Here’s How Much the Average Rich Person Has in the Bank
By: Kailey Hagen |
– First published on Nov. 1, 2023
The general pattern isn’t surprising. A higher income makes it a lot easier to stash money in the bank. What is surprising is how much more the richest 10% have saved compared to the bottom 20%. The wealthiest 10% earn about seven times more than the bottom 20%, yet their savings are 124 times higher. That’s quite the difference.How to start growing your savingsI won’t sit here and pretend you can penny-pinch your way to a six-figure bank account balance if you’re currently in the bottom 20% with $900 or less in your checking account. It’s probably not going to happen. But there are a few things you can try that could help you get your personal finances on a firmer footing.First, choose the right accounts for your money. A lot of brick-and-mortar banks have maintenance fees and they don’t pay you a lot in interest. That’s bad news for anyone, but especially those who don’t have a ton of extra cash.Online banks, on the other hand, are known for offering high interest rates on savings accounts and some offer interest on checking accounts as well. Most don’t charge maintenance fees or have minimum balance requirements either. Switching to one of these could potentially put more money in your pocket because you’ll be able to ditch any monthly bank fees you’re paying now, and you could earn more in interest.You could also look into community and government programs, like Supplemental Nutrition Assistance Program (SNAP) benefits, that help low-income families with their everyday expenses. This could potentially free up a little extra cash you could put into savings.And if cutting your expenses back isn’t possible, see if you can find ways to boost your income. You could try a side hustle if you have some spare time. Or see if you’re able to negotiate a higher salary at your current job.Saving regularly is ideal, but if you’re not able to do this, set aside money when you can. Even if it’s just $5 or $10 here and there, it adds up. Over time, you can work toward an emergency fund that can help you avoid major financial setbacks when unexpected costs come up. Once you’ve got that taken care of, you can start working toward some of your longer-term goals.
Do You Have a Bank of America Savings Account? Here’s Why You Should Switch
By: Lyle Daly |
– First published on Nov. 4, 2023
Even after a year, you’ll have less than $1 in earnings with Bank of America, compared to $404 with CIT. Over 10 years, sticking with Bank of America costs you over $5,000.Now, this is only an example, and it’s worth mentioning that interest rates on savings accounts fluctuate. CIT won’t offer a 5.05% APY for 10 years straight. That rate will go up and down depending on the federal funds rate. But it’s a safe bet that high-yield savings accounts like this one will consistently offer much more than Bank of America.Are there any downsides or risks with high-yield savings accounts?You might be wondering what the catch is with high-yield savings accounts. After all, there must be a reason why they offer so much more than big banks.The savings accounts that pay the most are typically offered by online banks. These are much smaller than big banks. Online banks can afford to pay more interest because they don’t have the overhead costs that come with operating bank branches throughout the country. They also need to offer higher interest rates to attract clients, whereas big banks with established customer bases don’t.Banking is different with online banks, but it’s just as safe. If you haven’t used an online bank before, here’s what you should know about it:Online banks can be FDIC insured just like big banks. FDIC insurance covers up to $250,000 per depositor, per account in the event of a bank failure. Quality online banks have this, and you can confirm if a bank is FDIC insured by checking its website or looking it up using the FDIC’s BankFind Suite tool.You won’t have access to physical bank branches. Brick-and-mortar banks can be more convenient, because you can visit in person to make deposits and withdrawals. With online banks, you do almost everything from your bank’s web platform or mobile app.You can get cash at ATMs in your bank’s network. Most online banks have ATM networks that their clients can use for fee-free withdrawals. Some have larger networks than others, so it’s worth checking what different online banks have available in your area.Online banks have fewer fees and other requirements. You can find online banks with no monthly fees or minimum balance requirements, including online banks with high APYs. Many brick-and-mortar banks charge a monthly maintenance fee that they waive if you complete certain requirements, such as maintaining a minimum balance.If you’re not sure about doing all your banking online, you can always have accounts at both a traditional bank and an online bank. You’ll still be able to bank in person this way at a brick-and-mortar bank. But for your savings, an online bank is a much better option.
Ask Yourself These Essential Questions Before Opening a CD This Year
By: Maurie Backman |
– First published on Nov. 8, 2023
One benefit of putting money into a CD versus a regular savings account is that you might get an opportunity to earn more interest on your parked cash. CD rates are often higher than the rate you’ll get in a savings account. Also, when you open a CD, your interest rate is guaranteed throughout its term, whereas with a savings account, you might start with a higher rate only to see it fall weeks or months later.Now, it just so happens that CDs are paying pretty generously these days. But before you rush to open one, make sure to address these important questions.1. Am I sure I don’t need the money for something else?When you put money into a CD, you’re making a commitment. You can technically cash out a CD at any time, but if you do so before the end of its term, you’ll face a penalty (the exact amount of which will depend on the length of your CD and your bank). So it’s best to only tie up money in a CD that you’re certain you won’t need for its duration.To that end, think about your upcoming financial needs. The holidays will be here soon. Are you sure you won’t need the cash you’re thinking of putting into a CD to buy gifts? This is just one example, but the point is to make certain you can really afford to part with your cash for six months, 12 months, or however long your CD term is.2. Am I planning any large purchases for 2024?You may not have many larger purchases planned in the near term. But what are your plans for the new year?If you’re thinking of opening a 6- or 12-month CD at some point this year, it means that money will be restricted for a good part of 2024, too. So if you’re thinking of renovating your home or you have reason to believe that you might need a new car, you may want to hold off.3. Do I think rates will be more favorable down the line?Right now, CD rates are high thanks to a string of interest rate hikes implemented by the Federal Reserve. On Nov. 1, the Federal Reserve announced it would pause its interest rate hikes — something it did back in September as well.But the Fed still has one meeting left this year scheduled for mid-December. And if the central bank opts to raise interest rates at that point, it could result in higher interest rates for CDs as well.Of course, that’s a big “if.” Some economists are confident that the Fed is done raising interest rates. But you may want to wait until December to open a CD in case another rate hike happens.Putting money into a CD is a good way to earn extra interest on cash you’d like to leave in the bank. Just make sure it’s the right time to open a CD before diving in.
Is Your Income Above Average for Your Age?
By: Lyle Daly |
– First published on Oct. 30, 2023
Your income isn’t everything, but it’s definitely important. If you earn an above average income, that makes it much easier to manage your personal finances. You’ll have more money to pay your bills, save, and treat yourself on occasion.The median U.S. income is $70,300, according to the latest Survey of Consumer Finances (by the Federal Reserve). But income also varies by age. To get an accurate idea of how your income compares, you can look at the average for your age range.The average income by ageHere are the median incomes in the United States, broken down by age range:Less than 35: $60,50035 to 44: $85,90045 to 54: $91,90055 to 64: $81,90065 to 74: $60,90075 or older: $49,100On average, people earn less as young adults in their 20s and early 30s. At that age range, most are starting the process of building their careers and don’t have too much extra money to fill out their bank accounts.By the mid-30s to the 40s, incomes go up significantly. The 45-to-54 range is when the average worker is at their earnings peak. The average income declines from there as people work less and eventually rely on money from their retirement accounts once they’re done working.Keep in mind that these are just averages, and everyone’s career path is different. For example, if you make a mid-life career change, then your income might peak later in life. There’s nothing wrong with that. If you’re in the NFL, there’s a good chance your income peaks in your 20s, not your 40s (unless you’re Tom Brady).What can you do to increase your income?If you’re not quite earning an average income for your age, or even if you are, you may be interested in increasing it. This can be one of the best ways to improve your financial situation.There are lots of ways to earn more money. Some of them only require small adjustments to your lifestyle, while others involve more serious changes. For starters, here are a few of the easier ways to boost your income:Increase your hours. Even working an extra 30 minutes per day adds up. For example, if you earn $40 an hour, then working another 30 minutes per day will make you an extra $100 per week.Raise your rates. You could talk to your employer about a raise if you have a full-time job or let your clients know you’ll be increasing your rates if you’re a freelancer.Improve your productivity. If you’re paid per job, then finding ways to work more efficiently will help you earn more. Better time management often makes a big difference — you may want to try strategies like time blocking.In some cases, the best option could be to make a more drastic change. For example, if you’re not satisfied with your current job and don’t see much room for advancement, then working a little more or asking for a raise probably aren’t the right options. You may want to consider one or more of the following:Make a career change. Your profession plays a big role in how much you earn. Think about what skills you have that you could leverage into a higher-paying job.Build your skillset. If you can’t think of any skills you can use to earn more, dedicate some time to building one. You could start taking courses in web design, copywriting, or digital marketing, to give a few examples, and then use what you learn to get a new job.Start a new business or a side hustle. Striking out on your own could make a big difference in your earning potential. I know from experience — I would’ve never earned as much money working as an employee compared to what I make now as a freelancer.The key ingredients to raising your income are hard work and patience. If you’re willing to put in the time, and you understand that results usually don’t happen overnight, you should be able to grow your earnings.
Is Your Net Worth Above Average for Your Age?
By: Lyle Daly |
– First published on Nov. 2, 2023
Your net worth is a good number to keep track of, as it gives you an idea of how you’re doing with personal finance. You can calculate your net worth by adding up the value of your assets and subtracting any debts you have. For example, if you have $100,000 in investment accounts, $25,000 in bank accounts, and $10,000 in debt, then your net worth would be $115,000.The median net worth is $192,900, according to the Federal Reserve’s latest Survey of Consumer Finances. This varies with age, and it tends to go up as people get older. Want to see how your own net worth compares with the average for your age range? Here’s the recent data.The average net worth by ageHere are the median net worth numbers by age in the United States:Less than 35: $39,00035 to 44: $135,60045 to 54: $247,20055 to 64: $364,50065 to 74: $409,90075 or older: $335,600As the numbers show, building net worth takes time. Young adults have the lowest average net worth because they haven’t had much time to grow their savings and investments yet. Some even have a negative net worth, like those who took on debt to go to college.Net worth rises with age for several reasons. People make more money as they get older. Those who save and invest regularly are able to grow their net worth year after year. When you invest, your money can also earn compound interest — interest on top of the interest you’ve already earned.If your net worth is above average for your age, that’s a good sign. If it isn’t, don’t let it get you down.Everyone’s situation is different, and this doesn’t mean you’re doing poorly with money. Net worth can take a hit for reasons outside of a person’s control. A recession could cause a temporary loss in your stock portfolio, or you could have unexpected medical bills that drain your savings. Those are just a few examples of how your net worth could unexpectedly drop.Financial habits to follow for a high net worthIt’s interesting to compare your net worth to the average. But what’s most important is that your net worth is trending upward, and that you eventually have enough to retire when you want.Building your net worth is a process. Most people don’t get rich overnight. It’s the result of years of responsible financial habits. Here are the best habits to follow to increase your net worth.Spend less than you earn. Your net worth ultimately depends on how much you’re able to set aside from each paycheck. If you spend every penny, then your net worth will be stuck in neutral. Commit to saving a specific amount each month — 10% to 20% of your income is a good place to start.Build and maintain an emergency fund. It’s best to avoid debt, especially expensive credit card debt. That means you need to be ready for unexpected costs so you don’t need to take on debt to pay for them. Work on saving until you have an emergency fund with at least three months of living expenses. When you use that money, make sure to replenish it as soon as possible.Set up retirement accounts. These are a great way to save for the future because they help you save on taxes. If your employer offers a 401(k), it’s probably worth taking advantage. Many employers will match your 401(k) contributions up to a certain amount. You can also open your own individual retirement account (IRA).Invest in stocks. The stock market has historically delivered an average return of about 10% per year. It’s one of the most effective ways to build wealth. You can invest in the stock market through investment funds that buy a large number of stocks, such as mutual funds. These are typically available through retirement accounts, and you can also buy them through brokerage accounts.Building your net worth is not complicated. If you adopt the right financial habits, your net worth will soon be trending in the right direction.