Getting married is likely one of the biggest life decisions you will make, and while it may seem like an easy one, it could just have gotten a little more complicated. In addition to the obvious selection and reflection of a life with a future spouse, and all the family, friends and other things that come with it, there may now be a new consideration to add to the mix: Uncle Sam. That’s because the so-called “marriage penalty” may have just gotten larger for high-earning dual-income households.
Under the recently released so-called “Green Book,” which contains the Department of Treasury’s tax-related proposal for the Biden administration, is a proposal to increase the top marginal income tax rate from the current 37% to 39.6%. This is similar to previous tax increase proposals by President Biden. Specifically, the Green Book provides that the increase, as applied to taxable year 2022, will impact those with taxable income over $509,300 for married individuals filing jointly and $452,700 for unmarried individuals. However, because of the way our tax system and tax brackets work, some married couples who each earn under $452,700 would be subject to a higher tax, as compared to their single counterparts earning the same amount. In this instance, being unmarried and single is better — for tax purposes anyway.
Married vs. Single: Do the Tax Math
The reason for this dichotomy is because we have different tax brackets for single filers and married filers. Assume you have a couple (not married) each making $452,699. These taxpayers would not have reached the highest bracket for an unmarried individual per the Green Book proposal. Each individual would be taxed at the 35% bracket, resulting in approximately $132,989 in federal income taxes using this year’s tax bracket for single filers (or a total of $265,978 combined for both individuals).
If instead this couple decides to marry, they will now have a combined income of $905,398, putting them in the highest tax bracket (39.6%) as married filing jointly. This translates to an estimated $284,412 in federal income tax, which is $18,434 more in taxes (or about 6.9%) than compared to a situation if they were single, according to a projected tax rate schedule we created based on the available federal income tax information.
There is another option for married couples: the filing status of “Married Filing Separately.” In this situation, the couple may file as “single” for tax purposes but must use the “Married Filing Separately” rate table, which for the vast majority of situations, when you do the math, does not yield a better result.
The Effect, Going Forward
If the changes, as currently proposed, pass, I am anticipating a lot of tax planning around filing status and income threshold management. Accountants will be very busy with detailed analyses and projections to evaluate the optimal filing status for married couples, and where certain deductions or planning opportunities would be more beneficial if applied to one spouse over the other.
In extreme cases, could this factor into one’s marital decision? While I certainly hope that we do not make life decisions around taxes, the reality is that taxes hit the bottom line, and that impact is real.
No one has a crystal ball as to what will happen, but let’s hope that in the end, this doesn’t become an unforeseen factor in the increasing divorce rate we have already seen since the start of the pandemic. Let’s hope for marital bliss, not marital dismiss.
As part of the Wilmington Trust and M&T Emerald Advisory Services® team, Alvina is responsible for wealth planning, strategic advice, and thought leadership development for Wilmington Trust’s Wealth Management division.
Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation. M&T Emerald Advisory Services and Wilmington Trust Emerald Advisory Services are registered trademarks and refer to this service provided by Wilmington Trust, N.A., a member of the M&T family.
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. It is not designed or intended to provide financial, tax, legal, investment, accounting or other professional advice since such advice always requires consideration of individual circumstances. Note that tax, estate planning, investing and financial strategies require consideration for suitability of the individual, business or investor, and there is no assurance that any strategy will be successful.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Chief Wealth Strategist, Wilmington Trust
Alvina Lo is responsible for strategic wealth planning at Wilmington Trust, part of M&T Bank. Alvina’s prior experience includes roles at Citi Private Bank, Credit Suisse Private Wealth and as a practicing attorney at Milbank, Tweed, Hadley & McCloy, LLC. She holds a B.S. in civil engineering from the University of Virginia and a JD from the University of Pennsylvania. She is a published author, frequent lecturer and has been quoted in major outlets such as “The New York Times.”
Do you think you’re telling yourself the truth about money? We may think we know the facts about our finances. But our beliefs can often overshadow the facts.
Our wishes, hopes and fears can tip the scales away from the truth. This makes it easier for us to believe what we want to about money — and it can happen without us even realizing it.
The “money lies” we tell ourselves can change the way we think and act when it comes to finances. And since most of us rarely talk about money with our friends and family, the money lies we tell ourselves stick around. That can lock us into destructive beliefs and reinforce poor financial habits.
But no matter what money lies we tell ourselves, it’s never too late to set the record straight. Let’s look at some of the most common money lies we all buy into at some point — and the truth behind them.
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1. I’ll be happier when I have $_____.
“With $___ in the bank (whatever amount you think is ideal), many of my problems would go away, and I’d be happier.”
Does this sound familiar?
Goals and target numbers for earnings, savings and budgets are great. But if you make the mistake of thinking some magic number will flip a happiness switch for you, think again.
When we tell ourselves this money lie, we put too much emotion into a single number. And we may be setting ourselves up for disappointment — both if we never get $__, and if we do get $__ and realize it doesn’t make us as happy as we thought it should.
The good news? Studies show that making progress toward our goals can be incredibly satisfying, regardless of whether we hit the target.
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2. I deserve it, regardless of whether I can afford it.
“I work hard, and I don’t treat myself often.”
“I could kick the bucket tomorrow (YOLO).”
“I’m getting a great deal!”
These are just some of the rationalizations we use to convince ourselves that it’s OK to buy something.
Whatever legs this money lie stands on, it’s usually used to soothe the sting of expensive purchases — those that aren’t really essential — and perhaps items we know, deep down, we don’t really need.
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3. I have strong financial willpower.
When faced with temptation, most of us lie to ourselves that we’re great at resisting it. But, when was the last time you chose not to buy something you really wanted? When was the last time you made an impulse buy?
The average American spends at least a couple of hundred dollars a month on impulse purchases.
And we’re more likely to buy on impulse and spend more when we’re stressed. That’s probably why impulse spending shot up about 18% in 2020.
Plus, those of us who are shopping with credit cards are probably spending more on the regular basis than we realize. The average credit card shopper spends about 10% more with their cards than they would with cash. And that’s not even counting the cost of interest if the balance isn’t paid in full.
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4. I’ll save more later.
Most folks focus on buying what we need and want now, and we tell ourselves we’ll start saving for the future later. If we save anything at all, it’s likely to be whatever we have left over. In fact, fewer than 1 in 6 of us are saving more than 15% of our income, and 1 in 5 aren’t saving any money.
No matter the reason, when we tell ourselves this money lie and put off saving, we’re prioritizing the present over the future.
That can catch up with us on a “rainy day” or whenever we do start thinking seriously about retiring. By that time, there can be a lot of heavy lifting to play “catch up” with our savings — or it may even be too late.
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5. I have plenty of time to plan for my financial future (& I don’t need to think about it yet).
The future can seem really far away when we’re looking 10, 20 or even more years out. When we feel like we have a lot of room between now and then, it’s easy to make excuses to not plan or save for it.
This money lie is an excuse for procrastination. It’s the rationale we use when we have a hard time managing our negative feelings or uncertainties about our financial futures. And it makes us turn a blind eye to the years of interest that we lose out on when we don’t plan.
Benjamin Franklin may have spoken best about the truth behind this money lie when he wisely said, “by failing to prepare, you are preparing to fail.”
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6. There is good and bad debt.
We tend to assign moral value to debt, thinking of mortgages and student loans as “good” debt, and considering credit card debt as “bad.”
This money lie gets us to think the wrong way about debt. All debt comes with some cost, and it’s critical to understand how every loan affects our current and future selves.
Instead of focusing on whether debt is “good” or “bad,” concentrate on the total cost of the interest over time (it’s often higher than you think) and on deciding whether the loan is really helping you achieve your goals.
About half of us seem to already be on track with that thinking, saying that we expect to be out of debt within one to five years.
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7. Wanting more is bad.
While I think we can all agree that obsessive greed is wrong, it’s not a bad thing to want more for you and your loved ones.
When we tell ourselves we shouldn’t want more than we have, we agree to settle for less. And we may be tricking ourselves into thinking it’s OK that we’re not doing something (or enough) to improve our financial situation.
This money lie holds us back and can make it hard to improve our financial behaviors.
When we frame wanting more as a positive motivator, it can be easier to take the chances or do the work needed to get to that next financial level we may want.
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How to Stop Losing Out to Costly Money Lies
How many of these money lies sound like something you’ve told yourself?
At some point, I think we’ve all tricked ourselves with at least one of them. Maybe we were rationalizing a decision, or we were trying to make ourselves feel better about what we wanted to do with our money. And we probably didn’t make the best financial choices as a result.
Here’s the truth: Honesty goes a long way with finances.
What we tell ourselves and what we believe about money influences our financial behaviors. If we’re not telling ourselves the truth, our money lies won’t just drain our wallets. They can affect our financial awareness and inflate our confidence. And they get in the way of maintaining or growing wealth.
When we recognize the money lies that we believe, we can reset our thinking, change our mindset and start taking action. And that sets us up to make better choices and make more progress toward our big financial goals.
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This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
Investment advisory services offered through Virtue Capital Management, LLC (VCM), a registered investment advisor. VCM and Reviresco Wealth Advisory are independent of each other. For a complete description of investment risks, fees and services, review the Virtue Capital Management firm brochure (ADV Part 2A) which is available from Reviresco Wealth Advisory or by contacting Virtue Capital Management.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Founder & CEO, Reviresco Wealth Advisory
Ian Maxwell is an independent fee-based fiduciary financial adviser and founder and CEO of Reviresco Wealth Advisory. He is passionate about improving quality of life for clients and developing innovative solutions that help people reconsider how to best achieve their financial goals. Maxwell is a graduate of Williams College, a former Officer in the USMC and holds his Series 6, Series 63, Series 65, and CA Life Insurance licenses.Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Reviresco Wealth Advisory and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
This is one of the first questions homeowners ask — or should ask — when they are shopping for insurance for their home:
“Does homeowners insurance cover water damage?”
The answer they are given is “it depends,” and such is the way with understanding what homeowners insurance covers and what it does not. Read this story to learn what insurance protects in general.
You pay for homeowners insurance because you must in order to get a mortgage, and you hope you never need to use it. But a variety of ills — natural or human made — can put you in a position to make a claim of loss or damage to property. You hope the coverage you have paid for all of these years will extend to the situation you are dealing with, but you just never know.
Again, It depends.
Below, you can find what to do when you need to contact your insurance company because you have suffered property loss or your home is damaged. Then you will find out what to do when your claim is denied.
But, first, let’s look at all the ways your home can be damaged by water, and the chances that your homeowners insurance will cover your loss in that event.
Does Homeowners Insurance Cover Water Damage?
The answer to the question “does homeowners insurance cover water damage?” is multileveled, just as the water damage might be.
In general, water damage caused by accident or mechanical failure of an appliance (washing machine, dishwasher, water heater, etc.) is going to be covered by standard policies. The same is true of a toilet that suffers a sudden leak.
But, if the water damage is a result of poor maintenance, such as broken pipes, mold or rotting pipes or water lines, the claim is likely to be denied.
Coverage for water damage is separated into dwelling damage and personal property damage, What is not covered is replacement of the appliance or machinery that caused the water damage. If your dishwasher develops a sudden leak which causes damage to your home, the structural damage and personal property damage likely will be covered but the cost of replacing the dishwasher will not.
If your home suffers water damage from a backed-up sewer or drain, traditional homeowners insurance doesn’t cover such occurrences. Many companies offer water backup coverage, however.
Flood damage is rarely covered by a standard homeowners insurance policy. Flood insurance policies are available thanks to the National Flood Insurance Program (NFIP) , but it is pricey.
According to the National Flood Insurance Program, the average cost of flood insurance for 2021 is $958 annually. That comes out to about $80 a month.
If you wonder “does homeowners insurance cover water damage?” check with your agent to determine just what is covered and what is not, and whether you need to consider extended water damage coverage due to current climate conditions or the age of your home.
Making a Claim with Insurance Company
If you have not yet been in a position to make a claim against your homeowner’s policy but know someone who has been denied and you worry about your own policy’s virtues, take time to consider your choices in company and coverage.
What follows is a simplified representation of what is involved in making a homeowners insurance claim for water damage, including the possibility of having your claim denied and what to do in that event.
Step One: Your Home or Property Suffers Water Damage
When your home suffers water damage, you need to determine the actual extent of damage, and if you can, how the damage was caused.
Then contact your insurance company to determine if the damage is covered by your policy. This response to this question is not cut and dried, but it is the starting point for recovering some of your losses.
Step Two: Take an Inventory of What Was Damaged
Take photos or video of water-damaged possessions, structure or property (actually, it would be wise to take a video of your pre-disastered home right now, so you can refer to post-disaster).
Attempt to determine the value of individual items that need to be replaced, and find receipts if you have them (which is actually easier these days since most purchases occur with some form of electronic transaction). If the damage is structural, that will create a need for damage assessment and estimates, but that will occur after the insurance company has agreed to pay up.
Step Three: Meet with the Adjuster
The insurance company will assign you an adjuster, who will eventually come to your home and assess the damage.
Do not assume this person is out to prevent you from covering your damages, but remember that the adjuster is protecting the interests of the insurance company to prevent fraudulent claims.
The adjuster will require a list of lost or damaged items with an estimated value of those items, and will assess structural or property damage that will require estimates to determine repair costs. Putting together a list of the valuable contents of your home is another thing to do before disaster strikes.
How much homeowners insurance do you need? Our insurance checklist will guide you to make the right decision.
Step Four: Get the Verdict
The adjuster will eventually call you with a detailed list of what the company is going to cover, the amount it will give you for your lost or damaged items, and what structural damage the company will pay to be repaired. You may or may not like the dollar figures the adjuster offers.
You may also be surprised to hear that the insurance company can deny your claim, in part or in whole. This is where the insurance company is covering its assets: it will present in written form why it is denying your coverage claim. This letter should provide a complete and specific explanation why your policy does not cover the losses you claim.
If your policy explicitly states certain items or losses are exempt from your coverage, that is the end of the conversation. However, if you believe your policy should cover the damage you suffered, speak to the agent who sold you the policy, if possible, or ask to have an in-person conversation with the adjuster to discuss the situation.
Proving that your policy should cover your losses will not be easy. However, if you have a different interpretation of the language in your policy than what the adjuster suggests, or you have notes from your original conversation with your agent at the time you bought the policy, you can go on to the next step.
What’s God Got to Do With It?
Most standard homeowners insurance policies include an Act of God provision. From an insurance standpoint, an Act of God is damage that occurs as a result of natural causes with no human component, something that could not have been prevented by proper care or maintenance.
Earthquakes or floods are often considered an Act of God. Wildfires may also be considered an Act of God if started by lightning rather than humans (campfire gone bad, tossed cigarette and more).
Homeowner’s insurance policies spell out which Acts of God are covered. For instance, floods are Acts of God, although homeowners in flood plains or near coasts or lakefronts can purchase flood insurance at an additional cost.
Often, standard homeowners insurance policies do cover damage from high winds from natural events like hurricanes and tornadoes. If this is a possible factor in your claim, determine what your policy covers before going onto the next extensive and expensive step.
The increased occurrence of wildfires in the Pacific Northwest has made fire protection a must for homeowners in that area. But different companies provide different levels of coverage and full coverage can be expensive.
How to Fight a Denied Claim
You feel your insurance company is not fulfilling its legal promise to cover the cost of water damage to your home. You have documentation of your losses, a detailed description of the event that caused your damage (malfunctioning appliances or plumbing mishap), and you are in a position where it will behoove you financially to argue your case.
In most cases, there is a limited time frame in which a denied insurance claim can be appealed, and the time frame begins from the moment you are notified of the denied claim.
Your homeowner’s insurance policy includes language stating how to appeal a denied claim. Getting involved in a battle with your insurance company may seem like a lost cause, but often, insurance companies can be convinced to adjust their decision to your benefit.
You might want to consider improving your chances by consulting a property insurance claims professional. These are licensed public insurance adjusters who can assess your claim from an objective viewpoint and will negotiate with our insurance company for you. Deciding on whether to hire a professional outside adjuster will be based on the cost of his or her service versus the amount of money you hope to recover.
The last step to recover funds would be to sue your insurance carrier, which would require hiring an attorney who specializes in property insurance claims. Get references and verifiable information on previous claims regarding water damage that were settled to the homeowner’s benefit.
Here’s hoping this helps and that you never need it.
Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.
These days, “retired” doesn’t always mean “not working.”
According to a study of U.S. retirees from the nonprofit Transamerica Center for Retirement Studies (TCRS), “nine percent … are currently working for pay, including five percent who are employed part-time, two percent who are employed full-time, and two percent who are self-employed.”
More than half — 56% — of those surveyed said their top reason to keep working was “wanting the income.” The good news: You might be able to make some extra dollars via passive income — money that comes in without you doing much work, or any work at all.
Passive income is often synonymous with a large upfront investment, such as buying rental properties or dividend-producing stocks. But the following passive-income strategies can bring in extra bucks without investing a bunch of money or time.
1. Rent out a room in your home
Got an empty nest? Someone may be willing to pay to roost there.
You can advertise your spare space on your own or list it on a vacation rental website such as:
Yes, it takes some work: You might have to keep the room tidy and wash a load of sheets and towels once the guests depart. But in some parts of the country, you can earn enough money in just a few days to cover a mortgage payment, as we detail in “Do This a Few Days Each Month and Watch Your Mortgage Disappear.”
If you’re the gregarious type, you can have fun talking up your town or even showing visitors around. If not, advertise it as a “Here’s your key, we won’t bother you” arrangement. Some people simply want an inexpensive place to sleep and don’t care about sitting around chatting with the host.
2. Rent out your vehicle or gear
Your spare bedroom is just one of many things you could rent to others to bring in extra money.
Use your imagination. Maybe you have a ladder, stroller, surfboard, bicycle, boat, camera equipment or a great selection of power tools.
Peer-to-peer rental sites like the following will help you find folks who occasionally need such things but don’t want to own them:
Whatever you’re renting, keep in mind that ordinary insurance might not cover the commercial use of your property. An insurance rider may cover some items, but you may need a separate policy, so consult your insurance agent.
3. Become a peer-to-peer lender
What is peer-to-peer lending? In short, P2P lending sites such as Prosper accept loan applications from borrowers. Investors like you can put some of your money toward loans to those borrowers. When loans get paid back, so do you — with interest.
Overall, P2P investments “can provide solid returns that are really hard to beat,” according to Clark.com, the website of financial guru Clark Howard.
As with any loan, however, there’s the possibility of default. You may not earn anything or may even lose money.
Sound too complicated? Maybe this simpler form of P2P is for you: Worthy sells 36-month bonds for $10 each. The money that comes in is loaned to U.S. businesses, with lenders who have purchased these bonds getting a 5% annual rate of interest on their investment.
To learn more about Worthy bonds, check out “How to Earn 80 Times More on Your Savings.”
4. Get rewards for credit card spending
If you’re going to shop with plastic, make sure you’re rewarded.
The form that the reward takes is up to you. Some people covet airline miles. Others take their rewards as cash or a credit against their monthly statement.
The number of rewards credit cards — and their pros and cons — can be a little dizzying. For an easy way to compare your options, stop by our Solutions Center and check out travel rewards cards or cash-back cards in the Money Talks News credit card search tool.
5. Use cash-back apps
An app called Ibotta lets you earn cash rebates on purchases from retailers, restaurants or movie theaters.
Or you can do your online shopping through cash-back portals like:
These websites enable you to earn cash back on purchases from thousands of online retailers. To learn more about them, check out “3 Websites That Pay You for Shopping.”
6. Sell your photos
Smartphones have made decent photography possible for just about anyone. The next time you capture a killer sunset or an adorable kid-and-dog situation, don’t keep the image to yourself. Apps like Foap — which is available for Android and Apple devices — will help you sell it.
You can do even better if you have a good digital SLR camera, a tripod and other equipment. Stock photo companies like Shutterstock and iStockphoto, which favor high-definition, high-quality images, are venues for selling photos on just about any subject you can find.
7. Write an e-book
It’s possible to bring in cash without a high-powered book contract, thanks to self-publishing platforms.
Amazon’s Kindle Direct Publishing, for example, allows you to write, upload and sell your words fairly easily. My two personal finance books are for sale on Kindle, and they provide a steady stream of passive income.
I also sell PDFs of the books through my personal website. I use a payment platform called E-junkie to handle payments and deliver the book downloads — and this brings me more money per book than Amazon does, even when I offer readers a discount.
If you’re fond of a particular fiction genre, write the kind of stuff you’d like to read. Nonfiction sells, too: cookbooks, travel guides, history, memoirs and how-tos are a few examples. Or maybe you have a specific skill to teach — job-hunting or food preservation or raising chinchillas.
Pro tip: Fiverr.com is a good marketplace through which to find freelancers to hire for help with formatting, design and cover art.
8. Create an online course
If you’ve got useful knowledge, why not monetize it? Sites like Teachable and Thinkific will help you build a course that could change someone’s life, either professionally or personally.
Note that online courses are not limited to computer-based topics. A quick search turns up classes on:
Building a pet-care business
And that’s just for starters. Like writing an e-book, creating a course will take some work. But again: Once it’s up, the work is done.
9. Join rewards programs
Rewards sites like Swagbucks reward you with points for activities such as searching the internet, watching short videos and taking surveys. You can cash in your points for gift cards or PayPal cash.
Maybe you didn’t retire to spend hours taking surveys. But if you’re going to search the internet anyway, why not use Swagbucks’ search engine and earn some points?
To learn more about Swagbucks, check out “6 Ways to Score Free Gift Cards and Cash in 1 Place.”
10. Wrap your car with advertising
Turn your vehicle into a rolling billboard with companies like Carvertise. They’ll pay you for the privilege of putting removable advertising decals for a business on your automobile.
Writer Kat Tretina describes the process at Student Loan Hero. You can expect to earn $100 to $400 a month, depending on how much and where you drive, she says. Requirements include having a good driving record and a vehicle that has its factory paint job.
Pro tip: Car-advertising scams make the rounds regularly. Tretina offers these tips to avoid being victimized:
Legitimate companies don’t charge an application fee, and they’ll have a customer service phone line that lets you talk with a real person.
The car-wrapping cost should be covered by the company.
Take a hard pass on any company that doesn’t ask questions about your driving record, auto insurance, driving routes and type of vehicle.
11. Create an app
Maybe yours is one of those minds that says, “There should be an easier way to do (whatever) — and I think I know what it is!” If so, creating an app could bring in extra income.
It could also bring in zero dollars. But nothing ventured, nothing gained, right?
For example, personal finance writer Jackie Beck — who cleared $147,000 of debt — used her expertise to create an app called “Pay Off Debt.”
Not a coder? App-builder services exist. The WikiHow.com article “How to Create a Mobile App” tells how to get started. It’s a time-consuming process. But that’s one of the beauties of retirement: You set your own hours.
12. Become a package ‘receiver’
OK, this idea is unproven — so far. But it’s a solution whose time has come. The boom in online shopping has been a boon for thieves who find it easy to swipe packages left outside front doors before the intended recipients get home from work.
You might be able to do your part to thwart those lowdown thieves by marketing yourself as a “professional package receiver.”
Try this: Put the word out — through friends, social media, places of worship — that you are available to accept deliveries. If a package is for someone in your neighborhood, you could watch the shipping company’s tracking info and be at the home to take the package in. Or you could specify that packages be shipped to Original Recipient, c/o Professional Package Receiver — that’s you.
Before asking a fee of, for example, $1 per package, ask the person who wants to hire you what it’s worth to them. You might be surprised by a response like, “I’ll give you $5.” Decide, too, whether you’ll be charging per package or per order, and whether you’ll set a weight limit, such as no packages over 30 pounds.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.
If you think higher education is in your child’s future, consider a 529 college savings plan.
Ready to stop worrying about money?
If you plan on covering some, but not all college expenses, you can tweak this formula to suit your situation. For instance, Fidelity recommends targeting a savings goal of ,000 multiplied by your kid’s current age if you plan on covering 50% of college costs and assume your child will attend a four-year public school. The financial institution provides a couple of examples of parents covering different percentages of fees and what that would look like at different ages of their children.
First, assess your total financial picture. Take inventory of your outstanding debt, and create a budget if you haven’t already.
If you want to save money, there are many ways you can go about it. Whether you’re thinking ahead to your child’s college education or just want to set aside a little something for when your child reaches a certain age, you have more than a few options to reach your savings goals.
(Have you picked your jaw up off the floor yet? Good. Keep reading.)
As with all investments, there are fees and risks associated with 529 plans.
There are also plenty of child-friendly bank accounts you can choose from to encourage your children to start saving early and often. A savings account is a good start.
Planning for Your Kids’ College Savings and Future Expenses
Now on to the good news: You have many options to start saving for your child’s future today, no matter your budget.
Again, that’s just the estimated cost. And there are grants and college scholarships available to help families chip away at the fees.
With this plan, a saver opens an investment account for the beneficiary’s qualified college education expenses, including room and board. This money can be applied toward universities (and some outside the U.S.), and withdrawals can also be used to pay up to K at elementary and high schools.
5 Ways to Save Money For Your Kids’ College Education
What’s the best type of savings account for a child? We’re glad you asked!
1. 529 College Savings Plans
How much money you “should” save depends on a few factors. For one, there are a lot of variables to consider: How much will a university degree cost in X number of years? How long do you think your child will go to school for? (Two years, four years or more years for advanced degrees.) What amount can you afford to regularly sock away for expenses?
These plans are sponsored by state governments as well, but there are fewer residency requirements. Investments in mutual funds and ETFs are not guaranteed by the federal government, but some bank products are protected.
A Roth IRA is an individual retirement account. You fund it with money you’ve already paid taxes on. So, when the time comes (typically at age 59 ½), you can withdraw your Roth IRA contributions and earnings tax free. However, you can withdraw this money earlier, penalty-free, to pay for higher education costs for your child.
Prepaid Tuition Plan
A 529 plan, or qualified tuition plan, is a tax-advantaged investment account. This means the money grows tax free and you can also take it out tax free. Each state (plus the District of Columbia) offers at least one plan. You can view minimum and maximum contribution limits and other considerations by state here.
With this plan, a saver or account holder can purchase units or credits at a participating university and lock in current prices for future tuition costs for the beneficiary. Typically, this money can’t be used for elementary and high school costs, nor be put toward room and board at college.
Education Savings Plan
While interest rates are low and whatever interest you earn is taxed as income, an FDIC-insured bank savings account is a tried and true (and safe) place to store money — whether yours or your kid’s.
With a Roth IRA, they’ll get tax-free money when they retire. They can also use these funds to help pay for their own qualified college expenses. While your child will have to pay taxes on the earnings, they won’t face an early withdrawal penalty.
You generally have more flexibility with brokerage accounts: You can choose from a variety of investments and make withdrawals at any time. Note: If your child does plan on going to college, the value of this account will be included in financial aid calculations.
There are other online calculators that can help you determine what you should save, depending on what your child’s future education plans might entail (like grad school). Again, a financial advisor or certified financial planner (CFP) can help you plan for college costs in way that accommodates your needs.
2. Roth IRA
Anyone can use a 529 college savings plan (no annual income restrictions!) and you can change the 529 beneficiary to another family member without incurring a tax penalty.
Here are three questions we see pop up time and again when it comes to investing in your child’s future. Oh. And this figure doesn’t even factor into university costs.
Of course, you can invest your money in a few different ways — some combination of a 529 plan; Roth IRA; or, UGMA, UTMA, brokerage or savings accounts — so you have options.
3. UGMA and UTMA Accounts
Sticking with college, here are additional ways to save that you and your child can work toward. Whether you’re a new parent or a year out from sending your kid off to college, consider these opportunities to save money.
Uniform Gift to Minors Act (UGMA)
A brokerage account allows you to invest money in stocks, bonds and mutual funds. Once you deposit your money, you can work with a financial advisor or robo-advisor, or both, to invest and grow your money.
Uniform Transfers to Minors Act (UTMA)
File this under “Things You Already Know” — kids are expensive. What you might not know is the best ways to save money for kids, and we’ve got your back on that.
This account establishes a way for someone under 18 years old to own securities without requiring a trustee or prepared trust documents.
4. Brokerage Account
Here are several ways you can invest and save money for your children, whether you want to open a college savings plan or start a rainy-day fund.
A parent or guardian will need to serve as the custodian, since minors generally can’t open brokerage accounts. Children need to have an earned income (part-time jobs, like babysitting, count) to contribute to it. Like adults up to and under age 50, they can only contribute up to K to the Roth IRA annually. Once the child turns 18 or 21 years old (depending on the state in which they live), control of the account must be transferred to them.
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5. Savings Account
College is an investment, and it can be a pricey one. By saving early (and with the magic of compound interest on your side), you can earn a bigger return on your money down the line.
And, mom and dad, when the time comes, make sure you fill out the Free Application for Student Aid (FAFSA).
There are two types of 529 plans: prepaid tuition plans and education savings plans.
Consider meeting with a financial expert to help you craft a plan that’s best for you.
The cost of raising a child from birth through age 18 is roughly 3,610, according to the United States Department of Agriculture (USDA). To break that down further, that’s around K per year, per kid.
Additional Ways to Save Money for College
Save early and save regularly, and you’ll be off to a good start.Contributor Kathleen Garvin (@itskgarvin) is a personal finance writer based in St. Petersburg, Florida, and former editor and marketer at The Penny Hoarder. She owns a content-writing business and her work has appeared in U.S. News, Clark.com and Well Kept Wallet.
Ask for gifts toward their education expenses. If friends and family would like to give a gift to your child, ask them to consider putting any money toward their college fund. You can do this for any birthday or holiday, though the earlier you start investing in their education, the better. (Bonus: Your 1 year old doesn’t have the capacity to ask for the latest toy and won’t object to this gift.)
Encourage your kid to work and save. Once your child is of legal working age, they can get a job and start saving money for their school expenses. Even saving a small amount per paycheck can help them make a dent in later costs; you might also consider “matching” their savings to incentivize them (for example, give them $1 for every $20 they put away for college).
Look to companies and professional organizations. Your workplace may offer opportunities to children of employees looking to earn money for college. Some large companies, like UPS, offer such scholarships. Review your company handbook or ask your HR department about any available opportunities. Professional organizations, like the Rotary Club, are also known to offer scholarships and grants for continuing education. If you belong to any organizations or other clubs, look out for these benefits.
Apply for scholarships and grants. Additionally, encourage your high school student to look for scholarships and grants to help mitigate their college costs. Universities typically offer money for students who fit certain criteria — such as transfer students or people in certain majors — and meet other requirements. There are all sorts of weird scholarships, contests and even apps that can help them earn money for school, too. Just make sure they weigh the pros and cons of any entry fees and stay on top of contest deadlines.
If we use the earlier figures from CollegeCalc that forecast what a four-year education will cost in 2039 (5,167.67 / 4 = ,792 a year), it’s recommended you put 1 a month into a college savings plan. This calculation assumes an after-tax return of 7%, an annual tuition increase of 7% and four years of school.
Frequently Asked Questions (FAQs)
It’s great if you’re able and want to contribute to your children’s future expenses and education fund — student loan debt has surpassed a whopping .7 trillion in the U.S. — but you need to be smart about it. If you put yourself in a precarious financial situation, it can be more difficult for you to course-correct later.
When Is the Best Time to Invest Money for College?
With that said, don’t let getting started “later” deter you from saving at all. It’s kind of like the Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.” You want to save what you can as early and regularly as possible. But if life circumstances prevented you from doing so before, right now is the next best time to start saving.
On average, tuition and fees ran ,411 at private colleges and ,171 for in-state residents at public colleges for the 2020-2021 school year. The estimated cost of a four-year degree, 18 years out?
What’s the Best Way to Invest Money for a Child?
Most prepaid tuition plans have residency requirements for the saver and/or beneficiary, and are sponsored by the state government (and not guaranteed by the federal government). However, not all state governments guarantee the money paid into them, so it is possible to lose money. Additionally, your mileage may vary with this plan if the beneficiary doesn’t attend a participating college, resulting in a smaller return on investment.
First things first: If you have nothing saved for retirement, focus on your own needs before you start saving for someone else. You’re on a more fixed timeline. Plus, you can’t borrow for retirement savings like your child can for their education. 5,167.67.
How Much Money Should I Save for My Child?
Looking for more options that aren’t exclusive to education? You can invest in a taxable brokerage account.
The good thing about putting away money for your children is that there is no one “right” way to do it. You can open a 529 plan for your child early on or later as they get closer to college aid. Or, you can fund a brokerage account so you’re not held to stricter rules about how the money’s spent.
If you want to invest in your kid’s future without choosing an account that’s for education expenses only, look into a Uniform Gift to Minors Act or UTMA Uniform Transfers to Minors Act.
Don’t forget the old standby: a traditional savings account.
The Best Way to Save Money for Kids
This account is similar to a UGMA. However, minors can also own property such as real estate and fine art.
A custodian will also need to be set up for this type of account. Parents can set up a custodial account and then make withdrawals to cover child-related expenses. Once the child is of legal age, the assets are transferred to their name. Since the funds for both UGMA and UTMA accounts are in the child’s name, they cannot be transferred to another beneficiary. <!–
If you’re in the 18+ year old camp, you can open a high-yield savings account to save money toward your children’s expenses. You can earn higher interest rates with these accounts, though you’ll need to be diligent about your money moves to qualify for the rates. You can also open a Roth IRA in your child’s name. Still, these numbers can be downright scary. Thankfully you have several solid options when it comes to saving money for your children and their future education plans.
Is your monthly car payment a burden to your budget? Paying off your car loan early can earn you much-needed financial freedom and save you potentially hundreds (or thousands) of dollars in would-be interest.
You can pay off your car loan early using several effective strategies, but before you do, consider any potential penalties and effects to your credit score.
The True Cost of a Car Loan
It’s no secret that cars are our worst big-ticket investment. Unlike houses, which typically increase in value over time, and education, which theoretically opens the door to higher earning potential, cars lose their value over time. In fact, a new car depreciates in value as soon as you drive it off the lot and will lose 20% to 30% of its value in the first year.
That’s a big deal, especially given the average cost Americans are spending on new cars in 2021. According to KBB, that hard-to-swallow number is over $40,000, up more than 4% over 2020.
That means Americans are shelling out $40,000 for a car that, in a year, will be worth anywhere from $28,000 to $32,000, representing an $8,000 to $12,000 loss.
But there’s more than just the sticker price to consider. In addition to sales tax (average of 10.12% in 2020, though it varies by state), be prepared to pay interest on your car loan. Right now, the average car loan interest rate (also referred to as APR, the annual percentage rate, though there’s a difference) is over 4%.
APR includes the interest rate, in addition to other fees, like loan origination fees or mortgage insurance. You should use the APR, not the flat interest rate, when calculating what you’re paying.
Your APR will depend on the current market and your credit score. The better your credit score, the lower your APR. If you have a weak credit score and can put off buying a car, it is advisable to build up your credit score before applying for a loan.
For 2021, rates are expected to hover between 4% and 5% for 48-month (four-year) and 60-month (five-year) loans.
Car Loan Calculator: An Example
Interest on a car loan adds up. Let’s take the $40,000 new car as an example, with a $995 dealer fee. Assume you put $2,000 down and have a tax rate of a clean 10% and an APR of 5%. You’ve agreed to pay off the loan over 60 months, or five years. (The typical car loan is anywhere from three to seven years; the shorter the loan period, the higher the monthly payment.)
In this scenario, the total cost of the vehicle after tax and dealer fees is $44,995, minus your $2,000 down payment. That leaves $42,995 to be financed. Given the 5% interest rate over 60 months, your monthly payment would be $811.37.
Over 60 months, you will end up having paid $50,682.20 (including down payment) for a car that, with taxes and dealer fees, cost just $44,995. That means, over five years, you’ve paid $5,687.20 in interest.
And let’s just ignore the fact that, due to depreciation, that car that you’ve just paid $50,000+ on is now worth just $18,752.41 (average value of 37% of original cost after five years).
Use The Penny Hoarder’s car loan calculator to figure out how much you’ll pay with real-life numbers that match your scenario.
How Car Loan Interest Rates Work
Paying off your car loan early, if you can afford it, seems like a no-brainer then. However, before you start strategizing about how to pay off your car loan ahead of schedule, do some digging to determine what kind of car loan you have.
In an ideal world, your loan will be a simple interest loan. If you have not yet purchased your car, only consider lenders that will offer you a simple interest loan. This means the interest is calculated entirely on the principal balance of the loan.
But if your lender charges precomputed interest, that means they will calculate how much you will pay in interest over the life of the loan and include that in your total balance. That means, even if you pay off your car early, the payoff quote will include all the interest you would have paid had you kept the loan open. In this case, there are absolutely no financial savings in paying your car loan off early.
One other element of your loan to research is payoff penalties. Payoff penalties are legal in 36 states and allow lenders to charge you a penalty (usually a fixed percentage of the remaining balance) for paying off your car loan early. In this case, it may be more expensive than what you would have paid in interest over the life of the car loan.
Will Paying Off Your Car Loan Early Hurt Your Credit Score
It is not likely that paying off a car loan early will hurt your credit score, but it could be keeping you from growing your credit score. Regular, on-time payments account for roughly 35% of your FICO credit score, making it the most important factor. Making monthly payments on a car loan is a great way to show lenders you are responsible with repaying your debts.
In addition, lenders like to see a nice mix of credit (mortgage, car loan and credit cards are the big three). Keeping your car loan open also helps extend the length of your credit history. If you have no other open credit (like a credit card), keeping your car loan open may be advantageous in building up your score if you eventually intend to buy a house.
5 Strategies for Paying Off Your Car Loan Early
If you have a simple interest car loan, your credit is in good standing and your loan doesn’t have any payoff penalties, it may be wise to pay off your car loan ahead of schedule. Not only will you avoid spending heaps of money on interest, but it will also give you the financial freedom of hundreds of dollars back in your monthly budget.
The best advice for paying off a car loan early: treat it like a mortgage. If you are a homeowner, you have likely heard that making an extra (13th) payment toward your mortgage principal every year can shave years off your loan. If you pay even more toward the principal each year, you can easily get your 30-year mortgage down to 15 years—and you’ll be able to drop PMI (private mortgage insurance) costs much earlier.
Of course, home loans tend to be much bigger than vehicle loans, so the potential to save is much larger, but the logic works the same with your car loan.
These strategies for early payoff are all effective, if done right:
1. Make One Large Extra Payment Every Year
If you can count on your grandma slipping a fat check into your Christmas card every year without fail, don’t use that money to splurge on alcoholic eggnog (OK, maybe one bottle). Instead, apply it directly to your car loan as a lump sum.
If you have autopay scheduled online, you can log into your account and simply arrange to make a one-time payment. If you’re old-fashioned and pay by phone or mail, simply call your lender and let them know you’d like to make an extra, one-time payment toward the principal.
Apply this logic to any unbudgeted (aka, not-planned-for) funds, like a bonus at work or a tax refund.
2. Make a Half Payment Every Two Weeks
Talk with your lender to see if you can switch to biweekly payments, instead of monthly. If your lender allows you to pay half of your monthly loan amount every two weeks, you will wind up making 26 half payments. Divide 26 by 2, and you get 13 full months of payments, paid over 12 months. That means, by the end of the year, you will have essentially made an extra car payment.
Just check your budget first to ensure that kind of payment plan is feasible.
3. Round Up
Rounding up to the nearest $50 or even $100, if you can swing it, is a great way to add extra money every month to the principal. For example, if your monthly payment is $337, you could round up to $350 or even $400 to essentially pay an extra $13 or $63 a month. This will wind up knocking a few months off the life of your loan.
If you have autopay scheduled, log onto your loan platform and see if you can add the additional funds toward the principal each month so you don’t even have to think about it.
4. Resist the Urge to Skip a Payment
Some lenders may let you skip one or two payments a year. So kind of them, right? Wrong. They do this knowing it will extend the life of your loan, meaning they will rake in even more of your hard-earned cash in interest fees.
Unless you fall on very hard times, fight the urge to skip a payment. You will wind up paying more in the end if you do.
5. Refinance, but Exercise Caution
If you had a poor credit score when you bought your car and opted for a seven-year loan to keep payments low, it might make sense to refinance. Perhaps you’re two years into the loan, you’ve got a higher-paying job, and your credit score is in great shape. You could potentially refinance at a lower APR and build the loan out over 36 months, saving you two years and lots of money in interest.
But borrower beware: Don’t refinance to get a lower monthly payment by extending a loan, as you will end up just paying more in interest.
When You Shouldn’t Pay Off Your Car Loan Early
As we’ve seen, it doesn’t always make sense to pay off your car loan early. But there are more reasons to hold your horses than just payoff penalties and precomputed interest.
Here are some other reasons not to pay off your car loan early:
Lack of emergency savings. Bankrate reported early in 2021 that most Americans could not afford a $1,000 emergency. Just 39% have enough to cover such an unexpected expense. If you are a part of that 61% without a well-padded emergency fund, prioritize adding funds to a high-yield savings account to protect yourself and your family should the unthinkable happen. And it’s not just your family’s medical emergencies; you may need to cover a deductible on your renter’s insurance in the case of a break-in, the cost of an unexpected car repair or even a terrifying trip to the vet when your dog eats something he shouldn’t.
Higher-interest loans. If you have a reasonable interest rate on your car loan but are drowning in credit card debt, focus on the debt that has the highest interest rate. Credit cards historically have interest rates in the high teens, so they make the most sense to pay off first. If you are free of credit card debt but have a mortgage or student loans, compare those interest rates to that of your car loan to figure out which makes the most sense to pay down with extra funds.
Lack of credit history. If you refuse to get a credit card and don’t yet have a house, a car loan is your best bet for building your credit score. Keeping your car loan open could positively affect your credit score.
Investments. For most drivers, car loan APRs are not terrible. If you have some extra funds and are thinking about paying off your low-interest car loan, consider instead investing in your retirement fund or even buying a few stocks on your own. The average stock market return is about 10%. Obviously, you could wind up losing money, but in general, if you invest and hold, over time, you should expect your money to grow.
Timothy Moore is a managing editor for WDW Magazine, and a freelance writer and editor covering topics on personal finance, travel, careers, education, pet care and automotive. He has worked in the field since 2012 with publications like The Penny Hoarder, Debt.com, Ladders, Glassdoor, Aol and The News Wheel.
Tired of looking for a branch or navigating a clunky app when you need to manage your bank account?
For anyone who’s ready to walk away from traditional branch banks, an industry of online challenger banks has blown up over the past decade. Technology companies have swooped in to respond to the need for more mobility, better apps and lower fees.
Varo and Chime, two of the top players in the online banking space, compete for customers with no-fee bank accounts and high-yield savings you can set up and manage from your smartphone.
Which is a better fit for you? See how they compare:
Varo vs. Chime Comparison
Varo (previously Varo Money) and Chime each offer checking and savings accounts through user-friendly mobile apps and online banking. Here’s how we rated each company.
Chime and Varo offer most of the same account options aimed at simplifying banking and savings for anyone who’s ready to say goodbye to traditional banks.
Small Business Banking
$2.50 + third-party fees for out-of-network ATMs; up to $5.95 retailer fee for over-the-counter deposit or withdrawal
$2.50 + third-party fees for out-of-network ATMs; up to $5.95 retailer fee for over-the-counter deposit; $2.50 + up to $5.95 retailer fee for over-the-counter withdrawal
Varo Bank Review
Chime Bank Review
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Chime is the leader in online banking, offering a no-frills account with features meant to simplify your money management and help you reach savings goals.
Chime Features and Fees
Chime offers fee-free online spending and saving accounts. It includes built-in automatic saving features, SpotMe fee-free overdraft protection, access to two fee-free ATM networks and more.
Chime is known for fee-free services, so you won’t pay for much. You’ll just pay a $2.50 out-of-network ATM fee, plus any fee charged by the ATM operator. And you could pay up to $4.95 to withdraw or deposit cash through your debit card at a Green Dot retail location.
Chime Bank Review
Is Chime right for you? Read our full Chime review to learn more about its features and see what it has to offer.
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As of July 2020, Varo is the first banking app to gain approval for a full bank charter in the U.S. That means it’s its own bank, unlike other banking apps, which provide technology and work with national banks to provide the financial services and accounts behind the scenes.
It hasn’t yet taken full advantage of its status to offer a full suite of financial services, but it does offer services beyond its original stripped-down checking and savings account, including a forthcoming credit builder program and small cash advance loans.
Is Varo a good bank? Read our full review to learn more about its features and decide whether it’s a good fit for you.
Varo Features and Fees
Varo offers an online, app-based checking and savings account with built-in automatic savings tools, optional overdraft protection called Varo Advance, access to a network of fee-free ATMs and more. It also offers cash advance loans and is developing a credit builder program called Varo Believe for qualifying customers.
Nearly all Varo features are fee free. You’ll just pay $2.50 to Varo to use an out-of-network ATM, plus third-party ATM fees. And you could pay a third-party fee up to $4.95 to the retailer if you deposit or withdraw cash over-the-counter at a Green Dot location. If you use Varo Advance, you’ll pay a fee between $0 and $5, depending on how much cash you draw.
Varo Bank Review
Is Varo a good bank? Read our full Varo review to learn more about its features and decide whether it’s a good fit for you.
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More Details: Chime and Varo Bank Account Features
Both accounts offer these features:
Fee-Free Checking and Savings Accounts
Both Chime and Varo include a debit account (a.k.a. checking) and optional savings account, both with no monthly fees.
Automatic Savings Tools
Both accounts include simple ways to automatically build your savings account by setting rules to move money from checking to savings when you get paid and when you shop.
Both savings accounts offer higher-than-average APY on your savings account balance.
Chime offers 0.50% APY on savings with no minimum balance requirement.
Varo offers 0.20% APY on savings to any customers, and you can earn 3.00% APY in a given month if you receive at least $1,000 in direct deposits, maintain a minimum balance of $5,000 and keep both of your accounts above a $0 balance during that month.
Early Direct Deposit
As with many online banks, both accounts make your paycheck available up to two days early if you get paid through direct deposit. The money is available in your account as soon as your employer processes payroll, which could be up to two days before the scheduled payday.
Through Chime’s SpotMe overdraft protection program, the company will spot you up to $20 with no fee as long as your account has at least $500 per month in direct deposits. That limit can go up to $200 based on your account activity.
Through Varo Advance, you can add instant overdraft protection through the app with a small cash advance loan of $20, $50, $75 or $100, for a fee of $0, $3, $4 or $5, respectively.
With both Varo and Chime, you can deposit money into your bank account at more than 60,000 retail locations with Green Dot, which is a function many online banks don’t allow.
With either account, you can pay bills through ACH transfer by giving companies your bank account and routing numbers, or mail a paper check.
Both companies provide FDIC-insured accounts up to $250,000 (the typical amount for any bank account). Chime partners with The Bancorp Bank and Stride Bank, N.A., and Varo Money is backed by its own Varo Bank.
Instant Money Transfer
With both Chime and Varo, you can send money instantly with no fees to others who use the same app. Varo Bank also works with Zelle for money transfers to folks who use other banks, though it admits the connection isn’t always reliable (and is working to fix that).
Neither company uses ChexSystems, which many traditional financial institutions use to determine your eligibility for a bank account, so a bad banking history won’t necessarily disqualify you for these accounts. Neither company checks your credit report for a banking account or credit builder card, either.
Free ATM Withdrawals
A Chime account gives you access to 38,000 fee-free ATMs in the United States through the MoneyPass and Visa Plus Alliance networks. Varo’s account connects you to more than 55,000 fee-free Allpoint ATMs in the U.S.
Live Customer Support
Talk to a real person from either company via chat in the app, email or on the phone seven days a week.
Reach Chime customer service via email at [email protected], or by phone at 844-244-6363 during business hours: Monday through Friday 6 a.m. to 10 p.m. Central, and Saturday and Sunday 7 a.m. to 9 p.m.
Reach Varo customer service via email at [email protected], or by phone at 800-827-6526 during call center hours: Monday through Friday 8 a.m. to 9 p.m. Eastern, and Saturday and Sunday 11 a.m. to 7 p.m.
Stay on top of your Varo account balance with optional notifications anytime money moves in or out of your account. Chime gives you the option to receive a push notification when a direct deposit hits.
Credit Building Programs
Both companies offer a new, secure way to build credit.
Chime’s Credit Builder Visa credit card is a secured credit card with no annual fee, no credit check to apply and no minimum required deposit (an unusual feature for a secured card). It works like a debit card that lets you build credit.
Through the program, Chime members can move money into their Credit Builder account to back the card, make purchases with the card and have the balance automatically paid off from their Credit Builder account. Chime reports activity to credit bureaus, so the card is a less risky way to build or rebuild your credit.
Varo’s forthcoming Varo Believe program is nearly identical, backing a secured credit card with a dedicated amount of your choice from your Varo Bank account.
What They Don’t Offer
Neither platform offers these features:
Joint accounts or additional authorized debit card users.
Other financial products, like personal loans, auto loans and mortgages.
Small business banking services.
Paper checks (though you can use bill pay to have the banks send checks for you,
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Which Is Better: Varo or Chime?
Chime and Varo bank account features are nearly identical, with details that could sway you one way or the other.
Varo Bank Account: A
Chime Spending Account: A-
Both banks offer a fee-free checking account for deposits and spending. In both cases, you’ll automatically apply for this account when you set up your account in the app (or online). You can fund it through direct deposit or transferring money from an external bank account.
Both Chime and Varo eschew traditional banking fees, including monthly maintenance fees, minimum balance fees and overdraft fees.
Both accounts let you get your paycheck up to two days early compared with a traditional bank, because they release the funds as soon as your employer initiates the deposit.
Both accounts come with a Visa debit card you can use for transactions anywhere Visa is accepted, and for ATM withdrawals. Both are also connected to the Green Dot network, so you can deposit or withdraw cash at retail locations around the U.S.
Both Chime and Varo charge no overdraft fees and offer optional overdraft protection — but eligibility and details vary.
Chime SpotMe: Chime will spot you for an overdraft up to $200 and take it out of your next deposit. To be eligible, you just have to receive $500 in direct deposits every month.
Varo Advance: You can opt into overdraft protection as you need it with Varo Advance, a small paycheck advance you select instantly through the app. Choose an advance of $20, $50, $75 or $100, and pay a fee of $0, $3, $4 or $5, respectively. You’ll choose an automatic repayment date anytime between 15 and 30 days of the advance. To qualify, you have to have at least $1,000 in direct deposits within the past 31 days.
Varo Savings Account: A+
Chime Savings Account: B
Both Varo and Chime offer optional savings accounts that facilitate automatic savings and yield competitive interest rates.
Funding the Account
You can only fund a Chime Savings account by transferring money from your Chime Spending account — not through direct deposit or an external bank account. To add money from another source, you must first deposit it into your Spending account, then make an instant transfer.
You can deposit money into a Varo Savings account from your Varo Bank account in the app or directly from an external account through ACH transfer.
Savings Account Interest Rates
Both Chime and Varo savings yield interest at an annual percentage yield (APY) above the 0.06% national average for savings accounts reported by the FDIC.
Chime Savings offers a 0.50%% APY with no additional requirements.
Varo Savings offers a 0.20% APY with no requirements. You can earn up to 3.00% APY on balances up to $10,000 by receiving at least direct deposits of at least $1,000, maintaining a minimum $5,000 balance and keeping both your Bank and Savings accounts above $0 for the month.
Chime and Varo each let you select one or both of two savings “rules” that automatically move money into your savings account. Varo’s options are slightly broader than Chime’s.
Chime: Save when you get paid by transferring 10% of any direct deposit of $500 or more into savings. Save when you spend by rounding up Chime debit card transactions to the nearest dollar and depositing the digital change into savings.
Varo:Save Your Pay lets you set a percentage of your direct deposits to automatically transfer to savings. Save Your Change rounds up every transaction from your Varo Bank account — including debit card purchases, bill payments and transfers — to the next dollar and deposits the difference into your savings account.
All online-only banks are convenient relative to traditional branch banks, unless you prefer face-to-face service from bank tellers at a brick-and-mortar bank.
Each bank’s mobile app lets you manage your account 24/7, including mobile check deposit and money transfers, and live customer service agents are available if you need questions answered.
Varo and Chime accounts offer features many online banks don’t, including cash deposits via Green Dot, early paycheck access and flexible overdraft protection.
Varo App: A
Chime App: B
Chime and Varo both offer mobile banking apps that are more user-friendly and easier to navigate than what you’ll get for most traditional bank accounts. However, both are pretty simplistic, lacking the budgeting tools you’d find in a lot of mobile apps.
In both apps, you can:
View and manage your accounts.
Transfer money between savings and checking, to and from external accounts, and to other customers of the same bank.
Deposit checks using your smartphone camera.
Locate in-network ATMS.
Freeze your debit cards.
Manage overdraft protection.
Contact customer support (via chat or email).
Both apps give you the option to stay on top of your bank account balance by receiving a push notification every time money moves in or out of your account — via deposit or withdrawal, debit card purchase, or over-the-counter or ATM cash withdrawal. Chime also sends daily account balance alerts.
Small Business Banking
Neither Varo nor Chime offer small business banking accounts or products and services.
Both companies tout fee-free banking that eliminates many of the costs associated with traditional banks — largely because they don’t bear the expense of running brick-and-mortar locations.
You’ll pay no maintenance fees, overdraft fees or foreign transaction fees, and you can avoid ATM fees by using in-network ATMs.
With both banks, you’ll just pay for:
Out-of-network ATM: $2.50 for using an out-of-network ATM, plus any fee the ATM owner charges.
Cash deposit: You’ll pay a retailer fee up to $5.95 to deposit cash via Green Dot.
OTC cash withdrawal: You’ll pay a retailer fee up to $5.95 for a cash withdrawal via Green Dot. Chime also charges a $2.50 fee for over-the-counter withdrawal, while Varo does not.
Varo Advance: You’ll pay between $0 and $5 to use overdraft protection with Varo, while Chime’s SpotMe overdraft protection is free.
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How They Differ: Choosing the Right Bank for You
Overall, Chime and Varo offer similar banking products that will likely appeal to the same types of banking customers — but each has slight differences that might appeal to certain customers.
Who Should Join Either Bank?
You might prefer either account over traditional banks if:
You prefer the easy access and mobility of online banking.
You regularly run your account balance close to $0 or live paycheck to paycheck.
You’re often paid through direct deposit — you could benefit from an early payday!
You’re often paid in cash but want an online bank account.
You want an easy way to save money automatically.
You want a flexible and secure way to build credit without the risk of accruing debt.
A traditional bank or credit union is probably a better fit if you want to manage your checking, savings, loans, credit cards and investment accounts all in one place.
Who Should Join Varo?
Varo is better than Chime if:
You want to build an emergency fund. Varo’s Save Your Pay rule lets you set aside any percentage of your paychecks you want, so you can set it above Chime’s 10% Save When You Get Paid rule to help you reach your savings goals faster.
You want to make the most of your savings. Varo offers six times Chime’s interest rate on savings for qualifying account holders, though the rate comes with balance requirements.
You live in the Mountain states. Although services in general tend to be limited in this region, Allpoint’s ATM network has a little more coverage than both MoneyPass and Visa Plus Alliance in Montana, Idaho, Wyoming, Colorado, Utah and Nevada.
Who Should Join Chime?
Chime is better than Varo if:
You run on a tight budget. Chime provides overdraft protection with just $500 in monthly direct deposits compared to Varo’s $1,000-deposit requirement. It covers you up to $200 compared to Varo’s $100 and doesn’t charge a fee for the service.
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Are Chime and Varo the same?
Chime and Varo are distinct companies operating online banking apps, but they each offer similar services.
Is Varo Bank a good bank?
Varo Money is a reputable and popular banking app backed by FDIC-insured accounts through Varo Bank. The mobile bank is a good option for anyone who likes online banking and has simple banking needs that don’t require all financial services to live under one roof.
Is Varo an actual bank?
Yes, Varo Bank, N.A. received approval for a U.S. bank charter in July 2020 and is an FDIC member. Varo Bank is a wholly-owned subsidiary of the financial technology company Varo Money, Inc., which operates the Varo Money banking app.
Which bank is better: Current or Chime?
Current is an online bank account that offers many of the same features as Chime and other neo bank competitors. Current stands out for offering “savings pods,” which help you save toward specific goals, and separate accounts for teens; but it charges fees to access those unique features.
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You can sign up for either Varo or Chime by downloading their mobile apps or visiting their websites.
Neither account requires a minimum opening deposit, but you can connect an external bank account to transfer money in right away or set up direct deposit to fund your account when you get paid.
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Our Bank Review Methodology
The Penny Hoarder’s editorial team considers more than 25 factors in its bank account reviews, including fees, minimum daily balance requirements, APYs, overdraft charges, ATM access, number of physical locations, customer service support access and mobile features.
To determine how we weigh each factor, The Penny Hoarder surveyed 1,500 people to find out what banking features matter most to you.
For example, we give top grades to banks that have low fees because our survey showed that this is the No. 1 thing you look for in a bank. Because more than 70% of you said you visited a physical bank branch last year, we consider the number of brick-and-mortar locations. But more than one-third of you use mobile apps for more than 75% of your banking, so digital features are also considered carefully.
Ratings are assigned across the following categories:
Personal checking accounts
Personal savings accounts
Credit card and loan products are not currently considered.
Dana Sitar (@danasitar) has been writing and editing since 2011, covering personal finance, careers and digital media.
Compound interest is an incredibly powerful force. It allows your money to start growing on its own, with the returns exploding in value over time, if you have the patience.
While the idea is easy to understand, the actual application of it can be tricky. Does it make a difference if money is compounded monthly or quarterly? How does one teach the idea to young children? Are there any places that offer steady compound interest with a high interest rate? Let’s dig in!
In this article
Impact of bank compounding quarterly
I used to keep my savings at one bank but I didn’t like their service so I switched everything to a new bank. The new bank is great except that they only put interest in my checking account quarterly. The APR on both accounts is the same. I’m trying to figure out how much I’m losing and if it is worth it to find another bank.
It’s probably not worth it to find another bank if you like the customer service at your current bank.
Let’s say you have a large amount in savings — $100,000. Let’s also say that the bank offers 0.5 percent APR on their savings account, which is a reasonable amount in the current banking world. I’m guessing that your old bank compounded monthly, as that’s very common in banking, and your new bank compounds quarterly.
At your old bank, with monthly compounding, you would earn $501.15 in interest in a year. At your new bank, with quarterly compounding, you would earn $500.94 in interest in a year. That’s right, over the course of a year, with $100,000 in the account at 0.5 percent APR, the difference between the two is about 20 cents.
With interest rates as low as they are, different compounding rates don’t make a huge difference. However, if interest rates rebound strongly, you may want to pay attention. Let’s say that interest rates were 5 percent instead of 0.5 percent. In that case, the monthly compounded account would generate $5,116.19 in interest, whereas the quarterly compounded account would generate $5,094.53 in interest. Suddenly, you’re talking about $22, which might be enough to be concerned with.
Unless interest rates rebound a lot, I wouldn’t worry too much about the rate of compounding in your savings account. If you have a big enough balance that it’s making a large difference, there are likely better places to keep your money than a typical savings account at a local bank. Your best approach is to simply find a bank with a good interest rate and good customer service and stick with them rather than chasing a better compounding frequency.
We withdrew a bunch of rolls of pennies from the bank and put a bowl of pennies out on the table, starting with 30 or so. We told them that each day, the number of pennies in the bowl would grow by 10 percent — in other words, for every 10 pennies in the bowl, we would add one penny.
We had them guess how many pennies would be in the bowl in one month. Each night, we’d count the pennies, then we would add one penny for every 10 we counted.
Their guesses were all super low, so they were blown away by the growth of it — the bowl was literally overflowing by the end of the month, with incredibly fast growth over the last week.
Later, we offered them a very high weekly compound interest rate on their allowance money if they deposited it at the “Bank of Mom and Dad.” In other words, if they held their allowance in their hand and decided to deposit it with us, we would give them 5 percent interest each week on their savings. At first, our children were hesitant to take advantage of it, but when one of them started to save for a big goal and they saw how the savings were accelerating thanks to the power of compound interest, they all jumped on board. We actually had to put a cap on weekly interest!
The message is simple. If you want your kids to learn about compound interest, make it tangible and visual. Make it important to them. Make the rate of growth rapid, so that their patience is not overly tested. Once they see the idea, it will stick with them for life.
Are there any investments that offer a high rate of steady interest? Bank accounts are so low these days and everything else is so variable.
Unfortunately, investments that offer a very steady rate of return offer a very low rate of return these days. It’s not like it was in the late 1970s and early 1980s, when you could buy U.S. Treasurys that paid 10 percent or more. Even as recently as 2007, online bank accounts could be found that paid as much as 6 percent per year.
Before we dig too much into this, consider why banks offer interest on bank accounts in the first place. In really simple terms, they do it because they need to have a certain amount in their vaults in order to lend out money to other customers. In essence, the money in your checking or savings account ends up being the money that banks lend out to people getting mortgages and business loans.
The reason that you won’t find steady, solid interest rates much above 1 percent right now is because of the Federal Reserve. The Federal Reserve sets a number of interest rates that dictate how much banks can charge each other for temporary loans and how much the Federal Reserve charges them for emergency loans. If banks have access to money at the low interest rates that the Federal Reserve offers, they don’t have a whole lot of incentive to offer high interest rates to customers.
Think about it this way. If a bank can borrow money from another bank for 0.25 percent, why would they give you much more than that in interest on your deposits? All a bank wants is money in their vaults as inexpensively as possible so they can lend it out in the form of business loans and car loans and mortgages. If they charge a lot more than 0.25 percent, they’re probably going to lose money by doing so.
So, as long as the Federal Reserve keeps interest rates low, your bank will give you low interest rates on your savings and checking accounts. It will only go up when the Federal Reserve raises rates.
Too long, didn’t read?
As long as interest rates remain low, the rate of compounding in your savings account doesn’t make much difference.
If you want your children to understand compound interest, make it visual and tangible, and make the rate of compounding very rapid.
There aren’t any stable and secure investments that offer a steady high interest rate of compounding right now. If you want a high rate of return, you have to take on some risk and volatility.
Banking Black isn’t a new concept, but it’s gaining momentum amid the rise of the Black Lives Matter movement. But what does it mean to bank Black? According to the Urban Institute, a Black financial institution provides services to minority communities and is 51% or more Black-owned.
Black financial institutions have been around for centuries, with initial meetings among African Americans interested in establishing their own banks held as far back as 1851 — before the Civil War. However, the first Black-owned bank in the U.S. didn’t materialize until after the war, in 1888.
The first Black-owned banks enabled African Americans to accumulate enough capital to start other service-oriented businesses like nursing homes, catering businesses and insurance companies. And they provided an opportunity for African Americans to learn accounting skills and other techniques required for handling large volumes of cash.
Today, there are roughly 19 Black-owned banks in the U.S. offering the same services as other financial institutions, such as certificates of deposits, loans, online and mobile banking assistance and more. This number used to be much higher — in 2001, there were 48 Black-owned banks — but, as with other community banks, the numbers have dwindled over the years partially due to regulatory restrictions that often favor larger financial institutions.
As we celebrate Black History Month, we celebrate the Black-owned financial institutions that have served as pillars in the community for years now.
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Why you should consider banking Black
It’s no secret there’s a wealth gap between minority and non-minority households. As of 2016, the median wealth for a White family was $171,000 compared to $17,600 for a Black family.
This is partly attributed to a lack of financial services in minority communities. Without financial inclusion, minorities can’t affordably save, invest and insure themselves, which is required to grow and sustain wealth. This lack of experience also places them at a disadvantage.
“I believe it is vital that African Americans make financial literacy a priority in 2020 and beyond, especially because of the effects of the coronavirus. Over 67% of Americans cannot pass a basic financial literacy test. African Americans, on average, can only answer less than 40% of financial literacy questions correctly. According to research, African Americans have the lowest levels of financial literacy,” states Dr. JeFreda R. Brown, personal finance consultant, educator and CEO of Provision Financial Education.
Because of financial exclusion, minorities often resort to expensive financial services, such as check cashing stores and pay-day lenders, because there are fewer banks in their neighborhoods. There are roughly 41 financial institutions per 100,000 people in a White community compared to only 27 in non-White majority communities. And the financial institutions present in minority neighborhoods often make it difficult to open and maintain an account. For example, a bank may require higher account balances to eliminate service charges or a larger minimum account balance. According to one study, the average minimum account balance at banks in Black neighborhoods is $871, compared to $626 in White communities.
Because of this, nearly half of Black households are either underbanked or lacking access to such institutions.
“Earning money is not a problem for African Americans,” says Dr. JeFreda R. Brown. “However, there is a large gap for African Americans when it comes to personal finance education, understanding how money works, understanding economics and economic indicators, understanding time value of money and understanding wealth building.”
Many Black-owned banks aim to combat the wealth disparity gap through:
community development lending
supporting minority businesses and nonprofits
offering financial literacy workshops for community members
providing financial aid to underserved Black communities
“I think banking with Black-owned banks is good because many of them give people a second chance who can’t get bank accounts with other banks,” says Dr. JeFreda R. Brown. “Also, Black-owned banks offer the same services as other banks and credit unions.”
In 2016, there was a rise in support for Black-owned businesses following the Black Lives Matter movement. One initiative was the Black Money Matters movement, headed by rapper Michael “Killer Mike” Render. He made a call for action in July 2016 during a town hall meeting televised by BET, asking Blacks to “bank Black.” It was an effective yet short-lived effort that led to 8,000 new accounts at Atlanta’s Black-owned Citizens Trust Bank. In addition, One United Bank reported receiving $3 million in deposits at branches across the country, and Carver Bank witnessed $2.4 million in deposits thanks to the movement.
There is also the Bank Black Challenge, which was launched by One United Bank, that is challenging one million people to open a $100 savings account at a Black-owned bank to generate $100 million of economic power. This challenge started in 2016 and is still ongoing today.
Initiatives like these are significant, but it requires ongoing support to make their effects long-lasting. In 2020, the current Black Lives Matter (BLM) movement is motivating people to support the Black community in new ways. And by banking with Black financial institutions, you can now play your part in reinvesting in the Black community in the U.S.
“Black-owned banks should be given a chance to grow and be a strong financial staple in the communities they serve. Also, Black-owned banks are a great option for anyone because they promote economic revitalization. Banking with Black-owned banks helps increase community development and economic development. This is why they need support from everyone,” states Dr. JeFreda R Brown.
Black-owned banks and credit unions
If you’re considering banking with a Black financial institution, check out this list of Black-owned banks and credit unions in the U.S. If you don’t see a bank listed in your area, keep in mind you may still be able to use the bank’s digital banking services.
Black-owned financial institutions are struggling. In 2013, 60% of Black banks lost money, and they were especially hit hard by the 2008 recession. As we enter yet another economic downturn, now is a great time to invest in Black banks. In doing so, you can help keep these entities afloat so that minority communities can continue working to close the disparity gap.
Together, Black banks control $5 billion in assets, which is a fraction of what the banking giants have (for example, Wells Fargo has $1.7 trillion in assets alone). It’s up to the people to help grow Black financial institutions in the U.S. If you’d like to make a difference, then follow these simple steps to switch to a Black-owned bank.
Step 1: Identify your banking needs
Are you currently banking with another bank? What do you like and dislike about it? Keep this in mind as you’re shopping for a new, Black-owned bank.
Maybe you like the mobile banking options your current bank offers but hate the high monthly fees. Or perhaps you want to do your banking with an institution that has more involvement in minority communities.
Make a list of your must-haves to help you decide on the best Black banking solution for your needs.
Step 2: Choose a new banking institution
After you’ve identified your list of banking needs, it’s time to search for a Black-owned financial institution that meets those requirements. Use the list of Black-owned banks and credit unions above to start your search. Create a list of options and mark off the ones that don’t make the cut.
Step 3: Take note of your automatic payments and deposits
Do you use automatic withdrawals for your billing? How about direct deposits from your employers (or clients)? If so, you’ll need to make a list of these automatic transactions so you can set them up with your new bank.
Step 4: Open up your new account
Once you’ve found a bank that meets your needs, it’s time to create your new account. Go through the application process and schedule to make a deposit (if required). Also, check with your new bank to determine what process they have to make transferring funds from your old bank easier. Once your account is up and running, don’t forget to schedule your automatic payments and deposits.
Deciding to bank Black isn’t just about choosing where you keep your money. It’s a way to take a stand against inequality in minority communities that lack financial inclusion. And it helps push the Black Lives Matter movement forward.
In 2012, Wells Fargo was sued for pushing Blacks toward more expensive mortgages with higher fees and rates (compared to white borrowers with similar credit). Then in March 2018, Bank of America was fined for racial discrimination in its hiring and lending practices.
Unfortunately, this is an ongoing issue for people of color who receive less than 1% of mortgages from white-owned banks.
Banking Black isn’t a choice only available to African Americans, either. It’s a viable option for anyone who wants to make a difference in their financial prosperity, as well as the prosperity of those in underserved communities.
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One of the best ways to make the most of your money is to head to the thrift store and see what’s available. I once bought a bed frame and cute lampstand for less than $13 total.
But just because something is cheap, that doesn’t mean it’s a good idea to buy it. There are some things you should avoid at thrift stores.
I asked a few consumer advocates and frugal experts to weigh in on when it’s worth it to pay a little more. They consider the following items among those you should avoid buying from secondhand stores.
1. Vintage painted items
“I shop at thrift stores for probably 50% of my stuff, so I’ve learned many tricks of the trade,” says Dustyn Ferguson, a blogger at frugal website Dime Will Tell.
He points out that old painted items — such as vintage dishware — can contain lead and contaminate whatever you’re eating.
“If you do buy, always test for lead,” Ferguson recommends.
This is the ultimate thrift store no-no. Just about every expert says buying a mattress at a thrift store is a terrible idea.
Indeed, we cite mattresses in both “10 Things No One Should Ever Buy Used” and “It’s Worth Spending More on These 14 Purchases.”
“Mattresses can be contaminated with dirt, skin cells and who knows what else,” says Ferguson. “Think of it like a sponge: Over time, it’s so contaminated you need a new one.”
And, of course, you don’t want to risk bringing bedbugs, lice or other hard-to-get-rid-of pests into your home.
This is another purchase that earned a spot in “10 Things No One Should Ever Buy Used.” The article explains:
“If you’re interested in having comfy feet and minimizing back pain, you might want to skip past the used shoe section at the thrift store. Shoes often come to conform to their first owner’s feet, which can make them uncomfortable for you.”
J.R. Duren, senior editor at consumer review website HighYa, says it’s best to avoid thrift-store electronics when possible.
Cords could be frayed or internal wiring might be degraded, leading to safety problems when you plug it in.
“Just because a monitor powers on doesn’t mean it’s devoid of issues,” Duren says. “There could be glitches that you don’t see with a 30-second test, but that would annoy you if you took the monitor home and used it for work every day.”
5. Small appliances
You can’t be sure that small kitchen appliances will actually work as expected when you buy them at a thrift store, says Steven Millstein, an editor at CreditRepairExpert.
He points out that items like blenders and kitchen appliances, which you can’t adequately field test, are likely to be outside their warranty. And you could spend the money with no recourse if things don’t work out.
“Vacuum cleaners are not built to last long,” says Millstein, citing a Consumer Reports article putting the median lifespan at about eight years.
As with kitchen appliances, you don’t know the status of the warranty.
However, some vintage models that actually were built to last — such as Kirby G series vacuums — might be an exception if you know what to look for.
You can’t always completely sanitize bedding, notes Jennifer Hayes, founder of the website Smarty Pants Finance.
If you’re concerned about what used bedding could be harboring, she suggests looking for new sets of bedding. You can find them at big-box stores like Walmart and online retailers like Amazon for as little as $20.
8. Beauty products
Even sealed cosmetics could be expired or otherwise past their prime.
As we detail in “8 Household Items That Go Bad — or Become Dangerous:”
“In some cases, they may simply not work as well, but some cosmetics may collect bacteria over time and may pose a health risk.”
Worries about toys stretch beyond the inconvenience of missing puzzle pieces or an incomplete set of parts.
“Afflictions suffered by pre-loved toys can render them dangerous to kids as well as useless,” says Jennifer McDermott, formerly a consumer advocate with personal finance comparison website Finder.com.
Stuffed animals could have contaminants in their fur. Broken cords on plug-in toys could present safety hazards.
“Play it safe and stick to store-bought toys or those passed along from trusted friends and family,” McDermott suggests.
10. Car seats
We advise against buying secondhand child car seats and booster seats in “7 Things That Prove Cheaper Isn’t Always Better.” The article explains:
“If it’s been in a crash, its integrity could be compromised. In addition, an old car seat could be expired. After years of sitting in the sun or freezing in the winter, the plastic may be degraded or the seat may be so old that it no longer meets current safety standards.”
Multiple federal safety websites, such as the website of the National Child Passenger Safety Board, offer tips and links to resources to help you choose the best car seat.
This is another baby buy that you should not make at secondhand shops due to safety concerns.
The federal government implemented new crib safety standards in 2011. So, thrift-store cribs could have been built to dated standards.
Even if you’re certain that a thrift-store crib was made post-2011, the warranty could have lapsed or the crib could have been recalled.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.