5 Reasons to Start a Savings Account Today

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5 Reasons to Start a Savings Account

Whether you have begun working or not, opening a savings account is one of the most important steps you can take toward becoming financially independent and achieving your dreams. Here are five good reasons why you should start a savings account today.

1. To Start Building Wealth

The road to financial freedom begins with a single dollar. Every dollar you can save is like adding a brick to the house you are building. And until you can accumulate sufficient amounts to invest in stocks and real estate, what could be a better place to park your hard-earned money than in a savings account? As the money sits in your account, it will earn interest and keep on growing for as long as you leave it there.

2. For Easy Accessibility

If you need easy access to your money, a savings account can give you just that. Keeping it at home is not a good idea because it may get stolen. On the other hand if you put all your money in investments, you won’t have any when you need it. Money saved in a savings account is easily accessible. You can withdraw it anytime you need it. Just make sure you understand your savings account’s terms — some accounts have a maximum number of times you can withdraw money from your savings account every month without a fee.

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3. To Help With Unexpected Expenses

Life is full of unexpected twists and turns. And when the unexpected happens, such as accidents, sickness or a furnace dying, you need money to pay for the unplanned bills. Having a savings account makes the money easily available to you. Thus, your savings account also serves as an emergency fund. To make sure that there will be sufficient funds to cover unexpected expenses, you should set aside three to six months of your income for emergencies. Having a substantial emergency fund can also help you stay out of debt, or at least reduce the amount you would need to put on a credit card in an emergency. Using too much of your available credit can have a negative impact on your credit scores and, if you have so much credit card debt you can’t afford to make the payments, you will definitely hurt your credit (you can see what impact your credit use and payment histories currently have on your credit by checking your scores for free on Credit.com).

4. To Accumulate Capital for Investment

Investing in assets like stocks, exchange-trade funds and real estate is a great way to make sure that your money will grow sufficiently to beat inflation. But to make any meaningful investment, you need quite a large amount of capital. By putting money regularly into your savings account, you can build some significant savings in no time, which will allow your savings account to serve as a launching pad for your investments.

5. To Save Money for the Things You Have Always Wanted

Have you always dreamed of buying an expensive car or vacationing in an exotic destination? Opening a savings account is the first step towards achieving that dream. But to make your dream come true, it’s important to set aside some money every month. Once you have deposited the money into your savings account, it’s best not to touch it until you have saved up enough to meet your goal.

Once you have opened a savings account, one of the best ways to save some money is to automate your savings so you don’t have to remember to set aside money every time you get paid. There are many innovative and easy-to-use automated saving tools that can help you save automatically, and can make saving money almost as easy as spending it.

More Money-Saving Reads:

  • What’s a Good Credit Score?
  • What’s a Bad Credit Score?
  • How Credit Impacts Your Day-to-Day Life

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9 Apps That Will Help You Manage Your Debt

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A hand holds an iphone, open to the home screen with debt management app icons.

Debt can feel like a terrible thing, but paying off your debts is how you demonstrate that you can successfully manage your finances. Whether you make your debt payments on time makes up 35% of your credit score. Making on-time payments is one of the smartest ways to use your debt to your advantage.

If you need a little help, debt management apps can help you organize and manage all of your debts in one place. Just input all debt data into your phone and manage them there. Here are a few options to consider.

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App Best Used For Price Platform
Tally Credit card management Free to download iOS and Android
Debt Book Borrow/lender communication Free Android
Debt Manager Snowball Method, debt summary and tracking, progress bar $0.99 iOS
Pay Off Debt Motivation to make your debt payments $4.99 iOS and Android
Mint Budgeting for debt payments   Web, iOS, and Android
ChangEd Student loan repayments $1/month iOS and Android
Unbury.me Quick payoff calculator Free Web only
Digit Savings to apply to debt $5/month iOS and Android
Credit Report Card All-around financial wellness and credit score tracking free Web, iOS and Android

Tally

Tally is a debt management app that makes it easy to save money by automating your credit card payments to help you reduce your debt faster. The app is free to download, but the real value of Tally comes if you are approved for a Tally Line of Credit that consolidates your credit card debt with a lower APR. You’ll owe interest on that loan, but Tally will automate your credit card payments and determine the best way to save you money based on your credit card rates.  

>> See our full review

Debt Book 

Debt Book is an app for borrowers as well as lenders. It allows you to track and update your debt in a “Master Book,” which shows your borrowed/lent amount, how much has been paid/collected, and how much remains. The app also gives you options to view this data in a statistical chart for a visual representation of your current debt situation. And if the borrower and lender are both on the app, they can communicate and send payments through the app. This makes it easier to stay in contact with one another and to stay on top of existing debt.

Debt Manager 

Debt Manager uses your debt information to create progress bar graphs to help you see how far along you are in paying off each debt, how much debt is remaining, and your interest rate. The application specifically focuses on the Snowball Method to track and pay off all debts quickly and efficiently. The interactive app gives hints and tips based on your debt situation. You can also track monthly payments within the app manually or automatically and test out different “What If?” scenarios.

Pay Off Debt

Pay Off Debt helps you choose the payoff method and order that works best for you. You can use the debt snowball method, debt avalanche method, or something else. Track your payoff progress and the interest you’ve saved. Pay Off Debt also prioritizes keeping you motivated during your debt payment journey: the app provides a burst of motivation with a PAID icon each time you pay off a debt, and you can add pictures to symbolize your “Why.”

Mint

You’ll need to budget in order to efficiently pay off your bills. Mint helps you do just that. It’s one of the best-known budgeting apps for good reason. It’s easy to use and is packed with extra features. Mint gathers everything in one place—your cash, credit cards, loans, investments, credit score, and more. Track your bill payments, budget for future payments, and get alerts when you overspend or a bill is due.

ChangEd

A round up app like Acorns, ChangEd is an easy way to automate regular extra payments to pay off your student loans early. Connect your loans and bank accounts and create an FDIC-insured ChangEd savings account. As you spend, ChangEd will roundup your purchases and transfer those roundups to your ChangEd savings account. Once you reach $100, they’ll send that money to the student loan you want to pay off first.

Unbury.me

If you want a quick and easy way to visualize your debts and how long it will take you to pay them off, Unbury.me is a great tool. You don’t need an account to use it—just start entering your information—but you can sign up for a free account to save your information. Enter the principal remaining, interest rate, and monthly payment and see how long it will take to pay off those loans based on the payment methods you choose.

Digit

In order to pay off your debts, you need money. That’s where an app like Digit comes in. It’s not a traditional debt management app, but it’s definitely a debt management tool. For $5 per month, it helps you save automatically without even thinking about it. You won’t miss the money it puts in savings for you, but you will benefit from it when it’s time to pay your bills.

Credit.com’s Free Credit Report Card

If you want to see how your debt management is improving your credit, sign up for Credit.com’s free Credit Report Card. Our Credit report Card is an easy-to-understand breakdown of your credit report information that uses letter grades so you can track —plus you get a free credit score updated every 14 days. 

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Get Your Debt Under Control

Regardless of what approach you prefer to manage your debt, these apps have options for everyone. We suggest taking a look at which app works best for you and personalizing it to fit your needs.

Ready to take your finances to the next level? Sign up for ExtraCredit. This five-in-one financial tool will help you build, track, protect, and restore your credit profile—and reward you while you’re at it! Learn more about all the amazing benefits of an ExtraCredit account at Credit.com/Extracredit.

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New Student Loan Models Attract Borrowers & Investors

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New Student Loan Models Attract Borrowers & Investors

It was bound to happen.

So-called alternative financing sources for student loans have been popping up all over the place. Some take a peer-to-peer (P2P) approach, where individuals with a few bucks to spare and hopes of a better-than-market return lend to others who are looking for a good deal on a loan.

P2P companies serve as matchmakers of sorts. The firms pair pre-screened applicants with investors who set the credit and pricing ground rules for the loans they’re eager to make. The fees that the P2Ps earn may come from arranging the match and babysitting (servicing) the offspring (loans) over time.

The more traditional alternative lenders are somewhat less paternalistic.

A number of high-powered professional investment companies—including private equity and hedge fund firms—are backing a string of nonbank lending operations that are busy staking out market positions in a variety of business sectors.

Higher education is one of these.

The reason for the interest is obvious: More than $1 trillion worth of student loans, a portion of which will make its way into the private market at some point. For example, some borrowers may require additional financing after maxing out the amount they can get from federal programs. Others may need to combine and refinance their government and private student loan debt later on.

What’s less obvious is the lenders’ control over the selection process, and the fact that even if a bad deal were to slip through anyway, all student loans—government and private alike—continue to be virtually impossible to discharge in bankruptcy.

The selection process is attracting a bit of attention these days. Some lenders are seeking to improve upon their already good repayment odds by exclusively marketing to those students who are pursuing historically high-paying areas of study at premier colleges and universities. As for the rest, their rates are typically higher and their loans may need to be co-signed by deep-pocketed parents or other close relatives.

To paraphrase Orwell, all students are equal, but some are more equal than others.

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Meantime, there’s news that the first of these alternatively-originated loans are ending up in securitizations.

Fundamentally speaking, this form of structured finance serves two key purposes: It broadens lending capacity by recycling previously originated loans, thereby freeing up the lenders to grant new credit. It also locks in the originating lender’s profit, which is typically expressed in terms of the difference between the interest rates that borrowers are charged and those that are paid to investors to whom the loans are ultimately sold through one of these complex transactions.

The integrity of the investors’ rate of return depends on three things: an originally agreed-to payment stream that will not change, a loan value that can be expected to amortize as it was intended and a repayment term that will also remain intact.

Reduce the payment amount, forgive a portion of the loan value or extend the duration and the investor’s rate of return could get hammered—which explains the strong reluctance on the part of their agents (loan servicers) to meaningfully restructure or permanently modify securitized loans for distressed borrowers, whether for home mortgages or education debt.

So, as securitizations and other forms of structured-finance transactions begin to crank up in the education-loan sector, what should be done differently this time around?

As long as Congress continues to do nothing about the free pass in bankruptcy court that education lenders and investors enjoy today (including the feds), lawmakers should, at the very least, mandate two things.

First, that the governing documentation for all after-the-fact financing transactions (securitizations, in particular) makes it clear to all concerned that troubled debts will be promptly restructured or modified in a manner that is consistent with the student-loan relief programs the government has in place at the time.

Second, that everyone that’s involved in this financial conga-line — lenders, investors and loan servicers alike — will be held equally accountable for that as well.

More on Student Loans:

  • How Student Loans Can Impact Your Credit
  • Can You Get Your Student Loans Forgiven?
  • A Credit Guide for College Graduates

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.

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Everything You Need To Know About Final Expense Insurance

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Final expense insurance is typically a small whole life insurance policy where the proceeds are earmarked specially for funeral and other end of life expenses. Ultimately, the net result will be a tax-free cash payment to a beneficiary(s). Most insurance companies aim to pay claims within a few days since they know the funds are likely to be used for a funeral. Technically, the money can be used for anything. If for example, all the money is not used for funeral costs, the remaining amount is owned by the beneficiary(s) to use as they see fit.

Most life insurance companies make these plans available to seniors from the ages 50 to 85 and offer between $5,000 and $25,000 in coverage. The health requirements to qualify are very lenient too. Even if you have serious health issues, you can still get a policy. Some plans actually guarantee approval no matter what health issues you have. It is important to note that if you buy a plan that has guaranteed approval where there are no health questions, there will be a two to three year waiting period before benefits become active. To get a plan that covers you right away with no waiting period, you must at minimum answer health questions and be approved by the insurance company.

How much does it cost?

Final expense insurance premiums are typically low since the benefits are on the smaller side. Overall, the average cost of a final expense policy is between $50-$100 per month. Rates will vary depending on your age, gender, health, tobacco usage, coverage amount and the insurance company you purchase your policy from.

For example, a non-smoking 65-year-old woman in generally good health will pay roughly $40-$45 per month for a $10,000 policy. However, a man with the same profile would pay $56-$60 per month.

How do you buy a policy?

There are few different ways to purchase a policy. There are dozens of insurance companies that offer this type of plan, and they all have different application processes.

Ultimately, you must choose which method suits you best. Working with an agent gives you the advantage of having a professional who can answer your questions and make recommendations. However, if you value your privacy and prefer simplicity, then buy a plan online or through the mail. 

No matter how you apply, you can find an affordable life insurance policy for final expenses since there are so many companies to choose from.

Who are the best companies to consider?

The market for final expense insurance is vast. You will find a ton of insurance companies to choose from. Below are some highly rated companies to consider. This information is as of 9/23/20, visit the company websites for current policy information.

1) Mutual of Omaha

Mutual of Omaha is one of the oldest life insurance companies in the USA. They offer two different final expense plans to anyone between the ages of 45 and 85. The first plan is called “Living Promise” and is only sold through agents. You can purchase up to $40,000 in coverage on this plan. It does have underwriting, so your qualification depends on your health. If you are approved, this plan has no waiting period. The second plan they offer is guaranteed issue, so you cannot be denied. With their guaranteed acceptance plan, you can buy up to $25,000 in coverage. Since this plan has no health questions, you will be subject to a two-year waiting period before you are covered. 

2) AIG

AIG is another very old and stable life insurance company. They only offer one type plan to seniors between 50 and 80, which is a guaranteed acceptance policy. Because it has no health questions, there will be a two-year waiting period before your coverage begins. The premiums are affordable and applying can be done online or through an agent.

3) Aetna

Most people associate Aetna with health insurance, since that is the most common insurance they sell. However, they do offer final expense insurance too. What is most unique about Aetna is they will insure applicants as old as 89. Very few life insurance companies will go beyond 80 or 85. The amount of coverage you can buy from Aetna varies based on your age. It is important to note their plans have underwriting, so you must qualify for their coverage. That is the main downside with Aetna. They have no guaranteed acceptance option. Depending on your health, you may or may not qualify. 

Should you buy final expense coverage?

For some people, a final expense policy makes all the sense in the world, and for others it does not.

A final expense plan is typically suitable for any individual who presently has no means to pay for their funeral costs. For example, you have no savings or real property that can be sold to pay for burial costs. If you are in that situation and don’t want to leave a financial burden to your family, then a final expense policy is fantastic option you should pursue.

At the same time, if you currently have cash, a retirement account, or some other assets that can be quickly liquated to pay for your funeral, you probably do not need a policy. You may prefer one, but you do not necessarily need it. 

If you have the cash, it would probably be better to put it into a funeral trust, so it’s securely locked away for when that day comes.  

At the end of the day, preplanning is an act of love. No matter how you financially prepare for your funeral, your family will appreciate it more than words can express. 

What you do now ensures they aren’t forced to make tough decisions while riding an emotional rollercoaster.

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