Track your financial health with net worth, not income

As we move through adulthood, it’s smart to keep an eye on continually boosting your financial health. Indeed, the Japanese concept of “kaizen”, meaning “constant improvement”, is an excellent way to think about your finances.

A financial life cycle has many stages. Money can seem tighter when you’re young and newly employed. The middle stage tends to bring bigger incomes, but also bigger expenses, especially if you have children. And at retirement, the game changes to no income at all.

So if income changes so much, how can we easily measure whether we’re doing better financially this year versus last year, or versus ten years ago? The answer is to ignore income and instead regularly track your family’s net worth.

Net worth is well summed up by its name: It calculates what your money, investments, and assets are worth “net” of what you owe others. It’s what you’d have left if you had to settle every current debt and financial obligation.

This is a much more holistic way of assessing how you’re doing financially, as it deducts for debt and increases for savings. For instance, making $200,000 a year isn’t all that impressive if you're saddled with a six-figure student loan, massive mortgage, or credit card debts.

To use net worth as a personal measurement tool, simply create a chart or spreadsheet that lists the value of all your financial accounts and assets, then lists every debt you owe, and then subtracts debts from assets. This result is your net worth on that date.

From there, just create a new column for the next time period, edit the inputs as they stand then, and see how your net worth has changed. To keep yourself on track, simply repeat this process at least once a year, but ideally every quarter.

Four easy steps to protecting your phone from hackers

In today’s world, you carry an immense amount of sensitive personal information almost everywhere you go. That’s because your cell phone stores usernames, passwords, account numbers, emails, texts, and personal photos and videos.

Fortunately, it’s not hard to put roadblocks in the way of thieves and hackers who might try to use your phone to steal your identity or buy things with your credit cards or bank accounts. Four simple steps recommended by the Federal Trade Commission can make a world of difference in reducing your risk.

First, make sure you have your phone set to lock whenever you’re not using it, and to only allow unlocking with a secure method. This can be a numeric passcode (if so, 6-digit codes are more secure than 4 digits), or it may be biometric, like a fingerprint or face scan. This is your first line of defense against anyone trying to gain access to your phone’s data.

Second, embrace your phone’s operating system updates. Whenever security vulnerabilities are identified, software updates are released to close the door on those risks. But these security patches only work on phones where they’ve been installed, so either set your phone to automatically install updates or manually install any updates as soon as you see them become available.

Third, if you lose your phone, you won’t also lose your data if you regularly back it up to the cloud or to your computer. So be sure to set an automatic backup system that regularly runs without needing your input.

Lastly, turn on the feature in your phone’s settings to help find your phone should you lose it. This can help reunite you with your phone, or may alternatively enable you to lock and erase your phone if you feel it has fallen into dangerous hands.

Should I save money for my child in their name or mine?

If you’re looking to sock away money for your child, one question you’ll face is whether to save the money in their name. There is more than one right answer, and it depends on how and when you expect they’ll use the funds.

The easiest answer is for college savings. Though there are other ways to accumulate funds for tuition, books, and housing, the tax-advantaged 529 plan is considered by most financial experts to be the smartest move since the funds can be invested and grow tax-free, assuming the funds are used for approved expenditures.

A 529 plan should be set up in a parent or other custodian’s name, as it will be treated much more favorably when colleges assess your student’s eligibility for financial aid. Conversely, a 529 plan in the child’s name will significantly hamper their aid calculation.

For funds desired for other purposes, a simple savings account is one option, as is a custodial account, which can be invested in stocks, bonds, and other assets. For both savings and custodial accounts, naming your child as the primary account holder is generally the wiser move. (If going with a custodial account, be sure to familiarize yourself with the IRS rules on acceptable withdrawals.)

By putting these accounts in your child’s name, some or all of what they earn will be untaxed. Children not earning wages can earn up to $1,100 in unearned income (e.g., interest, dividends, capital gains) before needing to pay tax. And earnings between $1,100 and $2,200 are taxed at the child’s rate, which is often zero. After $2,200, the earnings are taxed at the parents’ rate.

For kids with working wages, the calculation is different, but earnings from a savings or custodial account still have the chance to avoid taxation.

What is a VantageScore and do you have one?

Anytime you apply for a mortgage, an auto loan, a credit card, or any other kind of credit, the potential lender uses a scoring system to determine how safe or risky a bet you appear to be.

For decades, FICO scores have been the dominant credit scoring system. And though they still command the lion’s share of the credit scoring market, a competitor called the VantageScore entered the scene about 15 years ago.

VantageScore was created in 2006 as a joint venture among the three credit bureaus: Equifax, Experian, and TransUnion. In contrast, FICO scores are the product of an independent company called FICO, originally called Fair, Isaac and Company.

As far as most consumers are concerned, the difference between these two scoring models is not significant, and virtually everyone has both types. Like FICO, VantageScores consider a number of characteristics of your credit use and history, and weigh each with different importance. While not identical, the weighting of factors is fairly similar between the models.

The highest impact factor in both cases is your on-time payment history. In a VantageScore, this accounts for 40% of your calculation. Next most important is a mix of how much you owe and how much credit line you still have left, making up about 35% of your score.

The remaining considerations are your “credit depth” (age of your credit history and the diversity of credit types), which contributes 20% of your score, and how recently you’ve applied for new credit, providing the last 5% impact.

One notable difference between the models is that it takes just a single account with as little as a month of history to be assigned a VantageScore, while FICO scores typically require a six-month history. So VantageScores more quickly provide a score for those new to credit.

Four red flags that can tip you off to a scam

In today’s digital era, fraudsters aiming to trick you out of your money employ ever-evolving strategies. Fortunately, the first step in protecting yourself is to simply recognize the signs of a scam.

According to the Federal Trade Commission (FTC), the red flags fall into four big categories. First, scammers often pretend they’re from an organization you know and trust. Beware of anyone contacting you on behalf of a government agency or another large entity you know, such as the Social Security Administration, the IRS, Medicare, utility and tech companies, and large charities.

Second, the FTC warns that scammers often try luring victims by suggesting there’s a problem to solve or a prize to be claimed. They may say there’s an issue with your account that requires verifying bank or credit card information. Or they may use scare tactics, saying you owe money, that you’re in trouble with the government, or that a family member has had an emergency. Saying you’ve won a lottery or sweepstakes requiring bank information to deposit the prize is also common.

The third red flag is if they impose significant time pressure on you. Because they want you to act before thinking, they may suggest that if you don’t act fast, you could be sued or arrested, could lose your license, or could suffer a computer hack. It’s also common to pressure you to stay on the line with them, so they can get you to act without verifying their story.

Lastly, a fraudster will have specific ways they want you to pay. Many will ask you to send money to a transfer company, or to buy a gift card and share the access numbers. Some may even send you a fake check and ask you to transfer money to them to cover the check amount.

What is an umbrella insurance policy and should I buy one?

If you have a home or auto insurance policy, it includes some protection against losses from being sued over an incident occuring on your property or while operating your vehicle. But the coverage provided by these policies isn’t always enough, leaving you exposed to covering the rest of your liability with your own assets.

That’s where an umbrella policy comes in. Umbrella insurance refers to liability coverage that goes significantly beyond what your other policies cover, providing extra protection against potential financial losses if someone sues you, and covering your whole family.

Examples of where liability insurance would kick in include someone slipping on your front walkway and suing for their injuries, a lawsuit over your dog biting someone, a family suing you for their child being hurt while at your home, or your teenager causing a car accident that results in more damage or lawsuit payouts than your auto policy limits will cover.

In short, umbrella policies cover injury to others and damage to their possessions that are either caused by your family or that occur on your property. It does not, however, cover your own possessions and injuries.

While it might seem unlikely you’ll be sued for more than your auto and homeowner insurance covers, accidents can happen to anyone. In addition, the cost of umbrella insurance is generally very affordable, giving it a low cost-benefit ratio compared to what you could lose in a lawsuit. Though premiums vary by state, $1 million of coverage typically costs just $150 to $300 per year.

Deciding whether or not to purchase liability insurance is a personal decision, and speaking to your agent who already provides your home and auto insurance is the place to start. For many, it’s a small price to pay for peace of mind and sound sleep.

Save money by paying annually

Big bills that recur every year are often easier to handle when the amount is spread out over monthly payments. The regular installments can also make it easier for you to budget by keeping your expenses more uniform from month to month.

But that doesn’t mean paying monthly is always the best choice. In fact, some billers provide a significant discount for those who pay their full balance once or twice a year.

You’ve seen it on some small ticket items, like software or gaming subscriptions, where the cost is higher per month than if you opt to pay for an annual subscription right away. You can often save 10, 20 or even 30% this way.

But where you can really score the savings is on larger bills, and one of the top candidates for this is insurance.

Many home and auto insurance companies provide the option of monthly payments. And in some cases, the cost to pay monthly may be low or zero. But more often, there is a surcharge for splitting your bill into 12 payments, and it’s smart to figure out exactly what your insurer charges.

Life insurance also falls into this category. Though the percentage savings here might be just 10 percent or less, since these policies tend to clock in higher than your typical bills, you could save a modest little bundle by paying once a year.

What if you can’t afford paying all at once? One strategy is to work up to it by socking away funds in a savings account until you have enough for the full annual bill. At that point you can shift to paying your savings account just 1/12th of the annual bill every month, giving you enough funds to pay the yearly bill amount when the time comes.

Four major warning signs of identity theft

The prospect of identity theft can be scary, but the sooner you recognize it might be happening to you, the more quickly you can take action to stop it.

 Many people imagine identity thieves raiding bank accounts or charging to credit cards that aren’t theirs. But identity criminals also apply for loans and new credit cards in other people’s names, and even file unauthorized tax returns and medical claims.

 Knowing the red flags of this activity can tip you off early in the criminal’s process that something’s wrong, and by catching identity theft happening before it gets too far, you can dramatically limit your exposure.

 First, watch for bank withdrawals and credit card purchases you don’t recognize, or invoices coming in the mail for products or services you didn’t order. Receiving a bill for a loan or credit account you don’t recognize is also an obvious warning sign.

 Two, watch for small unrecognized charges on your credit card, as thieves will sometimes test out stolen card numbers with easy-to-overlook micro charges before moving on to more expensive transactions.

 Three, if you’re no longer receiving a monthly statement you normally receive by mail, it could be a sign that fraudsters have changed the address on your account so you won’t see unauthorized charges on your statement.

 Four, if your tax return is rejected as a duplicate, identity thieves likely filed a fraudulent return on your behalf ahead of your legitimate one, aiming to capture a refund in your name.

 In all of these instances, immediately contact the associated financial institution or IRS to report the fraud and cooperate with their investigation efforts.

 As for minimizing future breaches, two of the best practices you can adopt are strong password management and regular monitoring of your financial accounts.

How saving without investing actually costs you money

We’ve all heard the advice… Spend less than you earn and save the rest.

That’s a good start, and if you successfully follow this adage, you’ll fare better than most. But it really is only a start. Because unless you’re saving for just a couple of years down the road, saving is simply not enough.

The critical next step, of course, is investing some of what you save. For some, investing is intimidating, or even outright scary. The fear of potentially losing even a portion of your hard-earned savings in an investment is a risk some feel they can’t or shouldn’t take.

But it’s important to understand how not investing can be riskier than playing it completely safe. That’s because simply socking cash away in a savings, money market, or CD account will rarely earn enough to keep up with inflation. This means your money will actually be worth less in the future than it is now, and most of us can’t afford that kind of falling behind.

Yes, it’s true investing offers no guarantees. While it offers significant upside earning potential, you also have to take on the risk of possibly losing money. That’s why the key is investing for the long haul.

During any single year, the stock market can rise or fall. But the losing years have generally numbered only about one out of every four. By investing long-term, you would historically have reaped three years of gains for every year of loss.

Of course, the stock market’s pattern is not this reliably tidy, and is never predictable. But with interest rates on bank accounts and CDs significantly suppressed over the last many years, simply saving without investing any of your long-term funds means you’re taking on a bigger inflationary risk than you might realize.

What happens to a forgotten CD?

Though some might find it hard to imagine, money socked away in CDs occasionally falls off the radar. Off the saver’s radar, that is. But banks don’t forget, and though you won’t lose your money, you may not be able to claim it as easily as you’d like.

When a certificate’s maturity date is soon approaching, your bank will remind you of the upcoming date, along with instructions for specifying what you want done with the funds. But if you neglect to provide instructions, most institutions will roll the money into a new CD of the same term. So if your maturing certificate had a five-year term, the bank will move the funds into a new five-year CD.

If you miss your maturity date, because you left mail unopened or you changed address and didn’t receive the notice, there is usually a 10-day grace period during which you can still direct the funds. But if it’s been months or years, you’ll have to contact the bank to inquire where they moved your money.

The good news is that the funds are still yours. But once they’ve been rolled into a new CD, you face two disadvantages. First, the interest rate on the new CD is not likely to be competitive, so you’ve given up your chance to earn more with a better certificate. Second, you’ll be forced to either wait until the new CD matures, or pay an early withdrawal penalty. These penalties vary widely across banks, but can be steep.

Claiming a forgotten CD isn’t complicated, but you’ll almost certainly reduce your earnings by having neglected to act at maturity. So avoid penalties and lost earnings by putting maturity dates on your calendar, opening all financial mail promptly, and keeping your address up to date with financial institutions.

Why can I only make 6 withdrawals from savings

If you frequently transfer money out of savings, or cover checking overdrafts with a linked savings account, you’ve likely discovered there’s a limit to how often you can do this in a month. Exceed six withdrawals per statement cycle and your bank will warn you at best, or close your account at worst.

But before unloading your anger at your bank, or moving your savings to a seemingly friendlier institution, know that banks have no say in this. The mandate comes down from the Federal Reserve in a rule called Regulation D.

The six-withdrawal limit applies to all liquid savings instruments, so that includes savings and money market accounts. It also applies equally to banks and credit unions. And while the Fed doesn’t dictate fees, most institutions will ding you with a charge – often $10 – to teach you that your savings account can’t be used like a checking account.

If you’re a first-time offender, you may escape with a warning, or may be able to score a one-time courtesy waiver. But even if you pay the fee, repeatedly exceeding the limit will eventually lead the bank to close your account, as they simply can’t abide by their own Fed requirements if you keep breaking the rules.

Fortunately, only withdrawals authorized online, by phone, via bill payment or as auto-transfers count toward the six. So if you’ve hit your monthly limit but still need to take out funds, you can avoid the penalty by withdrawing at a branch or ATM, or by requesting a mailed check.

With an understanding of the rule, and the ability at many institutions to see how many withdrawals remain for the month, most consumers can plan accordingly to use their account as the Fed requires, and avoid their savings being diminished by fees.

Hate the idea of budgeting? Try one of these simpler methods

One of the perennial pieces of advice for improving your personal finances is to establish a budget and then aim to live within it. The concept is tried and true. There’s just one problem: many people are repelled by the concept.

But whether you have a knee-jerk reaction against the general idea of budgeting, or are put off by the amount of work you imagine it will require, there are different ways to think about it and shortcuts for doing it that may make it work for even the most averse.

For one, the word “budgeting” can be problematic, triggering an almost allergic reaction in some because it sounds so constraining. Contrast that with instead calling it a “spending plan”, which can feel much more liberating because it highlights that you still get to spend.

As for feeling overwhelmed by the perceived work of planning, there are many ways to make this more manageable. That’s because there are no rules on how broad or how granular you categorize your spending.

For instance, you could simply track your spending according to four or five simple buckets, such as housing, transportation, living expenses, and savings/debt reduction. Or maybe food, gas, utilities, spending, and saving. How you slice it is up to you.

Simpler still is determining how much you typically spend per month and aiming to stay below, or even underspend, that amount each month. Instead of tracking categories, this method has you simply noticing your spending level as the calendar month wears on, and aiming to keep it below your threshold by the end of the month.

The most important goal for a spending plan is to simply establish and maintain one. Far less important is whether you track a monthly amount, four broad spending categories, or two dozen detailed categories.

Improve your bottom line by avoiding bank fees

Banking fees have changed considerably in recent years. While many banks have eliminated certain fees, it’s unfortunately also true that the average dollar amount U.S. consumers are incurring in bank fees is higher than it’s ever been.

The good news is that it’s not hard to avoid these fees, and making even a minimal effort to do so is a smart money move, since many of the charges run $25 to $35.

The first smart step is to choose a free checking account. Even if you don’t want to change where you bank, you can likely just change your account type to one with fewer or lower fees.

Sometimes the best account isn’t outright free, but one that easily waives fees. For instance, many checking accounts become essentially free if you have at least one direct deposit every month.

Don’t have the direct deposit option? Many accounts will waive the monthly fee when you maintain a minimum balance. Getting in the habit of keeping that cushion in your account and never spending below it can also give you a fee-free account.

Besides monthly maintenance fees, overdrawing your account will often trigger a penalty. An easy way around this is to hold a savings account at the same institution, keep a small reserve in it, and link it to your checking account with free overdraft protection.

Lastly, ATM fees can be a big hit to your bottom line. Though you can avoid them by only using your own bank’s ATMs, that’s not always a practical option. A better strategy can be choosing an account that offers ATM fee reimbursements.

Though it can be difficult to avoid fees 100% of the time in your banking life, minimizing them to become rare events can save you considerable money over time.

Your smartest move when a CD is maturing

When you have a certificate of deposit approaching its maturity date, your bank or credit union can make things very easy on you. Do nothing and they’ll conveniently roll your funds into a new CD. But for the savvy saver, it’s usually a mistake to let them do this.

The CD marketplace is chock full of options from hundreds of institutions, in a wide variety of term lengths, interest rates and special features. And because investing in a new CD requires committing those funds for usually at least a year, and often several years, it’s wise to lock into a good deal.

In contrast, letting a CD mature without any instructions on how to handle the proceeds typically results in the bank rolling the funds into a new CD that’s as similar in length as possible to the maturing CD. So if your original certificate was a 21-month special, they’ll likely move your money into their current 24-month standard CD.

While it’s theoretically possible the standard CD offers a good return, chances are exceptionally high you’ll find a better yield by shopping around. That’s because many top-earning CDs are special odd-month terms or limited-time promotions, not standard issue certificates.

Fortunately, it’s easy to have your CD liquidated instead of auto-renewed. In the weeks before expiration, your financial institution will notify you of the impending maturity date, with instructions for informing them what to do with the funds. Generally, they provide the option to transfer the proceeds to a linked savings account, and from there, you can do what you like with the funds.

The important thing is to submit your liquidation request in time for their deadline, as the grace period is slight. You’ll then have whatever time you need to figure out the next best step for your funds.

Why an HSA is even better than a Roth IRA

If you have access to a high-deductible health insurance plan, you may be familiar with health savings accounts. While they seem to be a medically-focused vehicle, they can actually serve as a “best of both worlds” retirement account.

The way a health savings account, or HSA, works is that you’re eligible to contribute a certain amount of pre-tax funds to cover health-related expenses. If you have the HSA through your job, your employer may even make contributions on your behalf.

The funds in this account are eligible to be withdrawn for anything on the long list of eligible health-related expenses. So even if this is all you do with the account, the pre-tax nature of your HSA contribution means you’ve already saved money.

But where HSAs deliver a significant punch is that you don’t have to withdraw your funds anytime soon, allowing you to accumulate them. And since some HSAs allow you to invest your funds, you can grow your balance just like you would an IRA account. Indeed, not only are HSA contributions tax-free, but so is their growth.

There’s even a third tax benefit: so long as the funds are for an eligible expense, you can withdraw any amount tax-free.

Because you can do this at any future date for a documented expense incurred while you had the plan, this means you can save the money until you’re retired, and then withdraw tax-free funds as you like based on past expenses.

Though it requires a little bit of recordkeeping, HSAs can serve as the ultimate retirement account, combining the strengths of traditional and Roth IRAs. Like a traditional IRA, you can claim a tax deduction upon contributing, while like a Roth, you can withdraw the funds tax-free. And like both accounts, all the growth goes untaxed as well.

Retirement savings: Are you on track for your age?

The older you get, the more urgent the question becomes: Will I have enough saved for retirement? Because many of us wonder, how much is enough?

It’s a question without a precise answer, since no one can know how long they will live, what their expenses will be like in retirement, or how healthy and active (or not) they will be as they age into their 70s, 80s, and beyond.

But just because there are a lot of unknowns doesn’t mean there aren’t some reasonable targets, and investment giant Fidelity has been promoting its rules of thumb on this topic for years.

Fidelity’s model starts with the idea that, if you retire at 65-67 years old, you should have savings equivalent to ten times your salary by that time. From there, they backtrack to what that means you’ll need in savings at different milestones along the way.

They suggest that by age 30, you should aim to have retirement savings equivalent to your current salary, that by 40, you should have three times your salary, by 50 you should have six times, and by 60, you should have eight times your current salary.

Of course, various factors can influence these goals. For instance, someone planning to downsize and live frugally in retirement may have plenty with just eight times their salary, while someone who expects to embark on a lot of retirement travel will have much higher expenses and should therefore target a goal of 12 times their salary.

The age at which you retire has an impact as well, given the differences in social security payments at different ages. Those retiring at 62, the earliest eligible age for social security, will need more retirement savings than those who maximize their social security payments by working until age 70.

Cashing a CD in early? Here's what you need to know

While the ideal certificate of deposit scenario is to stash your savings and then not need that money until the CD matures, life doesn’t always work out as planned. Although cashing out early will cost you some money, sometimes it’s simply necessary.

Whenever you open a new CD, the bank or credit union will stipulate its early withdrawal penalty terms. In other words, these rules are set at the time you open the CD, not current bank policy at the time you withdraw.

This points out how important it is to read the fine print before deciding on a new CD. While many institutions fall within a normal range of penalties, some impose exceptionally stiff penalties, while others have pleasantly mild policies. Identifying this information is important pre-commitment homework.

But what if you’ve already opened your certificate, and now find you need the cash? The first step is to look up the terms you received when you opened the CD, and then call the institution to confirm your specific penalty calculation.

If the penalty is a flat number of months’ earned interest, it won’t really matter when you initiate the withdrawal. But with policies that penalize you more or less depending on how close you are to maturity, you may want to consider your best withdrawal timing. Some banks also allow a partial withdrawal, which can help minimize the penalty.

Once you know your penalty amount, you can also compare it to the expense of any other alternatives you might have for securing cash. For instance, if your cash flow need is short term, tapping a home equity line of credit may cost you less than the CD penalty.

In any case, be sure to talk with the institution to fully understand your penalty calculation before making a withdrawal decision.

How much should I have in an emergency fund?

When building an emergency fund, one consideration is how much to put into it. Ideally, you’d have enough to weather a substantial unexpected expense, like a major car repair or a large medical expense, without taking on debt to cover it.

Even more ideal is having a large enough emergency fund to cover all of your necessary living expenses for a number of months if you find yourself without any income, such as due to a job loss.

Conventional wisdom advises that we should keep three to six months’ worth of our monthly living expenses in an emergency fund. But many variables influence what the right amount is for you.

For instance, someone who’s the sole breadwinner for a family has more people depending on their income, and is therefore better served by a larger emergency fund than, say, a single person with few expenses, or a couple in which both partners have good-paying jobs at different companies.

The nature of one’s income also plays a role. Someone with excellent job security who gets paid regularly and predictably can get by with less of an emergency cushion than someone who works freelance and gets paid sporadically. The same could be true for those who are paid in bonuses and commissions.

Your monthly expenses also matter. If you have little or no debt, and many of your expenses are discretionary, such as dining out, travel, and entertainment, it would be easier for you to tighten your financial belt if needed and therefore manage with a smaller emergency fund.

But if your monthly expenses are dominated by debt payments, such as a very large mortgage or other significant obligations, an emergency fund becomes critical, as you don’t want anything to jeopardize your ability to always make your mortgage and other debt payments.

The benefits of saving for education with a 529 plan

Paying for college is one of the biggest expenses of many parents’ financial lives. Aside from buying a home, few things will cost a family as much as college tuition and expenses, especially if they have multiple children.

For parents wanting to save in advance for this significant expense, 529 plans are an excellent tool for maximizing savings by minimizing taxes, keeping as much as possible to cover education costs.

The way 529 plans work is that they allow all contributions to be invested and to grow federally tax-free, and also for withdrawals to occur tax-free, assuming the funds go to qualified education expenses.

Compare that to a savings account or a taxable brokerage account, where you’ll pay income tax every year on any earned interest and dividends, as well as capital gains taxes when you sell investments for a gain.

The trade-off is that 529 plans must be used for qualified education expenses. However, the realm of what qualifies is broader than many think, and the flexibility on what you can do with unused funds is generous.

For instance, much more than tuition qualifies. Student fees, books, and some room and board costs are also eligible. In addition, up to $10,000 per year can be used for K-12 tuition, and up to $10,000 in student loan debt can be repaid with 529 funds.

Additionally, if the beneficiary doesn’t exhaust the funds, they can be applied later to graduate, professional or vocational education. Or, they can be transferred to a sibling or any direct relative, including cousins, nephews, nieces, aunts, uncles -- even the parent, as there is no age limit on beneficiaries.

Given the tax benefits and flexibility of using the funds for wide-ranging educational expenses and recipients, 529s offer a solid college savings vehicle for American families.

What to consider before canceling that credit card

It seems counterintuitive, but sometimes the smartest financial move is to keep a credit card instead of canceling it. Other times it’s not. Here’s how to know the difference.

Every credit card and loan in your name is part of your credit record, and calculations based on that mix of accounts is what drives your credit score. Your score is obviously important whenever you apply for additional credit, but a good score can also help you lower your insurance premiums, land a job, or score an apartment.

If you’re no longer using a card, or you just happily paid it off, it makes sense to want to get rid of it. And if you’re worried you’ll succumb to the temptation of using it again and racking up new debt, closing the account may indeed be wise.

But sometimes, canceling a card can hurt your credit. One way this happens is when it lowers our average age of credit. Lenders prefer borrowers with long credit histories, so if you cancel a card you’ve held longer than your other cards, you’ll be erasing one of your longest histories, in turn reducing your score.

The other downside to canceling a card is that it lowers your credit utilization rate, or the percentage of your available credit that you’re using. Closing a card removes that account’s credit limit from the equation, which raises credit utilization and harms your score.

If you decide against canceling, it’s okay to store the card away or even cut it up, though you may need to make a transaction every year or two to keep the account active. You can also call the card company to request moving to a different card they offer, such as one with no annual fee or rewards you find more appealing.