The Worst Financial Gifts to Give Your Kids

The Worst Financial Gifts to Give Your Kids

September 16, 2023  The White Coat Investor

Parents with fantastic intentions often hurt their children by giving terrible financial gifts. Here's how to change that.

PIMD welcomes the White Coat Investor. WCI is a physician-specific personal finance and investing website. The White Coat Investor can help you to become financially literate and disciplined, which will allow you to spend your time and effort on your patients, your family, and your own wellness. WCI truly believes that a financially secure doctor is a better partner, parent, and practitioner. White Coat Investor is an affiliate partner of PIMD.

As a general rule, parents love their kids and would do anything for them. However, due to a lack of financial literacy, many parents with fantastic intentions end up hurting their children. Here are some of the ways they do that.

#1 A Car

I'm sure there are people who think it is a bad idea to give your kid a car because it will spoil them. That's not what I'm talking about. If you really want to spoil them, knock yourself out (actually we'll get to this under #6).

What I am talking about is giving your kid a car that isn't yet paid for. Yeah, some people do this. Can you believe it? They go down to the dealership, put down a $300 down payment, sign up for some loan payments, and then get the car for their kid. Along with the responsibility to make the payments! Uhhh . . . thanks, Mom. I guess it could be worse. They could have signed you up for a lease.

#2 Whole Life Insurance

Another common situation is a parent who bought their kid a whole life insurance policy at birth. It would stand to reason that if you're buying baby food and life insurance from the same company, one of the two probably isn't a very good product.

Despite that, I keep running into people in their 20s and 30s who have just been given a whole life insurance policy and asked to take over the payments. Their parents have been making monthly payments on these for 2-3 decades, but the surrender value is only a four-figure amount at this point and the child is basically being asked to pay a two- or three-figure amount every month for the rest of their life.

It wasn't a good policy to start with. It doesn't address any financial need they actually have (because the face value is usually something like $20,000). And now they have no idea what to do with it, so they just start making the payments too!

Incidentally, what they should do is surrender it; put the money toward their student loans; thank their parents for their kind gift; and never, ever run the numbers on how much that gift could have been had it been invested aggressively in a 529.

To continue reading, please go to the original article here:

https://passiveincomemd.com/the-worst-financial-gifts-to-give-your-kids/

Replacement Cost Versus Actual Cash Value Home Insurance

Replacement Cost Versus Actual Cash Value Home Insurance

By Financial Samurai / 09/18/2023

Home insurance costs are going up due to rising home prices, rising building costs, increasing natural disasters, and less appetite for risk from the insurance and reinsurance companies. As a result, more homeowners are looking to save by taking out an actual cash value (ACV) home insurance policy as opposed to the more common replacement cost value (RCV) home insurance policy.

I'm going through this dilemma right now as I diligently hunt for a home insurance policy for a new home I plan to buy. The actual cash value policy I found is about 52% cheaper than the best replacement cost policy I've found. With such significant annual savings, I'm leaning toward the actual cash value option.

Let me explain the definitions of each home insurance policy and discuss why one may be better than the other. Ideally, a homeowner needs disaster insurance in case the worst happens, such as a fire that destroys everything.

First, let's review what depreciation means. It is key to understanding the difference between replacement cost and actual cash value. In simple terms, depreciation is the loss of value of your property over time.

Replacement cost is the amount paid to replace property or personal belongings without any deductions for depreciation. You may also have the option for replacement cost value on automobile, motorcycle, and boat policies.

Actual Cash Value Home Insurance Policy Definition

Actual cash value is equal to the replacement cost value minus depreciation. In other words, an actual cash value home insurance policy does not replace what you lost. Instead, it reimburses you for the item's CURRENT actual value.

For example, your roof might have cost $30,000. However, since it's 15 years old and only has a useful life of 30 years, the current value of your roof might only be $15,000. If your roof tears off during a tornado, your actual cash value home insurance policy would just pay $15,000.

How is the current value of your roof determined? To determine an item's ACV, an insurance adjuster will take the cost of replacing your damaged or stolen property and reduce the cost of the property based on depreciation, such as age and wear and tear.

Therefore, the older your house, the less an actual cash value policy will likely cover.

Replacement Cost Value Home Insurance Policy Definition

Replacement cost value (RCV) is what it costs to replace damaged or stolen property without depreciation. It doesn't matter how old the item is. A replacement cost value policy is obligated to replace the item at whatever it costs today.

To continue reading, please go to the original article here:

https://www.financialsamurai.com/replacement-cost-value-versus-actual-cash-value-home-insurance/

The $2 Billion Powerball Winner Is Making The Worst Mistakes Financial Planners Warn People Of After They Come Into A Ton Of Money

The $2 Billion Powerball Winner Is Making The Worst Mistakes Financial Planners Warn People Of After They Come Into A Ton Of Money

Paige Hagy  Tue, September 19, 2023

The winner of the record-breaking $2 billion Powerball prize is breaking every financial planning rule in the book. Edwin Castro is buying up California real estate since winning the lottery in November, including a three-story $25.5 million mansion in the Hollywood Hills, the same part of Los Angeles that A-list stars like Leonardo DiCaprio and Ariana Grande call home.

That’s the exact opposite of what financial advisors recommend for lottery winners—or any person who suddenly comes into great wealth. Rather, they suggest waiting until the emotional high of winning the jackpot cools off. One advisor counseled against buying up expensive homes altogether.

“I’ve seen clients purchase large homes in faraway locations that they ultimately realize they will not use frequently and end up being a major ongoing financial burden that took several years to sell,” Paul Karger previously told Fortune.

Karger is a cofounder and managing partner at TwinFocus, a wealth advisory firm that manages over $7 billion for ultra-high-net-worth families. He recommends to clients, who range from centimillionaires to billionaires, to wait six months to a year before making any big buys.

The value of second or third homes (or mansions) is shrinking post-pandemic, and luxury real estate is not known for being a great investment considering its vulnerability to economic conditions outside the owner’s control. Plus, real estate is an illiquid asset, which can become a burden if the owners are careless about managing the rest of their wealth. The annual cost to maintain a home is roughly 1% to 4% of the home’s worth.

By this estimate, the upkeep for Castro’s $25.5 million Hollywood Hills home—which has five bedrooms, six bathrooms, a game room, wine cellar, home theater, wet bar, gym, cold plunge, steam shower, and sauna—will cost $255,000 to over $1 million annually.

More mansions and a vintage Porsche

And that’s not all he bought. A couple weeks after buying the first mansion, he spent $4 million on a Japanese-inspired house in Altadena, Calif., his hometown in the Los Angeles suburbs and near the gas station where he bought the winning ticket.

Earlier this month, he also bought a $47 million mega-mansion in Los Angeles, with seven bedrooms, 11 bathrooms, an infinity pool, koi pond, champagne room, wine cellar, home theater, and a view of the city skyline. Castro also purchased a vintage Porsche 911 costing $250,000, the New York Post reported in April.

Castro claimed his prize in February, choosing to immediately receive nearly $1 billion in cash, which came out to be roughly $628 million after taxes. The alternative option was to collect the full $2 billion prize through an annuity over 29 years, which financial advisors say is usually the better strategy.

“People don’t understand there is a potential for loss. They only focus on the potential for gain,” Nicholas Bunio, a financial planner told the Associated Press last November.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/2-billion-powerball-winner-making-170524751.html   

‘Rich Dad’ Robert Kiyosaki Says the Dollar Is In Trouble

‘Rich Dad’ Robert Kiyosaki Says the Dollar Is In Trouble: What That Means for Your Money

Angela Mae   Sat, September 16, 2023

It’s common knowledge that the value of the U.S. dollar has fluctuated throughout the years. But now, it seems the dollar could be in serious trouble. This could be especially problematic for people who are trying to save money, or who have most of their assets in cash.

A recent post on Rich Dad, which is part of Robert Kiyosaki’s “Rich Dad Company,” details just why the dollar is in trouble, what this could mean for your money, and what to do about it. Here’s the gist of it.

The Gold Standard

Simply put, the gold standard is a system in which a country ties the value of its physical money directly to gold. While it’s no longer implemented in any country today, the U.S. dollar was tied to the gold standard for many years — all the way until 1933. However, it wasn’t until the early 1970s when Richard Nixon was in office that the U.S. dollar fully went off the gold standard.

Once that happened, the dollar was no longer backed by something substantial — in this case, gold. Instead, it became what Kiyosaki called “fake money” or an “IOU.” It also began to lose its value compared to gold. This is also true for the Euro and Japanese Yen.

It’s no secret that Robert Kiyosaki has continued to invest in both gold and silver. Because these resources exist in a finite amount, their perceived value is higher than that of fiat currencies, like the U.S. dollar.

The Dollar: Inflation and Recession

According to Kiyosaki, the dollar’s purchasing power has diminished by almost 95% since 1996 as a result of inflation. Despite slowing demand, the Federal Reserve continues to print more paper money.

The reason why this is problematic for the value of the dollar is simple. With greater supply and less demand, anything is bound to lose value — the dollar included.

Kiyosaki noted that this particular dollar-related trouble began when Ben Bernanke, the previous Chairman of the Federal Reserve, made a choice to try to combat the Great Recession. Bernanke could have chosen to up the production of paper money, which would lead to increased inflation rates and potentially cause the dollar to collapse. Or he could have increased interest rates to try to slow inflation, which could have led to a recession.

In either case, it spells trouble for the U.S. dollar.

The U.S. Dollar Has Limited Time

Many Americans are caught up in trying to save as much money as possible, especially when dealing with the increased cost of living. But if the dollar is already losing value at an alarming rate, this could be disastrous for anyone who’s relying on it to get them through financially.

And, as Robert Kiyosaki pointed out, the U.S. dollar is already “living on borrowed time.”

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/rich-dad-robert-kiyosaki-says-170008171.html

5 Financial Mistakes To Unlearn Now

Millennials Say Boomer Parents Are to Blame for ‘Shameful’ Money Habits — 5 Financial Mistakes To Unlearn Now

David Nadelle  Sat, September 16, 2023

While only 27% of Americans across all ages say their money-saving habits are “excellent,” 65% of millennials and Gen Z-ers are worried about baby boomers’ impact on their future, finds a new study.

The survey, conducted by OnePoll for National Debt Relief between Aug. 4-8, 2023, found that although younger generations were concerned about the effect older generations’ financial decisions will have on them, 62% of all respondents (split evenly by generation) admit they make poor money decisions sometimes. Almost half (48%) of respondents said their parents influenced their money habits.

With 51% of respondents admitting they have been in debt at some point, and 42% currently experiencing money troubles, the study also found that many Americans are eager to destigmatize “shameful” debt (36%) and are taking responsibility for their bad spending and savings habits.

“There’s a lot of guilt and shame people feel when they’re in debt and that needs to change,” said Natalia Brown, chief client operations officer at National Debt Relief. “The data shows that most of us face challenges with money and that none of us are alone in that.”

Here are the five most common bad money habits — and ones you need to unlearn as soon as possible — according to the National Debt Relief/OnePoll study:

1. Writing Off Small Purchases As Insignificant (43%)

It’s easy to make simple purchases that can add up over time, so you have to hold yourself accountable for how you spend your money. Even if it seems like an insignificant purchase, write it down or acknowledge it. Spending even a few extra dollars a week can account for hundreds of dollars a year. And resist the urge to make impulsive buys or in-app purchases.

2. Gambling (39%)

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/millennials-boomer-parents-blame-shameful-180041296.html

Thinking Holistically About Finances To Avoid Bad Habits

Thinking Holistically About Finances To Avoid Bad Habits

Sam Ro·Contributor  Sun, September 17, 2023

Stocks ticked lower last week with the S&P 500 shedding 0.2% to close at 4,450.32. The index is now up 15.9% year to date, up 24.4% from its October 12 closing low of 3,577.03, and down 7.2% from its January 3, 2022 record closing high of 4,796.56.

I spent the past week at FutureProof and Excell, two leading industry conferences for financial advisors. I like attending events like these because I inevitably meet people I’d probably never cross paths with under normal circumstances. That means I get exposed to a wide array of views, some of which might affect the way I think about things. One topic that came up in many of my conversations was holistic thinking.

When you think about your financial situation holistically, you realize it isn’t characterized just by the assets you hold in your portfolio, but also the industry in which you work.

For example, you may be a young professional with a little bit of savings conservatively invested in a broadly diversified S&P 500 index fund. But if you work at a VC-backed startup and it’s your only source of income, then you are far more financially exposed to speculative risk than your 401(k) statements might suggest.

Speaking more broadly, it’s always treacherous to consider any piece of data in isolation. In the markets and the economy, there almost isn’t enough context to take into account when considering specific metrics.

The richer you get, the less you need to save

One unsettling metric that often gets misinterpreted and taken out of context is the personal saving rate — the percentage of disposable income that’s saved, not spent — which has been trending below pre-pandemic levels over the past two years.

Does a low saving rate mean households are going broke as they use more of their incomes for spending instead of saving?

The short answer is no. As we’ve discussed repeatedly at TKer, household finances are quite strong. People have money.

In fact, a declining saving rate may be a reflection of household finances getting even stronger. 

Renaissance Macro’s Neil Dutta recently reviewed the historical relationship between the personal saving rate and net worth. His findings were a bit counterintuitive.

"From the 1980s to 2000s, there was a pretty neat and clean relationship: as net worth rose relative to income, the household saving rate declined," Dutta observed in a September 8 note. "This made sense as households saw rising asset values as a low risk form of wealth creation. When you are ‘loaded,’ you have less reason to save."

This relationship broke down in the wake of the global financial crisis.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/thinking-holistically-about-finances-to-avoid-bad-habits-142415994.html

Paper Checks Are Dead. Cash Is Dying. Who Still Uses Them?

Paper Checks Are Dead. Cash Is Dying. Who Still Uses Them?

Andrew Van Dam, (c) 2023, The Washington Post

Fri, September 15, 2023

In a few years, comically oversized foam-board novelty checks will be the last remaining evidence of a 20th-century icon, as the paper check goes the way of the landline phone and the floppy disk. Even the most dubious cliché of the past century - the promise that the check's in the mail - has fallen from common usage.

So where - if anywhere - are paper checks making their last stand? That's what astute reader Bill O'Donnell from Chicago wants to know. "How many Americans still use paper checks?" he asks. "Who are they and where do they live? What are the trend lines?"

Let's start with the trend lines, Bill! They, uh, point down. At the turn of the millennium, back when recording each transaction on paper might still have seemed like a good way to outfox the Y2K bug, they were the default for anyone not handing over cash.

Back then, 6 out of every 10 noncash purchases, gifts and paid bills were handled with checks. A mere two decades later, just 1 in 20 are. The paper check's fall from grace has been meteoric, in the plummeting-so-fast-it-immolates-in-the-mesosphere sense.

As recently as 2003, the Federal Reserve ran 45 check-processing locations in which brigades of workers routed each check. A decade later, it was operating just one, in Atlanta, as check usage fell and the Fed executed a long-planned transition to a largely electronic system. The checks were also processed faster, meaning even fewer of them were, as the cliché went, in the mail.

We don't know exactly when the paper check peaked, because the Fed wasn't consistently measuring transaction methods until after the decline began. In the future, officials hope to stay ahead of our payment preferences. If we were to ditch cash at the rate we gave up checks, for example, the Fed's enormous cash-processing operations might require a sudden and substantial overhaul.

"[People were] caught off guard by the rate at which check-writing dropped off the map," said the Atlanta Fed's Kevin Foster, who has spent more than a decade measuring Americans' payment habits. "We don't want to be caught off guard the same way with cash!"

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/paper-checks-dead-cash-dying-173012508.html

Maybe It’s Time For Plan B To Become Plan A

Maybe It’s Time For Plan B To Become Plan A

Notes From the Field By Simon Black  September 13, 2023

The top two headlines in today’s Wall Street Journal say it all:

The first one is “US Inflation Accelerated in August as Gasoline Prices Jumped”.

And the second explains that “Exploding Budget Deficits” are here to stay.

These are technically two different stories about two separate issues. But I’ll show you how they’re related, and how they point to the same conclusion: higher inflation is not going away.

The first story talks about the latest inflation numbers. No one who has visited a grocery store or gas pump over the past few months should be surprised-- fuel prices are higher, and inflation has risen.

And ultimately this is a story about the rising cost of energy.

Remember that energy is one of the most important commodities in the world. Full stop. Every single activity in our modern world-- driving to work, browsing the Internet, heating a home, manufacturing new iPhones, mining copper, farming soybeans, etc. requires energy in some form-- gasoline, electricity, propane, etc.

And this means that cheap energy is critical to keeping inflation low.

Yet energy demand increases every year, for two key reasons:

First, there are obviously more people in the world each year. And rising global population means more energy demand.

Second, per-capita energy demand is also on the rise; in other words, the average individual around the world consumes more and more energy each year.

It’s pretty easy to understand why. In the US, for example, primary energy consumption is about 88.2 MWh per person per year. (A MegaWatt-hour, or Mwh, is a unit of measurement for energy).

That’s about 5x more than the global average, according to the US government’s Energy Information Administration.

So as lesser developed economies (like India) grow and become more advanced, their per-capita energy consumption rises dramatically.

And this is what’s actually happening; per-capita energy consumption rose more than 7% in India last year. In Indonesia it rose nearly 20%.

So global energy demand is clearly on the rise. And with very few exceptions, this trend has been very steady for the past several decades.

Energy supply, on the other hand, is a troubling story.

The #1 source of new energy supply growth over the past ~15 years has been shale oil in the United States. Shale created an American energy bonanza, propelling the US to triple its oil production in less than a decade and surpass Saudi Arabia as the #1 oil producer in the world. It’s all thanks to shale.

But those shale fields are quickly becoming depleted. This isn’t some crazy conspiracy theory or hidden secret-- the shale oil CEOs have been very public about their peak production.

Given that US shale oil accounted for virtually ALL the growth in energy supply over the past ~15 years, the depletion of these shale fields means there could be quite a bit of stagnation in oil supply.

It doesn’t help that other major producers like Saudi Arabia have also reached peak production. Again, this isn’t a conspiracy theory; Saudi Arabia’s Crown Prince “MBS” stunned the world last year when he said that his country didn’t have the capacity to increase its oil output.

The result of these future supply and demand imbalance issues should be pretty clear: higher energy prices.

And, again, since energy is a major factor in nearly everything-- food, fuel, manufacturing, etc., higher energy prices will cause higher inflation.

In theory this is an easily fixable problem. It’s not like energy companies don’t know how to explore, drill, and produce. And there are still places in the world (like Venezuela) that have vast, untapped oil reserves.

Unfortunately there’s an army of fanatics who are doing everything they can to block energy companies from producing more… including idiot protesters who literally glue themselves to the pavement or interrupt sporting events with glitter bombs.

The US government never misses an opportunity to frustrate and obstruct oil companies. They deny permits, they pass costly regulations, they impose punitive taxes, and they regularly demonize the industry.

Moreover, powerful investors like Larry Fink have forced banks and funds to deny much-needed capital to the energy sector, which reduces new discoveries and future production.

These same fanatics also willfully reject other obvious energy solutions like nuclear power, while clinging to the mythology that inefficient solar technology-- which requires a 9-year old child in the Congo to mine cobalt with his bare hands in toxic conditions-- will save the world.

Nothing goes up or down in a straight line, and gasoline prices will certainly go through periods where they rise and fall. But over the next several years, the current trajectory is pretty clear: energy will remain expensive. And that means higher inflation.

The second story in the Wall Street Journal this morning was about government spending.

And while there are some states in the US which routinely achieve exemplary fiscal results, politicians at the national level have absolutely no clue how to live within their means.

The federal budget deficit for Fiscal Year 2023 (which closes in 17 days on September 30th) will reach approximately $2 trillion. And as the Journal points out, there is no end in sight.

Annual spending on mandatory entitlement programs like Social Security and Medicare will reach a whopping $3 trillion over the next several years. And yet politicians from both parties insist that those programs will not be cut.

Simultaneously, gross interest on the debt could rise to $2 trillion annually within the next five years if interest rates remain at current levels.

This means that annual deficits will keep rising… and this is highly inflationary. Everyone alive has experienced first hand how excessive government spending over the past couple of years has contributed to nasty, stubborn inflation problems.

But it’s even more important to understand that the US government NEEDS inflation to stay alive. At $33 trillion (and rising), the US national debt is simply too large at this point. And their only realistic option is to keep inflation in the 5-6% range, and repay the debt with increasingly worthless dollars.

These two points together-- energy and government spending-- paint a very clear picture of why inflation will likely remain higher for a long time.

And there are other forces as well which will contribute to higher inflation-- geopolitical conflict, rising taxes, anti-capitalist “Bidenomics”, etc.

Again, these are all fixable problems. But the people in charge seem to have neither the competence nor desire to fix problems. They usually just make things worse.

Even when someone slaps them in the face with an obvious warning, they ignore it. When Fitch downgraded the US government’s credit rating last month, for example, the President and Treasury Secretary were genuinely bewildered; they found it incomprehensible that analysts wouldn’t have 100% confidence in their administration.

These people have a dangerous reality distortion field, and they’re clearly blind to the glaring dangers on the horizon.

Ever since I launched Sovereign Man back in 2009, I’ve been writing about the need to have a Plan B, just in case some of these risks come to fruition.

Yet when the risks are this obvious, and the people in charge so incompetent, it’s time to think about Plan B becoming Plan A.

To your freedom,   Simon Black, Founder   Sovereign Man

https://www.sovereignman.com/trends/maybe-its-time-for-plan-b-to-become-plan-a-148159/

Despite 70% of Millionaires Using a Financial Planner, One-Third May Outlive Savings — Here’s Why

Despite 70% of Millionaires Using a Financial Planner, One-Third May Outlive Savings — Here’s Why

Vance Cariaga  Wed, September 13, 2023

Having net assets of $1 million or more doesn’t carry the same aura of extreme wealth that it used to, but it’s still a pretty tidy sum of money — especially considering that the average retirement savings in the United States is less than $90,000. Even so, a significant percentage of millionaires worry that the wealth they’ve built up won’t be enough to last their lifetimes, according to a report from Northwestern Mutual.

Northwestern’s 2023 Planning & Progress Study, based on a poll of 2,740 U.S. adults, found that one-third of millionaires surveyed think it’s possible they could outlive their savings. In this case, “millionaire” means you have more than $1 million in investable assets.

Nearly half of millionaires (47%) say their financial planning still needs improvement. That’s the case even though 42% consider themselves “highly disciplined” planners, which is more than twice the percentage of the general population.

Odder still, 70% of wealthy Americans work with a professional financial advisor — and yet one-third still worry about running out of money in retirement.

Wealthy Americans May Not Be Convinced They’ve Got the Right Financial Planner On Board

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/despite-70-millionaires-using-financial-192517792.html

Different Ways to be Rich

Different Ways to be Rich

By  Ben Carlson  - A Wealth of Common Sense

It’s estimated only 5% of people in the United States are millionaires.

 So if we’re using millionaire-status as a way to gauge wealth in this country, a lot of people are never going to get to the point where they’re considered “rich.”   But there are plenty of other ways to live a wealthy life that extend beyond how much money you have in the bank or your portfolio. And even those with a lot of money may not be considered rich when you look at other areas of their life.

Here are some ways to be rich in this day and age that go beyond money:

 You have a job you enjoy. If you work a 9-5 job that means roughly 50% of your waking hours during the week are spent in the office, with your colleagues or at your place of employment. Many people put in even more hours than this.   So if you hate your employer, boss, co-workers, or career path that can be an enormous drag on your well-being.

 Simply enjoying what you do, who you do it with, and the company you do it for can make for a supremely richer life than the alternative. It would be nice to pair a fulfilling career with a high paycheck but most people never find the former even if they receive the latter.

Being in control of your own time. A big paycheck is always nice but the impact wears off when you’re forced to deal with a stressful work environment, co-workers you don’t care for, or work you’re not appreciated for.

To continue reading, please go to the original article here:

https://awealthofcommonsense.com/2019/08/different-ways-to-be-rich-in-2019/

Can You Lose Money In A Money Market Account?

Can You Lose Money In A Money Market Account?

Ben Luthi   Updated Mon, Sep 11, 2023

Money market accounts act as a hybrid between a checking account and a savings account, offering higher interest rates and flexible access to your funds — albeit with some limitations.

It's technically possible to lose money in a market account, but not in the same way you can lose money in an investment account. Depending on the terms of your money market account, you could lose value to fees and inflation.  If you're considering putting your money in a money market account for short-term savings goals, here's what you should know.

What is a money market account?

A money market account is a type of deposit account that you can use for short-term savings. Like a checking account, a money market account typically allows you to access your funds through a linked debit card, paper checks, or an ATM card.

At the same time, money market accounts often provide higher interest rates than traditional savings accounts, although they also usually come with the same monthly withdrawal limits. If you withdraw money more than six times in a month, you may incur a fee with each additional withdrawal.

Money market accounts may have steep deposit requirements and even charge a monthly fee, though you may be able to get the charge waived if you maintain a minimum balance. Your interest rate may be flat regardless of your balance, or you may be offered tiered rates based on your balance.

Can you lose money in a money market account?

Unlike an investment account subject to risk, you won't lose money in a money market account due to investment losses. However, there are other ways your account balance can decrease over time or lose value in the long run:

You can lose money to fees: If your account charges a monthly fee that you can't get waived, or you end up dealing with other fees, such as excessive withdrawal penalties, your account balance could drop if the fees exceed the interest you earn in the account.

To continue reading, please go to the original article here:

https://finance.yahoo.com/personal-finance/can-you-lose-money-in-money-market-account-182341738.html