deals on new products and refinances. Your credit score may not jump 200 points overnight, but taking steps to monitor your score and clean up your reports can do great things for your credit.

How to make this resolution work

Thanks to the many credit monitoring products on the market, setting the resolution to monitor your credit doesn’t have to be difficult. Your financial institution is the first place to check for credit monitoring services. Some credit card companies and banks have started offering free credit scores and credit monitoring. You can find a list of financial institutions that offer those services here. We also have a guide with tips for getting the highest possible score.

Final word

The key to setting resolutions for 2019 is making them realistic and actionable. Don’t resolve to increase your savings by $10,000 without a strategy. Instead, resolve to take action in ways that will get you to your desired result.

Deciding to automatically transfer about $385 from your checking to savings each pay period (if you have 26 pay periods) puts you on a path to saving $10,000. Resolving to track your credit score monthly can result in you taking the necessary steps to increase it. Put in the work throughout the entire year and you’ll have something to celebrate at the end of 2019. Cheers to the new year!

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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Taylor Gordon is a writer at MagnifyMoney. You can email Taylor here

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How Fed Rate Hikes Change Borrowing and Savings Rates

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Since late 2015, the Federal Reserve has raised the upper limit of its target federal funds rate by 2 percentage points, from 0.25% in December 2015, to 2.25%. The Fed is expected to raise rates another 25 basis points on Dec. 19.

MagnifyMoney analyzed Federal Reserve rate data to illustrate how the rates consumers pay for loans and earn on deposits have changed since the Fed started raising them two and a half years ago. In short, we find Fed rate hikes have wide-ranging implications for consumers.

  • Credit card borrowers are currently paying $110 billion in interest annually, up $31 billion from the annual $79 billion they paid prior to the first Federal Reserve interest rate hike in December 2015, making introductory 0% APR deals all the more attractive.
  • Meanwhile, depositors earned significantly more from savings accounts. In the 12 months ending in June 2018, depositors earned $26.8 billion in interest on their savings accounts, up $16.8 billion from the $10 billion they earned in 2015.
  • According to our analysis, credit card rates are most sensitive to changes in the federal funds rate, almost directly matching the rate change with a 2.16 point increase since December 2015. Credit card rates will continue to rise in line with the Fed’s rate increases, and if the Fed raises them again, the average household that carries credit card debt month to month will pay over $150 in extra interest per year compared with before the Fed rate hikes began. MagnifyMoney estimates 122 million Americans carry credit card debt month to month.
  • Student loan and auto loan rates have also risen sharply — but by less than half as much as credit card rates — in part because they are long-term forms of lending that are less reliant on the short-term federal funds rate. Federal student loan rates are set based on the 10-year Treasury note rate each May.
  • Savers at big banks have seen little change, with the average savings and CD account passing through only a fraction of the rate increase. However, that masks a big opportunity for savers who shop around and move deposits to online banks. Online banks have aggressively raised rates, and now often offer rates of more than 2%, versus just 1% in 2015. That’s over 20 times what typical accounts pay.

Let’s take a closer look at how the Fed rate hike impacts different financial products:

Credit cards

Most credit cards have a rate that’s directly based on the prime rate, for example, the prime rate plus 9.99%. As a result, card rates tend to move almost immediately in line with Fed rate changes. In the current cycle, the rates on all credit card accounts tracked by the Federal Reserve have increased 2.16 points, roughly in line with the Fed’s increase of 2 points.

That said, consumers can still find attractive introductory rate offers.

For example, 0% balance transfer offers have continued to have long terms even as the Fed hiked rates, with offers still available for nearly two years at 0%.

Credit card issuers make up for the rate hike with the automatic rise in variable back-end rates, as well as the increasing spread between the prime rate and what consumers pay on new accounts. They can also increase other fees, like late payment fees or balance transfer fees to keep long 0% deals viable.

The Federal Reserve tends to hike up interest rates gradually over time. And people in credit card debt will barely notice the rate increase in their monthly statement. When rates are increased by 0.25%, the monthly minimum due on a credit card will increase $2 for every $10,000 of debt.
The danger of such a small increase in the monthly payment is complacency. Remember that by paying the minimum due, you could be in debt for more than 20 years.

Rates are expected to keep rising, so it makes sense for consumers to lock in a low rate today. The best ways to lock in lower rates are by leveraging long 0% balance transfer deals or by consolidating into fixed rate personal loans.

Savings accounts

On average, savings account rates haven’t changed much since the Fed started raising rates. That’s largely because big banks with the biggest deposits and large branch networks have less incentive to offer higher rates, and this skews national data on rates earned because most savers don’t shop around to find higher rates at online banks and credit unions.

Consumers who shop around can find much higher savings account rates than three years ago, and shopping around for a better rate on your deposits is one of the best ways to make the Fed’s rate hikes work in your favor.

Back in 2015, it was rare to see savings accounts pay 1% interest.

Today, many online banks are competing for deposits by offering savings account rates in excess of 2%, flowing through about half of the Fed’s rate hike into increased rates for depositors. These rates will continue to rise as the Fed hikes rates. The increases are already apparent in the data. Depositors are currently earning more than $26 billion in interest on their savings accounts annually, versus $10 billion in 2015.

CDs

CD rates have moved faster than savings rates, up 0.26 points for 12-month CDs since the Fed started raising rates. That’s in part because they are a more competitive product that forces consumers to rate shop when they expire at the end of their 6-month, 12-month or longer term.

But that rate rise doesn’t fully reflect what some smaller banks are passing through, as the banks with the largest deposits have been slow to raise rates.

The rates on 1- and 2-year CDs at online banks have been increasing rapidly, and are now well over 2%, reflecting much of the Fed’s rate increases since 2015.

The rates on 5-year CDs have also finally begun to increase, with some banks offering 60-month CDs with rates above 3.50%. As a result, the rate curve has been steepening.

Still, a reasonable strategy would be to invest in short-term (1- and 2-year) CDs. If competition on the short end continues, you can get the benefit in a year on renewal.

Student loans

Federal student loan rates are set based on a May auction of 10-year Treasury notes, plus a defined add-on to the rate. Today, rates for new undergraduate Stafford loans stand at 5.05%, up from 4.30% before the federal funds target rate began to rise.

Since student loan rates are determined by the 10-year Treasury rate, rather than a short-term rate, they are less directly related to changes in the federal funds rate than some shorter-term forms of borrowing like credit cards. Instead, future market views of inflation and economic growth play a role. Federal student loan rates are capped at 8.25% for undergraduates and 9.5% for graduate students.

For private refinancing options, rates depend on secondary markets that tend to follow longer-term rates, rather than the current federal funds rate, but in general, a rising rate environment could mean less attractive refinancing options.

Personal loans

Personal loan rates tend to be driven by many factors, including an individual lender’s view of the lifetime value of a customer, funding availability and credit appetite. Most personal loans offer fixed rates, and in a rising rate environment overall, we expect these rates will go up, making new loans more expensive, so consumers on the fence should consider shopping for a good rate sooner rather than later. Since the end of 2015, rates on 2-year personal loans tracked by the Federal Reserve have increased by 0.46 basis points.

Auto loans

Prime consumers who shop around for an auto loan can still find very low rates, especially when manufacturers are offering special financing deals to move certain car models.

But the overall rates across the credit spectrum have gone up since the Fed raised rates, in part due to the rate hikes and because of recent greater than expected delinquencies in some parts of the auto lending market.

Mortgages

Since the Fed started raising rates in late 2015, the average 30-year fixed mortgage rate has increased from approximately 3.90% to 4.75% as of Dec. 6. The mortgage market tends to follow trends in longer term bond markets, like the 10-year Treasury, since mortgages are a longer-term form of borrowing. That shields them from the impact of Fed rate hikes, and it’s not unusual for mortgage rates to decline during some periods when the Fed is raising rates.

What can consumers do

Rates are only going to go up. That means life is going to get more expensive for debtors, and more rewarding for savers.

If you are in debt, now is the time to lock in the lowest rate possible. There are still plenty of options at this point in the credit cycle for people to lock in lower interest rates.

If you are a saver, ignore your traditional bank and look online. Take advantage of online savings accounts and CDs to earn 20 times the rate of typical big bank 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.

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Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Best and Worst Airports for Holiday Delays and Cancellations

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With the holiday travel season fast approaching, be prepared for a record number of passengers expected to take to the skies across the country. U.S. airlines carried 72.3 million passengers in December 2017, a new all-time high, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS).

MagnifyMoney’s research team dug into 10 years of U.S. Department of Transportation holiday flight data between 2008 and 2017 on the 50 busiest airports in U.S. to find out which ones are the worst when getting to your destination on time is the goal.

Holiday travel is defined as flights that depart between Dec. 20 and Dec. 31 each year. A flight delay is when one that arrived at its destination 15 minutes or more behind schedule or was canceled altogether.

Depending on your airport of choice, the potential for flight delays can grow exponentially. We take a look at which airports have the best — and worst — holiday delays and cancellations. We also offer tips on how to handle them if they happen to you.

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Key findings

  • The worst delays are after Christmas. 66% of airports had their worst day for delays after Christmas. Dec. 26 is the most unfavorable day for holiday delays at 44% of airports. Airports with reputations for delays before Christmas include San Francisco International, Ronald Reagan Washington National, Atlanta’s Hartsfield-Jackson International and Tampa International.
  • No geography is spared. Amazingly, airports toward the bottom of the list aren’t just located in the snowy Northeast and upper Midwest. Among the bottom 10 include Oakland International, Salt Lake International, Houston Hobby and Denver International. Among the 10 at the bottom of the list or canceled flights, Dallas/Fort Worth and Raleigh-Durham are two surprises, with about 3% of holiday flights canceled, thanks to occasional ice storms at each airport.
  • The Charlotte hub is the best. Among the major connecting hubs, North Carolina’s Charlotte Douglas International Airport, an American Airlines hub, fared the best, with 75.7% of flights reaching their destination on time over the December holidays. A mere 1.2% of flights were canceled, but beware — the least favorable day to travel out of Charlotte is Dec. 22, which could make getting home for the holidays more challenging for travelers. Atlanta — the world’s busiest airport and Delta Air Lines’ largest hub — came in second among the big connecting hubs, with 74.9% of holiday flights reaching their destination on time.
  • The Newark Airport hub? Not so good. This United Airlines hub, the airline’s third largest based on daily flights, only had 62.2% of its flights arrive on time in the past 10 years, with 4.5% of them canceled, thanks to its location in one of the most congested airspace corridors in the world. Try to avoid flying out on Dec. 27, the airport’s busiest travel day. Following Newark on the list for unfavorable connecting hubs was a bit of a surprise: Denver International Airport, United’s fourth largest, had 64.1% of its flights come it on time.
  • New Yorkers: Fly out of LaGuardia. Flights out of the city’s third airport — ranked a respectable 45 out of 50 for holiday delays — reached their destinations on time at least 75% of the time over the holidays, versus less than 65% at JFK and Newark. LaGuardia, which has strict federal limits on the number and distance of flights, has fewer of the regional feeder flights flown with smaller planes that are more likely to be delayed. Newark, as a major hub for United, and JFK, a major hub for Delta and JetBlue, have more of these flights than LaGuardia. When it comes to the most damaging delay of all – an outright cancellation – LaGuardia fares no better than the other two area airports, with 4% of flights canceled over the holidays.
  • Chicago ranks the highest for holiday delays. If you’re departing from one of Chicago’s two airports this holiday season, there’s about a 40% chance your flight will be late. Only 61.5% of flights departing Chicago Midway arrived at their destination on time over the past 10 years of holiday travel. O’Hare isn’t much better, with only 61.6% of flights arriving their destination on time. But it’s worse when it comes to cancellations, with nearly 5% of its flights canceled the last 10 holiday travel seasons.
  • Hawaii can relax. Travelers leaving Hawaii to see friends and family on the mainland have had it pretty easy, with 84.2% of flights departing out of Honolulu International arriving on time, and a mere 0.5% of them getting canceled, based on our data. Maui is almost as easy, with 83.7% of departing flights reaching their destination on time.

Be prepared for holiday delays

The key word for holiday travel is patience. The nation’s air traffic controllers handle 70,000 flights a day in the U.S., according to the National Air Traffic Controllers Association (NATCA). While the vast majority of flights operate on time, there are situations like weather and aircraft maintenance that can cause delays and cancellations, causing a ripple effect.

Advanced planning and helpful tools won’t stop flight interruptions and cancellations, but they can help you recover more quickly so your holidays aren’t ruined. Below are some concrete steps you can take to help mitigate the damage of a delay or cancellation, making it more likely you’ll arrive at your final destination.

Choose flights deliberately. Early morning flights can be painful, but those flights have better odds of being on time as the plane has often arrived the night before and is already parked at the gate. This gives you much better odds of an on-time departure.

You have rights. The DOT requires all airlines to offer travelers access to their contract of carriage, a document that outlines what they will and won’t do for passengers in case of flight delays or cancellations. CompareCards, also owned by LendingTree, outlined the contract of carriage for the top eight U.S. airlines here.

Check your credit card. That piece of plastic in your wallet can be an invaluable tool when it comes to flight delays or cancellations. If your credit card comes with trip delay reimbursement, you can get up to $500 per airline ticket to cover things such as meals and lodging if your flight is delayed for more than 12 hours. And if your flight is either canceled or cut short for reasons including sickness, severe weather or other covered situations, trip cancellation insurance offered by your card can reimburse you for up to $10,000 for prepaid, nonrefundable travel expenses, including passenger fares, tours and hotels. Some cards also provide access to a concierge service that is ready to help mitigate flight delays or cancellations. Be sure to check your card’s terms & conditions for more details.

Follow the numbers. Travelers can check on an airlines’ on-time statistics and delays at the Bureau of Transportation Statistics or at the monthly DOT Air Travel Consumer Report. There’s also the Federal Aviation Administration’s tracking of flight delays on its air traffic control system command center website. A map shows airport delays by color code and allows you to search for delays by region or airport.

Pick up the (smart) phone. Apps like FlightView, FlightAware, Flight Board, Flightradar24 and FlightStats can not only track the status of your flight, but also give you regular updates if your flight is delayed or canceled. This information can give you a leg up on other passengers if you need to be re-accommodated if your flight is delayed or canceled.

Get notified. Sign up for an airline’s flight status text notifications on your smartphone. You’ll get flight updates that can sometimes be more accurate than those given at the gate. Plus airlines use this tool to proactively rebook your flight in case the worst happens, usually waiving change and cancellation fees.

Membership has its privileges. If you are among an airlines’ best customers’ loyalty program, you can call a dedicated customer service line that tends to be more responsive than regular lines. These specially trained agents can be your best friend when it comes to recovering from flight issues.

This article contains links to CompareCards, another LendingTree-owned company.

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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5 Hacks for Selling Your Home During the Holidays

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Selling your home during the hustle and bustle of the holiday season is not always easy, especially for sellers in a cold climate. It will take a bit more effort to catch the eye of a potential buyer, but here are a few hacks to help make your home stand out this winter.

Be strategic about pictures

According to the National Association of REALTORS, 89% of shoppers find pictures very useful in real estate listings. But when selling your home in the holiday season, you might have to get a little bit creative. “Get pictures from different seasons, images of gardens and pools, and make a collage or video out of them. This will show what the home looks like in the spring, in the summer, etc.,” said Margaret Rome, owner of HomeRome Realty in Baltimore and host of the radio show “All About Real Estate.” She also suggested that sellers may want to have a photographer come out in different seasons even if they aren’t yet ready to list, just to catch the house looking its best in different environments.

One big issue during the holidays is decorations, which Brian Balduf, CEO of VHT Studios, says should be avoided in pictures. “Downplay the seasonal decorations if you can. Put them away or don’t get them in the shot because the photos get dated,” he said. If it doesn’t sell by the time the holidays are over, buyers will assume that it’s been on the market for a while.

If you have no choice but to take pictures with holiday decorations in them, you may want to look into the new process of virtual staging and digital enhancement of photos. “We use the technology to remove holiday decorations. In the studio, we can just take that out,” Balduf said, which can make it much easier to market the home in the winter. The technology can also remove snow from the yard or change the furniture and wall color, but it will not alter structural items.

Carefully choose holiday decorations

Selling a home during the holidays doesn’t necessarily mean that you have to avoid decorating altogether, but you may need to be more strategic when choosing how you show off your holiday cheer. Debra Carpenter of Sandpoint Idaho Real Estate suggests not going overboard. “It can be tempting to deck your home out like a winter wonderland, but too much decorating falls on the extreme end of the spectrum,” she said. “To sell your home, you want to stay somewhere in the middle.”

So what does that mean? It can mean sticking with celebratory seasonal basics that enhance the home’s cozy factor but don’t distract from its bones. “It’s fine to put a few holiday touches around the home, [such as] poinsettias in a vase, even an understated Christmas tree,” Carpenter said. “You want to be sure that the home can be seen in its entirety without having parts covered or changed with overdone decorations.”

Work with the weather

In most areas of the United States, holiday months are synonymous with colder temperatures. This could be one of the reasons that sellers often look at the holidays as a bad time to sell. Yet it may not be as disadvantageous as you think. “There won’t be as many people looking as in the spring, but the people looking at houses this time of year are serious buyers,” Rome said. She suggests showing off any beautiful snow scenes or fall leaves. Additionally, she advises sellers to write their listings with an eye toward the season, possibly positioning features such as fireplaces at the forefront.

If you’ve got potential buyers willing to brave the weather, you also want to show them how comfy your house can be in the cold. “Keep it around 65 degrees so your home feels warm and inviting,” Carpenter said. “A chilly home won’t come across as a cozy living space and can deter buyers,” she added. For those selling a vacant home, Rome suggests a programmable thermostat that can be controlled from a smartphone. “[Having buyers] walking into a cold house is a real no-no,” she said.

Curb appeal equals safety

Curb appeal takes on a different meaning in the winter and holiday months, especially with all the snow, slush and ice that time of year. “Be sure to keep driveways and walkways maintained and shoveled. You want buyers to feel safe and secure as they enter and exit your home,” Carpenter said. She also mentioned placing additional lighting to areas that are slippery and prone to freezing. Rome agrees, adding that sellers should keep salt or sand nearby.

As long as the safety aspects are covered, buyers are going to evaluate the aesthetics of the home’s outdoor appearance just as they would during any other season. “Make sure the house numbers are visible and prominent, the mailbox is new [or] freshly painted and the front door [is] immaculate,” Rome said.

Get the right agent

Time off is common during the holiday season — which can be great when you want buyers to come and see your home, but not so great if it’s your agent who’s out of the office. It’s important to make sure that you find an agent who’s willing to commit to showing your property when buyers are off of work, even if that means taking less time off for their own holiday celebrations.

One final piece of advice to remember is that selling your home when it’s ready is the priority — no matter the season. As Rome said, “Your house may not sell when you put it on the market at Christmastime, but it’s definitely not going to sell if it’s not on the market.”

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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Average Bank Interest Rates

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

There are many types of savings accounts and other interest-earning accounts offered by banks and credit unions today. Here are the current average bank interest rates for some of the more widely available products. The averages are based on annual percentage yields (APYs) collected from nearly 7,000 bank and credit union accounts – including about 5,600 Federal Deposit Insurance Corporation (FDIC)-insured banks.

Savings account yields, while historically low, can still vary widely among banks and credit unions. In general, the larger the bank, the less you may earn on your savings than you would if you shopped around for a better rate. While you might need a local bank for checking and a surcharge-free ATM, there’s no particular reason your savings needs to be languishing in a low-yielding account there as well. Shopping for a higher yielding account online is a relatively effortless way to find online banks that are paying much more in interest for the same type of savings products.

Average bank interest rates of select major banks

Bank

Interest Checking

Savings

MMA

1-Year CD

3-Year CD

Bank of America

0.01

0.01

0.02

0.07

0.55

Chase

0.01

0.01

N/A

0.01

0.45

Wells Fargo

0.01

0.01

0.03

0.10

0.40

Citibank

0.01

0.04

N/A

0.25

0.70

U.S. Bank

0.01

0.01

0.05

0.10

0.35

PNC Bank

0.01

0.01

0.09

0.15

0.35

TD Bank

0.03

0.05

0.15

0.20

0.45

KeyBank

0.02

0.01

0.11

0.15

0.20

Bank of the West

0.01

0.01

0.14

0.12

0.55

M&T Bank

0.01

0.02

0.05

1.40

0.90

Regions Bank

0.01

0.01

0.01

0.10

0.30

Source: DepositAccounts.com
Rates as of September 2018
CD Rates based on a $20,000 deposit.

Credit unions will generally pay more for your deposits than commercial banks. Below is a snapshot of average bank interest rates from earlier this year. In the interim, interest rate hikes from the Federal Reserve mean average bank interest rates are even higher now, particularly for certificates of deposit (CDs).

Average bank interest rates of select products

Product

Credit Union APY(%)

Bank APY (%)

Interest Checking

0.11

0.11

Savings

0.15

0.15

MMA

0.24

0.24

1-Year CD

0.92

0.75

3-Year CD

1.46

1.21

Source: National Credit Union Administration, June 2018.

Recent increases in various bank account rates

Interest checking. Rates on checking accounts are never going to be exciting. The core purpose of checking accounts is to provide security and accessibility of your cash, and sometimes offer modest interest on your funds. But even these rates have been ticking up slightly in 2018, to an average of 0.17% in September 2018. But some banks will offer much higher interest rates than the average if you’re willing to meet certain conditions. Minimum balances are often required to either earn interest or avoid monthly maintenance fees.

Personal savings account rates. A savings account is a bank deposit for which there is no expiration date. Often they’re referred to as statement savings or passbook savings accounts. Unlike checking accounts, which are often used for everyday transactions and check writing, Federal Reserve regulations limit savings accounts transactions to six per calendar month. And while the average savings account APY is still only 0.23%, many banks, especially online banks, offer savings accounts with APYs of more than 2.00% annually.

Money market account rates. Money market accounts embody characteristics of both checking and savings accounts. They’re similar to savings accounts in terms of offering higher yields than checking accounts, and similar to checking as they typically offer limited check writing (though still subject to six transactions as other savings products). Most money market accounts have minimum balance requirements. Although the average money market account rate is 0.30%, we’ve seen APYs from some banks in excess of 1.00% annually.

CD rates. Certificates of deposit often offer the best interest rates from a bank or credit union. When you purchase a CD, you’re making a time deposit at an institution, and you typically cannot withdraw any of the funds until the maturity date without paying an early withdrawal penalty. CD yields are the savings vehicles showing the sharpest increases in yields, especially those with maturities of one year or more. Currently, average APYs of a 1-year CD is still about 1.00%, but banks offering the highest yields will pay you more than twice that.

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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5 Holiday Nightmares That Can Break the Bank

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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It’s the most wonderful time of the year — weeks of hustle and bustle, spending time with friends and family, giving and receiving, and eating to your heart’s content. What can go wrong?

Well, a lot, actually. The holiday season is not only an opportune time for gift-giving, but it also serves up several opportunities for accidents and mishaps.

But even though much can go wrong, there is plenty you can do to protect yourself. Here we’ll share some common holiday disasters and what you can do to avoid them.

Your home catches on fire

You leave your favorite pine-scented candle a little too close to your Christmas tree or you plug in one too many strands of lights into an extension cord, and before you know it, you have a fire on your hands.

These, and other scenarios, lead to fires every year. According to the National Fire Protection Association (NFPA), more than 1,000 home fires occur each holiday season due to Christmas trees, holiday decorations, and cooking.

Prevent it. Stephen Boccarossa, principal agent at Boccarossa Insurance in Milford, Conn., said consumers should take precautions when decorating for the season. “LED lights use a lot less wattage and won’t put stress on your wiring or cause a short or fire,” he advised.

“If you’re going to burn a candle, put it where everyone is going to be and have it high on the mantle or on a countertop,” he said. The NFPA offers handy winter holiday safety tips as well as Christmas tree safety tips.

Protect yourself. Now is an excellent time to review your homeowners or renters insurance policy to make sure the limits you have in place are adequate enough to replace your home and belongings should a loss occur.

A guest hurts themselves in your home

Your dear Aunt Agnes is staying with you and slips and falls on your icy walkway. She lands in the hospital and is looking for someone to pick up the bill.

Having guests in your home during the season not only brings good cheer, but it also brings an increase in liability.

Prevent it. Make sure your home is guest-ready and safe. Take a walk around both the inside and outside of your property and correct or remove any potential dangers, especially if you live in a cold weather area.

“I recommend making sure that if you do have company, you’ve cleared your driveway, walkways, and front steps,” Boccarossa said. “If you have Christmas lights outside, make sure your wires are hidden so [your guests] don’t trip and fall.”

Protect yourself. Review the liability and medical treatment coverage in your homeowners policy. Consider getting an umbrella policy for increased protection if you don’t already have one in place.

Your flight or cruise gets canceled

Canceled flights and crowded airports make a great scene for a holiday movie, but they happen in real life all the time. And when they do, travel delays due to weather, technical issues, or even illness can derail your holiday plans.

Prevent it. There’s nothing you can do about the weather, but you can reduce the chances of potential illness by eating well, getting adequate sleep, and reducing stress in the days and weeks leading up to traveling.

Protect yourself. Know your airline or cruise line’s cancellation policy when booking your travel. CompareCards, also a LendingTree company, provides a comprehensive summary of the top domestic carriers’ cancellation policies.

Check your credit cards too, as you may have some built-in protection when booking travel. Additionally, Boccarossa recommended purchasing trip cancellation insurance. “I would definitely consider it, especially in the winter,” he said.

Holiday shopping is stolen

Thieves love the holiday season as much as you do  — probably more. Between gifts stolen from your car to right off your porch, holiday theft is a common occurrence.

Prevent it. Do not leave big-ticket items like electronics or jewelry in your car. “Have a plan for your shopping,” Boccarossa advised. “If you know you’re getting something important or expensive, plan so that it’s the last thing you get before going home.”

Similarly, plan to have gifts delivered to your place of employment, or schedule the delivery during a time you’ll be at home.

Protect yourself. Homeowners or renters insurance policies typically cover stolen items, including belongings taken from your car. But keep in mind that you will need to meet the deductible before coverage kicks in — something consumers tend to forget, according to Boccarossa.

Also, be sure to file a police report in the event of theft. “If your car is broken into, please call the police,” Boccarossa advised. “If you don’t, the insurance company will question it and could use that against you in a future claim.”

Credit card fraud or ID theft

Again, the holidays are an opportune time for theft, and it’s not limited to physical items. Having to deal with credit card fraud around this time will definitely drain the joy from the season.

Prevent it. Be vigilant when out shopping in stores. Thieves can get the number off your card just by glancing over your shoulder, snapping pictures with their phone, or by using a scanning device. If applying for credit cards in stores, avoid giving your details verbally — complete a written application instead.

When shopping online, only purchase from trusted sites. Consider using a credit card with a low balance to limit the extent of damage in the event your information is stolen.

Protect yourself. Your credit cards and debit cards provide you protection in the event of fraudulent purchases, but remember that in the case of a debit card, any theft or false charges will immediately affect your bank account balance.

Make sure you follow your bank or credit card company’s procedures for reporting fraudulent activity and address it right away.

But don’t forget to enjoy the season

While there are things that can go wrong during the holidays, don’t let yourself get overwhelmed with stress. Instead, put these precautions in place to protect yourself and the ones you love, and make sure the holidays are safe and enjoyable for everyone.

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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13 Ways to Protect Your Home (And Yourself) This Winter

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Winter weather can take a toll on a house. Frozen water pipes, icy walkways and sudden windstorms that send tree branches ripping through your roof are just a few of the problems your home (and its occupants) can encounter during the cold winter months. Fortunately, you can take steps to protect your home from inclement weather and all the problems that go with it.

Plumbing

Freezing temperatures wreak havoc on your home’s plumbing system. When water freezes, it expands, and the expansion can lead to leaks and breaks in the system. Gary Findley, CEO of Restoration 1, a water damage and restoration company headquartered in Waco, Texas, recommended taking the following steps to protect your home against frozen pipes.

Let ‘er drip. When temperatures are frigid outside, keep one or two faucets running slowly at all times to prevent water lines from freezing.

Disconnect garden hoses. Disconnect water hoses on outside faucets. Connected hoses don’t allow water to drain out of the hose bib, increasing the risk of freezing and bursting pipes.

Close the door. Keep the garage door closed if water lines are in the garage.

Caulk it up. Seal all leaks that can allow cold air into your home where pipes are located. Use caulk and insulation around pipes that are exposed to the elements.

Keep cabinets open. Leave cabinets open under kitchen and bathroom sinks that are placed on an exterior wall to allow warm air to reach the pipes.

Don’t drop the heat. If leaving your house for extended periods, leave the heat on in the home. Don’t set the thermostat below 55 degrees Fahrenheit.

Roof

Small leaks and weak spots in your roof are easy to overlook in the warmer months but make it more vulnerable to snow and ice during the winter. Here’s how to make sure your roof is ready for the cold winter months ahead.

Stay on top of maintenance. If your roof is only a few years old, you may think it’s safe and sound. But John Myers, a real estate agent with Myers & Myers Real Estate in Albuquerque, N.M., said homeowners need to have their roof maintained periodically.

At a minimum, you should clear any debris from the roof, clear gutters and drains to ensure proper drainage, and inspect all areas for leaks and deterioration. If you notice any trouble areas, it’s time to call a professional.

“Having a licensed contractor perform maintenance on your roof right before winter can save you money and grief,” Myers said.

Trim those branches. High winds and the weight of ice and snow can cause tree branches to fall, damaging anything and everything on their way down. Trim any trees near your roof, driveway or other property.

“If you have trees near power lines, call your local utility company to see if they will trim the trees free of charge,” Myers said.

Appliances

Some home appliances get more use throughout the winter, so preparing them before cold weather hits can help you avoid the expense of emergency repairs.

Check your furnace filter. Your furnace’s filter serves two purposes. “One is to clean the air in your home,” Myers said. “The other is to keep debris out of your system.” He recommended changing these filters every three months.

Using a dirty filter not only means the air in your home is dirty, but it can also mean your furnace will have to work harder to keep you warm and can even lead to system failure and expensive repairs.

Clean out your dryer’s lint duct. John Bodrozic, co-founder of HomeZada, a platform that helps homeowners manage and maintain their homes, recommended cleaning built-up lint in the duct connected to the back of your clothes dryer. “Laundry loads increase in winter months, and a clogged duct causes your dryer to work longer to dry your clothes, which increases your energy bills,” Bodrozic said. But it’s not just about energy efficiency. Clogged ducts are also a source of house fires, so keeping them clear reduces the risk.

Fireplace

According to the National Fire Protection Association (NFPA), fireplaces, chimneys and chimney connectors account for nearly 1/3 of home fires each year. Make sure your fireplace is safe and ready to go before lighting that first match.

Call a chimney sweep. Dirt and debris trapped inside the chimney can cause a fire, which can spread to the rest of your house. The NFPA recommends hiring a qualified professional to clean and inspect your chimney and vents every year.

Choose the right fuel. If you have a wood-burning fireplace, choosing the right wood to burn is important. The Chimney Safety Institute of America recommends only burning well-seasoned wood that has been split for a minimum of six months and stored in a covered and elevated location. Burning wet or treated wood creates more smoke and emissions that are not safe to breathe.

Plan to dispose of fireplace ashes safely. When you dispose of fireplace ashes, put them in a heavy metal container, moisten the ashes and cover the container with a metal lid. Store the container outside, away from your house, for at least four days. After that, you can dump them in a garden or flower bed away from your house. Avoid disposing in wooded areas or sites with dry leaves. Do not forget to moisten the dumping area. Never dispose of ashes in a flammable container such as a paper bag or cardboard box.

Pest Control

The winter months usually bring a welcome respite from flying pests such as mosquitoes and flies, but it’s prime time for other pests seeking shelter in your home. Luckily, there are ways to keep unwanted house guests from getting too cozy this winter.

Plug up cracks and crevices. Karen Thompson from the insect and pest control blog InsectCop.net said one of the easiest things you can do is plug up all cracks and crevices that allow pests to get inside your home.

“Do a thorough inspection of the exterior as well as the interior of your home, take note of all the gaps and seal them up. Remember, pests like roaches, ants and even mice can get indoors through holes that are no bigger than a dime, so don’t overlook small cracks in the foundation or holes in vent screens,” Thompson said.

Store firewood safely. Firewood is a common way for termites and other insects to get inside your home, where they can cause damage. Thompson recommended storing your firewood at least five feet from your home to minimize the chance that termites, carpenter ants and wood cockaroaches jump from the wood to your home.

“When bringing wood inside, bring in a little at a time and store it on an elevated storage rack that is located as far away from walls or wood furniture as possible,” Thompson said.

Many of the perils that can befall your home in winter may be covered by your homeowners’ insurance — but not all of them are. And if you have to file a claim, you’ll likely have to cover a hefty deductible and spend many hours dealing with adjusters and contractors. The tips above won’t guarantee you never fall victim to a natural disaster, but some small investments now can better prepare your home to withstand winter’s wrath.

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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The Cheapest and Most Expensive States and Metros to Have a Baby

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Everyone knows that having a baby is incredibly expensive, from delivery or adoption costs to outfitting a household with strollers, bottles, cribs and layettes. But even if friends and family come together to provide everything needed on day one, there are ongoing costs of raising a child. So how much should a typical couple expect to budget each month?To find out, we looked at some average costs (and one tax credit), both by state and for the 100 largest metros in the U.S.:

  • The difference in rent between a typical one-bedroom and two-bedroom apartment
  • Average cost of a day care center
  • Average cost of baby apparel, diapers and wipes
  • Average additional food costs
  • Average cost of adding a dependent to workplace insurance
  • Federal tax credit

These are just the basic costs. Parents who prioritize higher-end goods, parent-and-me classes, baby sitters and other little luxuries to help with parental stresses can expect to spend more.

Hover over a state to review its costs and tax credit.

Key takeaways

  • The average monthly cost of raising a baby across all 50 states is $1,037.
  • San Jose, Calif., is the most expensive metro to raise a baby, with an average base cost of $1,705 a month. Little Rock, Ark., is the cheapest of the 100 largest metros, with an average base cost of $707 a month.
  • Massachusetts is the most expensive state for raising a baby, at an average cost of $1,521 a month. Arkansas is the cheapest state, with an average monthly cost of $723.
  • Day care costs are far and away the largest monthly expense, representing 72% of monthly costs, on average. The proportion is highest in New York state at 85% and lowest in Alaska at 59%.
  • New parents in 22 out of the 50 states, as well as the District of Columbia, can expect their monthly costs to go up by at least $1,000 — just for the basics.
  • Parents in 63 of the 100 largest metros can expect to increase their monthly costs by at least $1,000.

People in the 10 most expensive states (and District of Columbia) to raise a baby can expect their monthly budgets to balloon by over $1,200 a month.

Living in a large metro can mean having to set aside more money each month for a new baby. Residents in the 10 most expensive metros can expect their bills to increase by between $1,368 and $1,705 a month.

Here is a breakdown of average baby costs in every state. The difference in cost between the most expensive and least expensive state is almost $800 a month.

How baby budgets compare in the 100 largest metros

Why parents struggle with the cost of a baby

A lot of new families incur significant debt when having a baby. Those who get pregnant may face hefty maternal and prenatal medical bills and those who adopt may see high legal and travel bills. Parents may also rack up credit card charges, such as to get a car seat, bassinet or maternity clothes.

Many families don’t have access to paid parental leave, so they are forced to forgo several weeks of at least part of their income. All this can put new parents into debt even before their monthly expenses increase, and those families can add monthly debt payments (including interest) to the very basic monthly cost increases we describe here.

That — combined with any other pre-existing debt, such as car payments or credit card bills ripe for consolidation — can create daunting challenges to people who are expecting or planning for a first child. In a perfect world, everyone would be on secure financial footing before having a baby, but that’s not always realistic, and most American parents find managing the additional monthly expenses to be challenging.

How to reduce these costs of having a baby

Here are some of the ways that parents can trim costs in each of the categories we surveyed.

Difference in rent between a 1- and 2-bedroom apartment

Couples can get away with living in a one-bedroom apartment for a while with a small infant (it’s recommended that infants stay in the same room with their parents for at least six months). Most parents prefer a separate nursery, but it will be a while before the baby cares.

Average cost of a day care center

For two-income and single-parent households, child care is essential and expensive. While some couples may decide that one parent should leave the workforce to stay home with the child so they don’t feel like they’re working just to pay for day care, it’s important to remember that stay-at-home parents can suffer long-term and compounding economic consequences by leaving the workforce for a period, including loss of career and wage advancement, Social Security contributions and retirement fund contributions. (Of course, there are other reasons why a parent may decide to stay home with a child.) Other parents can negotiate child care with family and neighbors. There are also federal, state and (sometimes) local child care subsidies based on income.

Average cost of baby apparel, diapers and wipes

After the initial purchase of clothes for an expected baby, most Americans don’t spend much on infant apparel, but they do spend some. But diapers and wipes are unavoidable. Couples who have access to a washing machine may opt for a larger initial outlay to invest in cloth diapering, although it’s growing in popularity and people donate, trade or sell discounted used cloth diapers when their kids are potty trained. Similarly, used children’s clothing is easy to come by, and because babies grow so quickly, they’re usually barely worn or brand new.

Average additional food costs

Although babies don’t eat a significant amount of solid food for at least six months, some families use formula either by choice or necessity. Breastfeeding mothers often require significantly more calories, often complain of being constantly hungry and may be more conscious about the quality of food they ingest. Organizing meal plans around nutritious and inexpensive foods and coupon clipping may be the only way to save money on adult food, but it may be especially challenging for sleep-deprived parents. Money can be saved on avoiding prepackaged baby food by steaming and pureeing or mashing regular table food.

Average cost of adding a dependent to workplace insurance

Not every family has workplace insurance, and many who don’t will qualify for government insurance programs for their children, such as Medicaid. (It’s estimated that Medicaid covers nearly half of all births.) But even families that don’t qualify for state-sponsored insurance will feel the hit of adding a dependent to their employer-subsidized plans. One bright spot is that under the Affordable Care Act, there aren’t any copays for the frequent well-baby checks.

Federal tax credit

For 2018, parents will receive a $2,000 credit, which means that amount will be taken off the top of their tax bill. A portion of that will be refundable, so that even if a family owes less than $2,000 in federal taxes, they’ll get some money back. That’s not the only tax break available to parents, but it’s the only one that has a dollar amount that applies to every American.

Deductions — which is an amount of income on which people don’t have to pay any tax — are available for parents at both the federal and state level (although a few states don’t have income tax).

Pretax deductions can also be taken from paychecks through a dependent care flexible spending account for up to $5,000 for child care costs, and health insurance costs are also taken from paychecks pretax. And $2,650 can similarly be deducted from paychecks pretax for health care expenses. Families in 2019 can deduct health care costs from their taxes if they exceed 10% of their adjusted income (up from 7.5% in 2018).

That’s a high hurdle for most, and some married couples decide to file separately so that medical bills meet the threshold of one income versus their combined incomes. In general, parents should expect a significantly lower tax bill after the arrival of a child.

Methodology

Researchers used the following data to estimate the basic budget changes a family would experience with the arrival of a first child, both at the state level and for the 100 largest metropolitan statistical areas in the U.S.

  • Rent: The difference in cost between an average one-bedroom and an average two-bedroom from the U.S. Census Bureau’s American Community Survey.
  • Child care: The average cost of in-center child care, as reported by Care.com. In instances where an average was not available for a particular metro, the state average was used.
  • Baby apparel, diapers and wipes: The former was taken from the Bureau of Labor Statistics’ Consumer Expenditure Survey regional tables, and the latter two were reported by Walmart.
  • Additional food costs: This was calculated from the Bureau of Labor Statistics’ Consumer Expenditure Survey by indexing the average total food costs reported in the regional table and applying that multiple to the difference between married couples with no children and married couples with children younger than 6 from the household units table.
  • Insurance: The difference in cost between the statewide average employer-subsidized plan for an employee and the employee plus another person plan from the U.S. Department of Health and Human Services’ Medical Expenditure Panel Survey.

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Kali McFadden
Kali McFadden |

Kali McFadden is a writer at MagnifyMoney. You can email Kali at kali.mcfadden@magnifymoney.com

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