Investopedia

Reviewed by Marguerita Cheng

A wide range of Social Security benefits is available to U.S. citizens depending upon their circumstances. These benefits include retirement, disability, survivor, and family assistance as well as Supplemental Security Income. Survivor and family benefits for children are taxed similarly.

Key Takeaways

• Social Security survivor benefits paid to children are taxable to the child although most children don’t have enough income to be taxed. 
• Survivor benefits aren’t taxable if they represent the child’s only taxable income. 
• The benefits become taxable if half the child’s benefits plus other income is $25,000 or more as of 2025.
• Parents or guardians who receive retirement benefits on the child’s behalf aren’t responsible for paying taxes on them.

Survivor Benefits vs. Retirement Benefits

Social Security survivor benefits are paid to children whose parent is deceased and who are younger than 18 years old. This extends to 19 years old if they’re enrolled full-time in school. Stepchildren or grandchildren may also qualify for these benefits. Children can receive benefits at any age if they were disabled before they reached age 22 and remain disabled. Children can receive up to 75% of the deceased parent’s benefit.  

Social Security retirement benefits are referred to as Family benefits when they’re paid out to a child after a parent has retired. Spouses, ex-spouses, and grandchildren can be eligible for these benefits as well. They can receive up to 50% of the retiree’s benefit amount.

Taxation of Survivor Benefits

Social Security survivor benefits for children are considered taxable income only for the children who are entitled to receive them. This is the case even if the checks are made out to a parent or guardian. Most children don’t make enough in a year to owe any taxes, however. Survivor benefits are only taxed if half of the child’s benefits in a year added to any other income they earn meets certain thresholds.

A portion of the benefits becomes taxable when half the annual benefits plus the child’s other income exceeds $25,000 in tax years 2024 and 2025.

Most checks for Social Security survivor benefits are made out to an adult on the child’s behalf. The amount of the benefits doesn’t affect the taxable income of the parent, however. The amount designated for the eligible child is subtracted from the check to determine the parent’s tax liability if both the parent and the child receive benefits.

Important

Social Security benefits for children are never treated as taxable income for the parent or guardian.

Taxation of Retirement Benefits

A child who receives retirement benefits based on a parent’s work record may still be considered a dependent for tax purposes. This is the case if they live with the parent for more than half the year and the parent pays for more than half of their living expenses such as food, housing, clothing, education, and medical care.

Parents or guardians are responsible for filing and signing a tax return on the dependent child’s behalf if they’re required to file a return due to receiving Social Security benefits. The income thresholds for required filing are the same as for survivor benefits.

What Are Social Security Benefits?

Social Security benefits are essentially federal insurance benefits. Many people are eligible for these programs including disabled people, older adults with little to no resources, and retirees. Age 62 is the minimum age although there are monetary incentives for waiting longer to collect benefits. Surviving spouses, minor children, and unmarried ex-spouses of beneficiaries who have died may also be eligible.

What Is the Social Security Administration?

The Social Security Administration (SSA) is a federal agency that manages and distributes Social Security benefits. It was launched in 1935 with President Roosevelt’s signing of the Social Security Act and has several programs. It administers benefits for retirees, their survivors, people with disabilities, and older adults with little or no resources.

The SSA also assigns Social Security numbers and enrolls people in Medicare, the federal health insurance program for those who are 65 years old or over.

Are Social Security Benefits for Children Reported to the IRS?

All Social Security benefit payments are reported to the IRS. The recipient of the benefits receives an SSA-1099 form in January that includes the amounts of all benefits received during the previous year.

The Bottom Line

A child who is younger than age 18 or age 19 if they’re enrolled full-time in school can receive Social Security benefits if their parent dies. They can also collect family benefits when their parent retires. The IRS doesn’t treat Social Security benefits for children as income for the parent or recipient who receives the money on behalf of the child.

They’re convenient if you don’t have a bank account, but they can also be costly

Reviewed by Lea D. Uradu
Fact checked by Yarilet Perez

If you’re paying someone to prepare your taxes for you this year and expect a return, they may give you the option of receiving it as a prepaid debit card. While that might seem like a great convenience, some aspects are worth considering, such as hidden or multiple fees or limits.

Learn more about prepaid tax refund debit cards so you can decide whether they are an option for you.

Key Takeaways

• Many tax preparation services allow you to choose to load your tax refund onto a prepaid debit card.
• A prepaid debit card might be useful for someone without a bank account, for convenience, or to expedite their refund.
• Many prepaid tax return debit cards have fees that can reduce how much of your refund you’ll be able to use.

Advantages of Tax Refund Debit Cards

Tax preparation services like H&R Block, Jackson Hewitt, TaxAct, and TurboTax all make prepaid cards available to their customers. Proponents of the cards point to these advantages:

• Useful if you don’t have a bank account
• Helpful if you want your refund a bit sooner
• More convenient than a check

Advantages Explained

If you’ve chosen not to use a bank, you won’t be able to receive your refund via direct deposit, the IRS’ preferred way of sending out refunds. These cards give you an alternate method of receiving your return.

It’s usually faster for the U.S. Treasury Department to deposit your return onto a prepaid debit card than into a bank account or for you to receive a refund check in the mail. According to H&R Block, if you e-file your return, you can typically expect a direct deposit within 21 days, while a check may take 21 to 28 days. If you file a paper tax return, the wait will be longer because of the time involved in processing paper returns.

Checks must be cashed to receive the funds, you’ll need an account at a bank or credit union. These cards remove this need and make it easier to access your return if you get it via check.

If you do have to cash a check and don’t have a relationship with a bank, some big-box stores, like Walmart, and major grocery chains, like Kroger, cash checks for much lower fees, typically less than $10. Payday loan businesses might charge you much more, so it helps to be wary of businesses that might charge too much.

Disadvantages of Tax Refund Debit Cards

If you don’t have a bank account, receiving your refund on a prepaid debit card can be convenient. However, that convenience generally comes with disadvantages:

• High and multiple card use fees
• Risk of loss
• Maximum daily withdrawal limits
• Out of network ATM fees

Disadvantages Explained

Many prepaid tax return debit cards come with multiple fees. For example, H&R Block’s Emerald Prepaid Mastercard charges a $3.50 fee for using the card to get cash at all automated teller machines (ATMs) plus any fees the ATM operator might charge. If you haven’t used your card in more than 60 days, H&R Block will charge you an inactivity fee of $9.95 per month. To check your balance at an ATM, you’ll be charged $1.

TurboTax’s Turbo Prepaid Visa Card charges $4.95 a month unless you’ve loaded at least $1,000 on it in the preceding month (the first monthly fee is waived regardless of the amount); in-network ATM withdrawals are free, but out-of-network ones cost $2.50.

A prepaid tax return debit card might seem convenient, but it is a card that you’ll carry around and be responsible for. If you lose your wallet, the card falls out, or you forget it at a store or restaurant, you might lose what’s left of your tax return—or the entire amount, if you lose the card before you can use it.

The retail giant Target has a reloadable account card into which you can deposit your tax return. In addition to fees, this card has a withdrawal limit of $750 per day. If your tax return exceeds this amount, you’ll need to withdraw it over multiple days and transactions. If you don’t use an Allpoint ATM (in a Target store), you’ll be charged $2.50 plus any ATM operator fees.

Minimizing Prepaid Tax Return Debit Card Fees

There are some things that you can do to minimize your fees. First, check the card agreement to make sure you understand the fee structure. For example, if you have H&R Block’s card, you’ll want to make sure you use it at least once every 60 days to avoid the monthly fees. With the TurboTax card, if you aren’t able to load another $1,000 on it each month (such as through direct deposit of your paycheck), you may want to spend down your balance in as few months as possible.

An even better alternative may be to open a bank or credit union account, even if you previously believed that you didn’t have enough money to be eligible for one. For example, some credit unions, designated as low-income credit unions (LICUs), have low minimum balance requirements, offer check cashing services, and even make small loans.

Can I Get My Tax Refund on a Prepaid Debit Card?

Yes. However, it’s important to be aware of any fees or limitations before agreeing to have your return deposited to a prepaid debit card. Depending on your circumstances, it might be more beneficial to use or open a checking or savings account.

How Do I Get a Tax Refund Debit Card?

Many tax preparers have agreements with financial institutions for tax refund prepaid debit cards. Some retailers, such as Target, offer these cards as well.

Does the IRS Send Refunds on a Debit Card?

The IRS (via the U.S. Treasury) only sends refunds through checks or direct deposit. If you want a prepaid tax refund debit card, you’ll need to use a tax preparer with that service.

The Bottom Line

Receiving your tax refund through a prepaid debit card can be convenient and a little faster than waiting for a check or deposit, and it is an option for people who don’t have a bank account. However, you also may be subject to multiple fees or other limitations, which will whittle away at your refund. If you decide to go this route, be sure to read the card agreement so that you can avoid as many fees as possible.

Fact checked by Timothy Li
Reviewed by Pamela Rodriguez

Special Needs Trust vs. ABLE Account: An Overview

Both ABLE accounts and supplemental needs trust (SNT), also known as supplemental needs trusts, allow the accumulation of resources for the benefit of an individual with a disability without jeopardizing key federally funded benefits, like Supplemental Security Income and Medicaid.

Though both financial tools serve a similar purpose, there are key differences in how they function and their rules regarding contributions, usage of funds, and management.

In this article, we will explore both options and highlight the differences between an ABLE account and an SNT, so you can make an informed decision based on your specific needs.

Key Takeaways

• Both ABLE accounts and SNTs enable individuals with disabilities (or their families) to save money without impacting eligibility for programs like SSI or Medicaid.
• ABLE accounts are easier to set up and manage, but they come with limits on how much money can be contributed each year.
• SNTs do not have contribution limits but can be expensive and more complicated to establish.
• You don’t have to choose one over the other; you can use both an ABLE account for everyday expenses and an SNT for larger expenses that aren’t covered by public benefits.

Supplemental Needs Trusts (SNTs)

A supplemental needs trust (SNT) is a way for an individual with a disability to receive money without losing access to their public benefits.

Most public assistance programs for people with disabilities have income and asset restrictions—if an individual with a disability earns too much or has too much money in savings, they will no longer be eligible for these benefits. An SNT is a way around this restriction. Money put in the trust doesn’t count toward the purpose of qualifying for public assistance.

An SNT is a legal arrangement and fiduciary relationship. In a fiduciary relationship, a person or entity acts on behalf of another person or people to manage assets. An SNT is a popular strategy for those who want to help someone in need without taking the risk that the person will lose their eligibility for programs that require their income or assets to remain below a certain limit.

The individual who creates the trust can rest assured that the money contributed will be used as outlined in the creation of the trust. Furthermore, benefiting both the beneficiary and the trust creator, assets in the trust cannot be claimed by creditors or in the loss of a lawsuit. It’s also important to recognize that the money in an SNT can only be used for healthcare needs, transportation, and other qualifying costs.

Advantages of SNTs

• No contribution limits
• Protects funds from creditors
• Ensures continued eligibility for SSI and Medicaid

Disadvantages of SNTs

• Setting up an SNT can be expensive and complex, often requiring legal assistance.
• Funds must be used for specific, non-basic needs (such as healthcare and therapy) and cannot cover regular living expenses like rent or groceries.

ABLE Accounts

In many ways, an ABLE account is similar to an SNT. An ABLE account is a tax-advantaged savings account available to individuals with significant disabilities that began before the age of 26. Contributions can be made to the account by the beneficiary, friends, or family members, just as with an SNT.

Money saved in an ABLE account doesn’t affect a person’s eligibility for public benefits. There are also tax benefits to setting up an ABLE account—while the contributions themselves are not intended to be tax-deductible, the funds within the account grow tax-free and distributions are tax-free.

ABLE accounts are a much newer financial product than SNTs. They were created by the 2014 Achieving a Better Life Experience (ABLE) Act as a way of giving more people access to the benefits that, up until then, were restricted to those who held SNTs.

ABLE accounts can be used to pay for a wider range of things than the money in an SNT. The money in an ABLE account can be used to pay for any qualified disability expenses (QDEs).

Advantages of ABLE Accounts

• Easier to set up and manage than SNTs.
• Funds grow tax-free, and withdrawals for qualified disability expenses (QDEs) are tax-free as well.
• Can be used for a broader range of expenses than SNTs, including basic living costs like housing and food.

Disadvantages of ABLE Accounts

• Annual contribution limits (currently $19,000 in 2025).
• There are state-specific limits on the total balance that can be held, typically up to $300,000.
• Money left in an ABLE account after the individual’s death may be used to reimburse the state Medicaid agency for services provided.

Note

There is an annual limit to how much you can contribute to an ABLE account: $19,000 in 2025. SNTs have no limits.

Key Differences

There are three main differences between SNTs and ABLE accounts: eligibility, the expenses permitted for each type of account, and the limits on how much money you can save through them.

Eligibility

ABLE accounts are offered to those meeting certain requirements. You only have to meet one of the following:

• Eligible for SSI determined by a disability or blindness that occurred before the age of 26
• Eligible for benefits, including disability insurance benefits, childhood disability benefits, and disabled widow/widower benefits determined by a disability or blindness that occurred before the age of 26
• A certificate proving that your disability or blindness occurred before the age of 26

An individual that qualifies for disability according to the Social Security Administration has to set up a first-party SNT before they reach 65. Third-party trusts, however, have no age restrictions. First-party SNTs are invested with assets that belong to the beneficiary while third-party trusts are invested with assets from anyone but the beneficiary.

Account Limits

ABLE accounts have contribution limits as well as amount limits. You can only contribute a certain amount each year. This amount is set federally under the same tax code governing 529 plans: $19,000 in 2025. In addition, ABLE accounts have a maximum limit set by the state that manages them. Many states set this limit above $300,000, with only the first $100,000 exempt from impacting eligibility for supplemental security income (SSI). SNTs have no such limits.

One disadvantage of SNTs is that they can be expensive to set up. You will typically need to hire an attorney to set up the trust. In contrast, setting up an ABLE account is fast and easy, and can be done directly through the state’s website. No attorney or financial advisor assistance is needed.

Permitted Expenses

The third main difference between these accounts concerns what you can use them to pay for.

Put simply, SNTs are supposed to pay for “extra” things that make life more comfortable, such as vacations, pets, entertainment, home furnishings, assistive technology, therapies not covered by Medicaid, and more. These are things that public benefits cannot pay for. If the money in an SNT is used to pay for basic costs of living, a person’s public benefits might be decreased.

ABLE accounts have a broader range of permitted expenses. This includes anything that helps a person with a disability improve their health, independence, or quality of life. QDEs can include basic costs of living, as well as costs for education, food, employment, transportation, technology, support services, and more.

Other Differences

As well as the fundamental differences mentioned above, these accounts differ in several other ways. These features may make a big difference to you, depending on your situation.

• Everyday management: In general, money in SNTs is more difficult to access. The funds in ABLE accounts can be accessed easily, and many programs offer a debit card that allows you to pay for items directly from the account.
• Who manages the account: ABLE accounts are owned and managed by a person with disabilities, who is responsible for making sure that they only spend money on allowable expenses. SNTs are managed by trustees, who are responsible for keeping records of expenses.
• Tax: The money you keep in an ABLE account is tax-free, but the money kept in an SNT is taxable each year.
• Medicaid liability: Money left in a person’s ABLE account after they die may be used to reimburse the state Medicaid agency for services Medicaid paid for after the ABLE account was created, depending on state regulations. There is often no money left after Medicaid is paid back. SNTs that were created with a parent, grandparent, or other person’s money (known as a third-party trust) do not have to repay Medicaid after a person dies.

SNT vs. ABLE Account: Which Is Better?

Every family’s needs and circumstances are different, and when making financial decisions it’s best to consult a professional. You can find lists of financial professionals who work with people with disabilities online, and the ABLE National Resource Center provides a comparison tool to help you understand how each type of account can help you.

It’s also important to realize that you don’t need to choose between an ABLE account and an SNT. You can in fact have both. These accounts are best used for different purposes, despite having some characteristics in common.

Important

The money in SNTs is to pay for “extra” expenses that are not covered by public benefits. You can use the money in an ABLE account for a much broader range of expenses, including the basic costs of living, education, food, employment, and transportation.

You should set up an ABLE account if you or a family member qualify. This will ensure that the individual with disabilities, whether you or a family member, will be able to obtain benefits. There may be additional benefits as well, such as tax relief.

There are many factors to consider when choosing the best option for your family, points out Juliana Crist, senior consultant at AKF Consulting, a municipal advisor to state-run investment plans. “Things like guardianship orders, end-of-life planning, tax considerations, Medicaid payback, and total assets all play into the decision of which financial tool to use,” Crist says. Her firm, she continues, “always likes to say that SNTs and ABLE accounts are complementary tools—they work very well together.“

Establishing an SNT is strategically viable if you need to sequester more money than an ABLE account allows, which is up to $100,000. If you put in more than $100,000, then SSI benefits will be suspended.

Can I Have an SNT and an ABLE Account?

Yes, you can have both. And you can even set up an SNT so that it can fund an ABLE account.

Who Controls an SNT?

The most common type of SNT is a third-party trust set up by parents to benefit their children. In this case, the parents act as trustees. A trustee is a person or entity who manages the trust assets and administers the trust provisions.

Does Autism Qualify for an ABLE Account?

Yes, autism is a disability that qualifies for an ABLE account. The Internal Revenue Service lists the disabilities that qualify, which the Social Security Administration will accept for SSI or SSDI.

The Bottom Line

Both ABLE accounts and SNTs allow a person diagnosed with disabilities—or their relatives—to save money without affecting their eligibility for public benefits. Prior to 2014, only SNTs could be used for this purpose, and they can be expensive to establish.

ABLE accounts are much easier to set up and manage. However, they come with some disadvantages: primarily, limits on the amount of money you can save each year. You don’t have to choose one or the other, though. It’s possible to set up an ABLE account for everyday expenses and have an SNT that you can use for larger purchases that are not covered by public benefits.

The number of women-fronted companies is growing and these are at the head of the pack

Fact checked by Vikki Velasquez

Women-owned companies in the U.S. are growing at more than double the rate of other firms. These companies contribute nearly $3 trillion to the economy with direct responsibility for 23 million jobs.

There are more opportunities to add their businesses to your stock portfolio as women gain a bigger stake in the corporate world.

Key Takeaways

• Women-owned businesses contribute nearly $3 trillion to the U.S. economy and are responsible for 23 million jobs.
• Women hold just 15% of the Fortune 500 CEO positions but they make up more than half of the U.S. population.
• Having more women on the boards of companies translates to less excessive risk-taking and improves companies’ reputations, earning quality, and sustainability performance.
• Investing in women-owned and -run businesses can help increase diversity and inclusion in American corporations.

Reasons to Invest in Women-Owned/Led Businesses

Many everyday investors want to put their money into businesses that align with their values whether that’s environmental, social, and governance (ESG) investing or female- or minority-owned companies. Investing in women-owned businesses can make a difference in increasing diversity and representation in corporate America.

Women make up more than half of the U.S. population but held just 10.4% of CEO positions at Fortune 500 companies as of February 2025. Only 6.1% of chief executives in the country were Black in 2024 despite making up approximately 13.7% of the population.

Women-founded companies received only a tiny 1.0% slice of total venture capital funding in the U.S. in 2025.

Boston Consulting Group study found that startups founded and cofounded by women performed better over time than those founded by men. They generated 10% more in cumulative revenue over five years.

Note

Having more women on the board of a company tends to mean less excessive risk-taking as well as improved firm reputation, earnings quality, and sustainability performance, according to S&P Global.

Top Women-Owned and Women-Run Businesses

1. Arista Networks

Arista Networks (ANET) leads the industry in cloud-to-client networking for large data centers and campus and routing environments. The company serves more than 10,000 cloud customers including global Fortune 500 companies. CEO Jayshree Ullal led the company to a historic multibillion-dollar IPO in June 2014.

The company continues to expand at a blistering pace under her leadership. Earnings growth is an important metric to consider when valuing a stock and it looks extremely promising for Arista with a 27% growth rate from 2018 through 2023. Return on equity (ROE) for shareholders was at an impressive 29% in 2023.

2. Chart Industries

CEO Jillian Evanko leads Chart Industries (GTLS), a top manufacturer of cryogenic gas processing and storage equipment. Evanko took charge in 2018 after serving as CFO and chief accounting officer which is particularly significant for a company that heavily relies on acquisitions.

Chart’s stock has doubled since 2019 thanks to solid financial expertise and leadership, Evanko attributes the company’s success in large part to their market dominance and high demand for services. Chart acquired Howden in 2022, a company larger than Chart in terms of revenues.

3. The Hershey Company

Hershey (HSY), the confectionery giant, has proved to be a delectable investment under the leadership of CEO Michele Buck. A stalwart at the company since 2005, Buck took over as CEO and board chair in March 2018. She served 17 years at Kraft/Nabisco in numerous senior positions and at the Frito-Lay division of PepsiCo before joining Hershey in 2005.

Her extensive experience in consumer packaged goods has paid off for the company. Hershey’s stock has nearly tripled since Buck joined the executive team in 2016, reaching a high of $274.04 in May 2023 although it’s at $179.54 in mid-March of 2025. The stock has nonetheless seen sustained growth as the company has cemented its position in the market through over 20 acquisitions. 

4. Progressive Corp

Progressive was already known as a giant in the insurance field but its status has grown since Tricia Griffith took charge. Griffith joined the company over 35 years ago and worked her way up through several leadership positions before becoming CEO in 2016.

The company trades under Progressive Corp (PGR) and its stock has a five-year price total return of 295.21% as of March 2025. Progressive stock and revenue performance has held strong through economic turmoil and market uncertainty perhaps thanks to its product being a basic need. The company’s annual revenue for 2023 was $75.34B as of March 2025.

5. Zoetis

Zoetis (ZTS) was once part of Pfizer. It’s a leading animal health company that produces medicines, vaccines, and diagnostics. CEO Kristin Peck played a pivotal role in Zoetis’ 2013 IPO and has led the company since 2020. She was been recognized by Barron’s as one of the top CEOs in 2022 and by Fortune as a 2020 Businessperson of the Year.

Global trends favor Zoetis based on increased spending on livestock healthcare and growing pet ownership. Zoetis delivered a solid 35% in total returns under Peck’s leadership, exceeding the 26% S&P 500 returns for 2023. Returns have dropped in 2024 and 2025, however.

Earnings per share, a key management metric, have grown consistently since 2011 with a 7.89% increase year-over-year for the quarter ending Dec. 31, 2024. 

6. Sunrun

Sunrun (RUN) is the nation’s leading home solar, battery storage, and energy services company and it’s both women-led and co-founded. CEO Mary Powell has run the company since August 2021. Co-founder and co-executive chair Lynn Jurich held the top position before that.

There are compelling financial reasons to invest in Sunrun beyond feeling good about supporting sustainable energy. The stock has seen some volatility but analysts remain bullish on this buy. The stock crossed above its 200-day moving average of $16.24 in December 2023 with some trades going as high as $18.54 per share. The 200-day moving average is an important indicator for investors who are looking to spot mid- and long-term trends.

7. Accenture

Accenture (ACN) has been led by CEO Julie Sweet since 2019. It’s a global IT services giant excelling in consulting and outsourcing. Accenture challenges smaller firms in innovation and expertise with a vast workforce and numerous diamond accounts,

The company benefits from the pairing of a solid reputation and steady, sustainable growth. It’s built a considerable economic moat with more than $66.3 billion in revenue as of March 2025 and a client list that includes more than 75% of the global top 500 companies. 

8. Eventbrite

Co-founder and CEO Julia Hartz leads vision, strategy, and growth at Eventbrite (EB), the world’s largest ticketing and event technology platform. Eventbrite attributes its success to her leadership under which the company has received several awards including Fortune’s 100 Best Workplaces in the U.S., Glassdoor’s Employees’ Choice Best Places to Work, and San Francisco Business Times’ Best Places to Work in the SF Bay Area.

Hartz has been honored as one of Inc.’s Female Founders 100, Fortune’s 40 Under 40 business leaders, Inc.’s 35 Under 35, and Fortune’s Most Powerful Women Entrepreneurs.

9. Veracyte

Veracyte (VCYT) founder Bonnie Anderson served as CEO from 2008 to 2016 before passing on the executive role to Marc Stapley. She remains active in the company via an executive chairman role. 

The global diagnostics company provides clinicians with insights and testing to help diagnose and treat cancer. The company boasts steady stock performance as well as revenue, income, and profit margins rising by 23.5%, 132.4%, and 126.3% respectively from 2023 through 2024.

What Qualifies As a Woman-Owned Business?

Qualifying for the Women-Owned Small Business (WOSB) Federal Contract program requires that a business must be at least 51% owned and controlled by women who are U.S. citizens. Women also must manage day-to-day operations and make long-term decisions.

Companies that meet this requirement can also apply for certification as a woman-owned business. Getting certified isn’t required but it entitles firms to federal contracts and economic resources.

How Do I Start Investing in Women-Owned Businesses?

The first step in adding women-owned or women-led businesses to your portfolio is to identify the companies you’re interested in. You should then track their performance, including stock activity, financial health, and any relevant news or events. You might also look at financial statements, earnings reports, and other relevant data. 

You can work with your brokerage platform or financial advisor to make a purchase if you’re ready to buy. You’ll have to specify the number of shares you want to purchase and the type of order you want such as a market order or a limit order.

Can I Invest Without Choosing Particular Companies?

You could invest in an exchange-traded fund (ETF) that focuses on or includes female-owned companies instead of handpicking individual companies to invest in. An ETF contains multiple companies and may include a mixture of investment types like stocks, commodities, and bonds.

The Bottom Line

Buying stock in successful, women-led public companies presents an opportunity for everyday investors and for the companies they invest in. It contributes to more diversity and gender equality in corporate leadership.

Research suggests that businesses with diverse leadership may exhibit better long-term financial results. Be sure to research the company, including stock and overall financial performance before making any investment.

Disclosure: Investopedia does not provide investment advice. Investors should consider their risk tolerance and investment objectives before making investment decisions.

Reviewed by Ebony Howard
Fact checked by Suzanne Kvilhaug

Independent contractors are considered self-employed even if they only work for a single client. Rather than relying on an employer to withhold their payroll taxes for them, they are responsible for paying their own payroll taxes and making quarterly estimated tax payments to the Internal Revenue Service (IRS).

Waiting until the annual tax deadline will get you hit with penalties and interest for late payment.

Independent contractors can rely on tax software programs to help them calculate their estimated tax payments. But those looking to better understand the finer points of how the estimation process works can use IRS form 1040ES, along with the accompanying instructions and the estimated tax worksheet.

Key Takeaways

• Self-employed individuals must pay their own payroll taxes and make quarterly estimated tax payments to the IRS.
• Independent contractors can use tax software to help estimate their taxes or rely on IRS Form 1040ES and its instructions.
• Quarterly payments can be estimated by paying either 100% of last year’s liability or 90% of the current year’s liability.

Information Needed to Estimate Tax Payments

Those who opt for the do-it-yourself approach must know their adjusted gross income for the previous tax year. They must then estimate their total income for the current tax year. This figure must include investment income and any other sources of taxable income in addition to any self-employment earnings.

Next, individuals must estimate their total deductions, exemptions, and credits. They must factor in both the self-employment tax (the additional Social Security and Medicare taxes they must pay, in lieu of an employer paying on their behalf), as well as the tax deductions for the self-employment tax.

How to Determine Estimated Tax Payments

Armed with all of the above information, independent contractors can then determine their estimated tax payments in one of the following two ways:

1) Make a quarterly estimated tax payment totaling 100% of their previous year’s tax liability for that period.

2) Make a quarterly estimated tax payment totaling 90% of the current year’s estimated tax liability.

Tax professionals recommend that self-employed individuals put aside 20% to 30% of their earnings for taxes.

The first approach makes the most sense for individuals who can reliably predict their annual income based on the past. It guarantees that the person will not owe penalties or interest for underpayment. It can, however, mean accidentally paying more tax than is actually owed.

Anyone who overpays must wait until after the following year’s April deadline for annual tax returns to get their money back through a tax refund.

What Are Payroll Taxes?

Payroll taxes are generally defined as the amounts labeled FICA and MEDFICA on a pay stub.

FICA translates as the Federal Insurance Contributions Act and reflects the employee’s payment towards future Social Security retirement benefits. MEDFICA, or the Medicare Federal Insurance Contributions Act, is the amount that goes towards health insurance for retirees.

The tax rates for FICA and MEDFICA add up to 15.3%, half paid by the employee and half by the employer. Self-employed people are responsible for the entire amount although the employer’s share is deductible.

Of course, federal income taxes and (for most Americans) state income taxes also are withheld from employees’ paychecks. Self-employed people make estimated quarterly payments for these taxes as well.

What Is the Deduction for Self-Employment Taxes?

As a self-employed individual, you are responsible for paying 15.3% in Social Security tax and Medicare tax. Half of that amount is the employer’s share. The employer’s portion of the tax, or 7.65%, is deductible.

What Happens If You Are Self-Employed and Have No Pay Stubs?

If you’re self-employed you won’t have any pay stubs but you should have records of your income and expenses in some form. You can show previous years’ tax returns, invoices, bank statements, or profit/loss statements. The IRS doesn’t want to see them unless you’re audited.

The Bottom Line

If your employer doesn’t withhold payroll taxes, you will have to pay these taxes yourself. This mostly applies to independent contractors who need to make quarterly estimates of their taxes to the IRS.

To do this on your own, you will need certain information, such as your adjusted gross income from the previous year, your estimated total income for the current year, and records of any deductions, exemptions, and tax credits you expect to be eligible to take.

By staying organized and making timely estimated payments, you can avoid penalties and ensure you are not caught off guard when it’s time to file your taxes.

Shopify makes money from subscriptions and various platform fees

Fact checked by Vikki Velasquez
Reviewed by Katie Miller

Shopify’s e-commerce platform connects merchants and consumers by allowing the companies to list and sell products and services online. Shopify primarily makes money by selling its plans via subscription models, and through various platform fees.

Shopify’s most significant revenue-generating segment is its merchant solution component, which generates more than 73% of its total revenues. The company invests heavily in discovering ways to include artificial intelligence and machine learning in its products and services (it doesn’t develop AI/ML models but uses third-party models) to drive future growth.

Key Takeaways

• Shopify is an e-commerce platform that makes money through subscription services and fees.
• In 2024, the company had a net income growth of 1429.55% and revenue growth of 25.78%, with its subscription solutions segment experiencing the most growth for the year.
• Shopify’s strategy for the future is to integrate artificial intelligence and machine learning into its services to help merchants and users save time and money and match prospective buyers to merchants.
• Shopify controls more than 12% of its industry’s U.S. market share.

Shopify’s Financials

• 2024 net income: $2.02 billion
• Growth in net income: 1429.55%
• Total subscription solution revenue: $2.35 billion
• Total merchant solution income: $6.53 billion
• Growth in subscription: 22.59%
• Growth in merchant solution: 24.54%
• Revenue: $8.88 billion
• Growth in revenue: 25.78%

Note

In 2024, Shopify had more than 875 million unique shoppers making purchases and controlled more than 12% of its industry’s market share.

Shopify’s Business Segments

Shopify divides its revenue-generating segments into what it calls components. It’s subscription solution component that provides its point of sale, apps, domain registration, and theme offerings.

The subscription component generated $2.35 billion in revenue in 2024, growing 22.59% from 2023.

Shopify’s merchant solution component is a one-stop shop for merchants who use various apps and services such as accepting payments, shipping, and accessing working capital. Revenues from merchant solutions are primarily generated from payment processing fees and currency conversion fees. This segment also generates revenues from Shopify’s lending and financial service products, which include sales from selling shipping labels and referral fees from partners.

The company’s research and development component doesn’t generate any revenue or income, but it is critical to Shopify’s future success as it develops solutions to meet the growing needs of merchants.

Note

Shopify’s platform allows any developer to create applications and themes from which merchants can choose. Developers are paid by merchants who choose their creations.

Recent Developments

In 2023, Shopify introduced Shopify Magic, an artificial intelligence tool that writes product descriptions for merchants. Shopify Magic makes it easier and faster for merchants to build product pages.

Artificial intelligence and machine learning are significant advancements for nearly every industry, and Shopify spent more than $1 billion on R&D in 2024, some of which included developing ways to integrate third-party AI solutions into its services.

How Does Shopify Make Most of Its Money?

Shoipfy makes most of its money through its merchant subscriptions and various fees for services and products.

Do You Actually Make Money on Shopify?

You can make money on Shopify selling products and services, and you can also develop applications and storefront themes and sell them on the e-commerce site.

How Much Does Shopify Take Per Sale?

It depends on the package you choose and where transactions occur. There are separate currency conversion fees, duties, and import taxes charged on international transactions.

What Is the Downside to Shopify?

Shopify’s model depends on third-party apps for storefront customization, making merchants spend more to purchase the customizations they might want to differentiate themselves. It also includes transaction fees for its third-party payment gateways, adding more expenses.

The Bottom Line

Shopify is a global e-commerce product and services provider that connects merchants and consumers. It experienced significant growth in 2024, ending the year with a $471 million increase in net cash and cash equivalents, a quick ratio of 3.7, a trailing P/E of 99.37, and a debt-to-equity ratio of 0.2.

Preserve your assets for the benefit of your heirs, instead of the taxman

Reviewed by David Kindness
Fact checked by Ryan Eichler

Transferring wealth to future generations of a family, especially when the assets are significant, requires careful estate planning. Having an estate plan helps ensure your property and money go to your beneficiaries with minimal tax implications.

Different types of trusts can help accomplish estate planning goals and objectives, but transferring large sums of money or other assets into these trusts at once can trigger gift taxes. Although strategies like sprinkling, Crummey power, or five-and-five power, may help, they are not always the most optimal solution.

One alternative may be to establish a special type of trust known as an intentionally defective grantor trust (IDGT).

Key Takeaways

• The purpose of estate planning is to ensure that when someone dies, their property and money go to their beneficiaries with as minimal an impact from estate and gift taxes as possible.
• An intentionally defective grantor trust (IDGT) can help protect your assets from estate and gift taxes.
• While assets in an IDGT are not taxed for gift or estate purposes, the grantor must pay income tax on the revenue the trust generates.
• The IDGT allows the assets to grow tax-free and avoid gift taxation for beneficiaries.

How an Intentionally Defective Grantor Trust (IDGT) Works

The IDGT is an irrevocable trust that has been designed so that any assets or funds that are put into the trust are not taxable to the grantor for gift, estate, generation-skipping transfer tax, or trust purposes. However, the grantor of the trust must pay the income tax on any revenue generated by the assets in the trust. This feature is essentially what makes the trust “defective,” as all of the income, deductions, and/or credits that come from the trust must be reported on the grantor’s Form 1040 as if they were their own. However, because the grantor must pay the taxes on all trust income annually, the assets in the trust are allowed to grow tax free, and thereby avoid gift taxation to the grantor’s beneficiaries.

For all practical purposes, the trust is invisible to the Internal Revenue Service (IRS). As long as the assets are sold at fair market value, there will be no reportable gain, loss, or gift tax assessed on the sale. There will also be no income tax on any payments made to the grantor from a sale. But many grantors opt to convert their IDGTs into complex trusts, which allows the trust to pay its own taxes. This way, they do not have to pay them out of pocket each year.

Important

Currently, federal law provides an estate tax lifetime exemption that allows individuals to transfer up to $13.99 million tax free to beneficiaries in 2025, up from $13.61 million in 2024. But that exemption could be cut to as little as $7 million when the Tax Cuts and Jobs Act expires in 2026.

What Type of Assets Should Be Transferred into an Intentionally Defective Grantor Trust?

While there are many different types of assets that may be used to fund a defective trust, limited partnership interests offer discounts from their face values that substantially increase the tax savings realized by their transfer.

For the purpose of the gift tax, master limited partnership assets are not assessed at their fair market values, because limited partners have little or no control over the partnership or how it is run. Therefore, a valuation discount is given. Discounts are also given for private partnerships that have no liquid market. These discounts can be 35%–45% of the value of the partnership.

How to Transfer Assets Into the Trust

One common method to transfer assets into an IDGT involves combining a modest gift with an installment sale. For example, the grantor may gift 10% of the asset’s value into the trust, while the remaining 90% is sold to the trust on an installment basis.

Example: Reducing Taxable Estate

Frank Newman, a wealthy widower, is 75 years old and has a gross estate valued at more than $20 million. About half of that is tied up in an illiquid limited partnership, while the rest is composed of stocks, bonds, cash, and real estate. Obviously, Frank will have a rather large estate tax bill unless appropriate measures are taken. He would like to leave the bulk of his estate to his four children.

Therefore, Frank plans to take out a $5 million universal life insurance policy on himself to cover the cost of estate taxes. The annual premiums for this policy will cost approximately $250,000 per year, but less than 30% ($72,000) of this cost ($18,000 annual gift tax exclusion for each child) will be covered by the gift tax exclusion. This means that $178,000 of the cost of the premium will be subject to gift tax each year. Of course, Frank could use a portion of his unified credit exemption each year, but he has already established a credit shelter trust arrangement that would be compromised by such a strategy.

However, by establishing an IDGT, Frank can gift 10% of his partnership assets into the trust at a valuation far below their actual worth. The total value of the partnership is $9.5 million, so $950,000 is gifted into the trust to begin with. But this gift will be valued at $570,000 after the 40% valuation discount is applied. Then, the remaining 90% of the partnership will make annual distributions to the trust. These distributions will also receive the same discount, effectively lowering Frank’s taxable estate by $3.8 million. The trust will take the distribution, use it to make an interest payment to Frank, and cover the cost of the insurance premiums. If there is not enough income to do this, then additional trust assets can be sold to make up for the shortfall.

Frank is now in a winning position regardless of whether he lives or dies. If the latter occurs, then the trust will own both the policy and the partnership, thus shielding them from taxation. But if Frank lives, then he has achieved an additional income of at least $178,000 to pay his insurance premiums.

What Makes a Grantor Trust Intentionally Defective?

The “defective” part of the intentionally defective grantor trust comes from the grantor still being responsible for paying the income tax on the trust’s earnings, even though the trust’s assets are removed from the grantor’s taxable estate. This arrangement allows the assets in the trust to grow without being subject to estate or gift taxes, effectively transferring wealth to the beneficiaries.

What Happens to an Intentionally Defective Grantor Trust After the Death of the Grantor?

If the assets were sold into the IDGT, they are not included in the taxable estate and can be passed on to the beneficiaries. But if an installment note for the sale of assets has not yet been paid off, the principal and any accumulated interest as of the date of death are included in the grantor’s taxable estate.

What Is a Spousal Lifetime Access Trust?

A spousal lifetime access trust (SLAT) is a type of intentionally defective grantor trust that makes the grantor’s spouse a current beneficiary and makes the assets in the trust available to the spouse without being included for estate tax purposes. The advantage is that a married couple can reduce their future estate tax liability and have some access to the assets they have transferred to the SLAT.

The Bottom Line

An intentionally defective grantor trust can be a valuable tool for transferring wealth from one generation to the next in a family without incurring high estate taxes. But they are complex and should be structured with the assistance of a qualified accountant, certified financial planner (CFP), or an estate planning attorney.

Either is a worthy goal. Here’s how to decide

Reviewed by Andy Smith
Fact checked by Vikki Velasquez

People who find themselves with extra cash can face a dilemma. Should they use the money to pay off—or at least, substantially pay down—that pile of debt they’ve accumulated, or is it more advantageous to put the money to work in investments that will grow for the future? Either choice can make sense, depending on the circumstances.

Key Takeaways

• Investing and paying down debt are both good uses for any spare cash you might have.
• Investing makes sense if you can earn more on your investments than your debts are costing you in terms of interest.
• Paying off high-interest debt is likely to provide a better return on your money than almost any investment.
• If you decide to pay down debt, start with your debts with the highest interest rates and work down from there.

Investing vs. Debt Repayment

Investing is a way to set money aside for the future, ideally in an investment vehicle—such as stocks, bonds, or mutual funds—that will grow in value over time.

Debt, on the other hand, represents money that you’ve already spent and that a lender is charging you interest on. Left unpaid, that debt will grow and grow, with interest charges adding to your balance and incurring interest charges of their own.

The Case for Investing

As a general rule, if you can earn more interest on your money by investing it than your debts are costing you, then it makes sense to invest. For example, if you have a mortgage with an interest rate of 5% and a stock market index fund that is returning 10% a year, you’ll come out ahead by investing your extra cash in the index fund.

On the other hand, if you have credit card debt at 20%, you would be better off putting your extra cash toward paying that debt rather than investing it in the index fund.

Unfortunately, it isn’t always that straightforward. Investments can be volatile. That index fund might be up 10% this year but down 10% next year. While there are investments that pay a guaranteed interest rate, such as bank certificates of deposit (CDs) and U.S. Treasury bills, they tend to have low rates of return that rarely exceed the interest rates charged by credit card companies and other lenders.

Another factor is more psychological: your risk tolerance. If you are comfortable taking the gamble that your investments will bob up and down with the markets, sometimes rising in value and sometimes losing value, then you are a better candidate for investing than someone who would lie awake at night worrying about what the market might do tomorrow.

The Case for Paying Down Debt

There are several good arguments for choosing to pay down debt rather than investing. The first, as mentioned above, is that you might come out ahead if your debt carries a relatively high interest rate. That’s especially true with credit card debt. The average interest rate on credit cards tracked in Investopedia’s credit card database was 24.20%, as of March 2025. Few investments can match that rate of return.

Another solid reason to pay down debt involves your credit score—a number that can be very important if you want to borrow money in the future, such as for a mortgage or a car loan. Having a low credit score can mean paying higher interest rates if you can get a loan at all.

Your credit score can even affect other aspects of your life, such as the premiums you’ll pay for insurance, whether a landlord will rent to you—and even whether an employer will hire you.

Note

If you’re a student, be careful of private loans as they are generally less flexible than federal student loans.

Credit scores are based on several factors. In the case of the most widely used one, the FICO score, your credit utilization ratio—the amount of credit you are currently using compared to how much credit you have available to you—accounts for a significant portion of your score.

So, for example, someone whose credit cards are all maxed out is likely to have a considerably lower score than someone whose credit cards have been paid off or at least paid down to a more reasonable level.

Paying off debt, particularly if you have a lot of it, can be a smart move for that reason alone.

As with investing, psychology comes into play here, too. If you’re losing sleep over your debts, then you could be better off repaying them—even if you might get a better return on your money by investing.

The Case for Doing Both

Paying down debt versus investing doesn’t have to be an either/or decision. You can, and sometimes should, do both. For example, if you don’t already have an emergency fund, you might want to use some of your money to create one, while using the rest to pay down your debts.

A good place to keep your emergency fund is a low-risk and highly liquid (that is, easily and quickly accessible) investment, such as a money market mutual fund.

How to Pay Off Debts

If you’ve decided to use your spare cash to pay off your debts, then the next question is how to go about it. If you have enough money to cover everything you owe, the answer is pretty simple: Just pay it off. However, if you don’t have that much cash to spare, then you will need to prioritize.

Generally speaking, you’ll get out of debt faster if you start by paying off your debt with the highest interest rate first and working your way down from there. For example, if you have balances on two credit cards, one that’s charging you 20% and the other charging 15%, tackle the 20% balance first.

In the case of credit card debt, you may also have another option: Transfer your balances to a card with a lower interest rate, then pay them off. Some balance transfer credit cards offer promotional periods of six to 18 months when they charge 0% interest, which can help you pay your balance down faster since you won’t be incurring additional interest.

Still, another option is a debt consolidation loan from a bank or other lender. The way that works is that you borrow enough money from the lender to pay off your other debts.

Now you just have one debt to worry about, ideally with a lower interest rate than your prior debts. You can then use your extra money to begin paying off that loan. Investopedia also publishes ratings of the best debt consolidation loans.

If You’re Really Deep in Debt

If your spare cash won’t begin to make a dent in your debt, then you may need to consider some more drastic measures. First, if you’re having trouble making even the minimum monthly payments on your credit cards or other loans, contact your lender. It may be willing to reduce your minimum payment or the interest rate on your debt.

A second option is hiring a reputable debt relief company to handle negotiations for you. This is an area that’s rife with scams, so make sure you know who you’re dealing with.

As the Federal Trade Commission notes, “These operations often charge cash-strapped consumers a large up-front fee, but then fail to help them settle or lower their debts—if they provide any service at all.”

How Can I Pay Down Debt?

There are a few strategies to pay down your debt. You should start with tackling your highest interest debt first as that can cause your debt to continue to grow. It’s important to have a budget to understand how your money is spent. After creating an emergency fund and covering your basic expenses, save additional money and use it toward paying down debt. This can include a bonus at work or a tax refund. Look into speaking with your creditors about better payment plans or lowering your interest rate. You can also seek to consolidate your data to make it easier to manage.

How Can I Start Investing?

Starting to invest is a fairly simple process. The easiest way is to open a brokerage account at an online brokerage, such as E*Trade or Fidelity. Next, deposit money into your account. This can usually be done as a direct transfer from your checking account. After that, decide what you’d like to invest in, such as stocks, and which stocks you’d like to purchase. Once you’ve decided, you can simply make a purchase order on the website of your broker.

What Types of Debts Should Be Avoided?

Not all debt is bad. Buying a home for example usually involves a mortgage, which is a form of debt, but it also helps you build equity through homeownership. Additionally, the interest rates are generally manageable. You should always avoid high interest rate debt, such as credit cards or payday loans which are difficult to pay off every month. Due to their high interest rates, your debt can spiral out of control and be difficult to reign in.

The Bottom Line

Having some extra cash is an enviable situation to be in. Whether to invest that money or use it to pay down your debts is a decision that only you can make. But either use is better than simply spending it. Whichever course you take, you’ll be in a better financial situation than you were in before.

Fact checked by Vikki Velasquez
Reviewed by JeFreda R. Brown

One group of powerful institutions, called global systemically important banks (G-SIBs), is so vital to the global economy that regulators fear their failure could trigger a systemic financial crisis. Identified by their size, complexity, and economic connections, G-SIBs are closely watched by regulators. They must adhere to more stringent standards than smaller banks, including the ability to take on a great flood of losses and still last past any financial storms.

Below, we take you through which banks count as G-SIBs, how they work, and the efforts of regulators to keep them stable in a fast-paced financial environment.

Key Takeaways

• Global systemically important banks (G-SIBs) are banks that regulators have identified as crucial to global financial stability.
• G-SIBs are determined by their size, interconnectedness, complexity, substitutability, and cross-jurisdiction.
• These banks face far more scrutiny from regulators, given that the health of the financial system depends on them.
• The Basel III regulations are among the tools used to mitigate G-SIB risks.

What Are Global Systemically Important Banks?

G-SIBs are a group of financial institutions with such significant economic weight that their failure could trigger global financial instability. The Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS) identify these banks based on their size, cross-jurisdictional activities, complexity, and interconnectedness. Different regulatory measures are in place to mitigate systemic risk for G-SIBs.

SIFIs vs. G-SIBs

Regulators often speak of two types of institutions that are “too big to fail”: systemically important financial institutions (SIFIs) and G-SIBs, which are related but distinct terms. In sum, while all G-SIBs are SIFIs, not all SIFIs are G-SIBs. We outline the differences in this table:

	SIFIs	G-SIBs
Scope	Broader range of financial institutions, including banks, insurance companies, and other nonbank financial institutions	Specifically refers to banks
Level of Systemic Importance	Systemically important at a national or regional level	Systemically important on a global scale
Impact of Failure	Significant impact on the financial system and economy of a particular country or region	Severe repercussions on the global financial system and economy, extending beyond national borders
Identification	Identified by national or regional regulations based on size, interconnectedness, complexity, and substitutability within their respective jurisdictions	Determined annually by the FSB and BCBS based on five factors: size, interconnectedness, substitutability, complexity, and cross-jurisdictional activity
Regulations	Subject to greater regulatory scrutiny as determined by national or regional authorities, which may include higher capital and liquidity requirements, stress testing, and recovery and resolution planning	Subject to additional regulations on top of those applied to SIFIs, such as higher capital buffers, total loss-absorbing capacity (TLAC) requirements, and more intensive supervision

Identifying Global Systemically Important Banks 

The FSB and the BCBS assess five criteria to identify G-SIBs: size, interconnectedness, substitutability, complexity, and cross-jurisdictional activity.

• Size: This is considered crucial since larger institutions have a greater potential to cause systemic disruptions if they fail.
• Interconnectedness: This criterion measures the extent to which a bank is linked to other institutions within the financial system, which means it has a greater potential for contagion effects.
• Complexity: This measures the range and intricacy of the bank’s financial instruments, which can complicate how failures are resolved.
• Substitutability/financial infrastructure: If a bank plays a significant role in a particular market or provides essential infrastructure, such as payment systems, its failure can cause substantial disruptions and liquidity issues. Customers of the failed bank may also face higher costs when seeking similar services elsewhere. Four metrics are used to measure this: assets under custody, payments activity, underwritten transactions in debt and equity markets, and trading volume.
• Cross-jurisdictional activity: This measures the global reach of the bank’s operations, reflecting the potential for cross-border transmission of financial shocks to different markets.

Each bank receives a score, and those surpassing a predetermined threshold are classified as G-SIBs. This classification determines the higher loss absorbency requirements and additional regulations that these banks must adhere to, as outlined in Basel III.

For example, although JPMorgan Chase & Co. (JPM) had about 29% less in assets in 2024 than the average of the four largest Chinese banks, it was ranked the highest in terms of the percentage of its capital it needed to hold back as a G-SIB. This is because other factors show Chase to be more central in different ways to major financial institutions and the economy.

For an example of how the G-SIB scores come together, below is a chart of three G-SIBs from 2022 data in each of the five criteria, along with their overall scores. In parentheses is the additional percentage of capital buffers that they must have on hand.

G-SIB Scores for JPMorgan Chase & Co., Bank of America, and Agricultural Bank of China

G-SIB Regulations

Introduced in the wake of the 2008 financial crisis, Basel III aims to strengthen the resilience of the global banking system. It imposes more stringent capital and liquidity requirements on banks, with G-SIBs subject to even higher standards.

G-SIBs must maintain larger capital buffers than those required for other banks with about $100 billion or more in assets. They must also meet the total loss-absorbing capacity (TLAC) standard, which ensures that G-SIBs have enough financial resources to go without taxpayer bailouts in an emergency. These measures, updated annually, aim to enhance the resilience of G-SIBs against economic shocks.

In addition to increased capital requirements, G-SIBs face stricter regulatory oversight and enhanced supervisory expectations. They must adhere to more rigorous liquidity and leverage ratios and undergo regular stress testing to assess their capacity to withstand major economic disruptions.

List of Global Systemically Important Banks

The last available list from the FSB, as of November 2024, includes these G-SIBs that are required to have more than 1.0% in additional capital buffers:

• JPMorgan Chase & Co., 2.5%
• Citigroup (C), 2.0%
• HSBC Holdings (HSBC), 2.0%
• Agricultural Bank of China (ACGBY), 1.5%
• Bank of America (BAC), 1.5%
• Bank of China (BACHY), 1.5%
• Barclays (BCS), 1.5%
• BNP Paribas (BNP), 1.5%
• China Construction Bank (0939.HK), 1.5%
• Deutsche Bank (DB), 1.5%
• Goldman Sachs (GS), 1.5%
• Groupe Crédit Agricole (CRARY), 1.5%
• Industrial and Commercial Bank of China (IDCBY), 1.5%
• Mitsubishi UFJ FG (MUFG), 1.5%
• UBS Group (UBS), 1.5%

The Role of G-SIBs in Systemic Risk and Financial Stability

Systemic risk refers to the potential collapse or significant disruption of the entire financial system, rather than just a single entity. The fear is that one bank failure could induce a cascading set of dangers that multiply and could soon engulf a sector or economy.

Mitigating the risk at the biggest banks is far easier than trying to stop the multiplying economic effects once they get started. The collapse of Lehman Brothers in September 2008 is a textbook example of how the failure of a large, interconnected institution can trigger a global financial crisis.

G-SIBs play a critical role in the international financial network. Their size, complexity, and the volume of other institutions that rely on them create a systemic risk. The failure or even pullback from the market of a G-SIB can amplify financial shocks through the system, making their stability crucial for preventing financial crises.

The role of G-SIBs in maintaining financial stability is somewhat paradoxical. While these banks are central to the efficient functioning of the global economy, enabling transactions and providing liquidity, they also pose cluster risks.

Recognizing the importance of G-SIBs, regulatory bodies have put in place stringent capital, leverage, and liquidity requirements. These measures, like the additional capital buffers, aim to enhance the resilience of G-SIBs, ensuring they can withstand financial shocks without resorting to government bailouts that can strain public resources and destabilize the global economy.

Real Example of G-SIB Impact

A pivotal event involving global systemically important banks (G-SIBs) was triggered by the collapse of Lehman Brothers, which filed for bankruptcy on Sept. 15, 2008. At the time, Lehman was the fourth-largest investment bank in the United States, with 25,000 employees worldwide and $639 billion in assets.

The collapse of Lehman is often cited as accelerating the 2008 global financial crisis. That crisis highlighted the risks that G-SIBs pose to global financial stability and underscored the need for regulations to make sure these risks don’t appear in the first place. The lessons from the crisis led to the creation and implementation of more robust regulations, including Basel III.

Future Outlook and Challenges

As the global financial landscape evolves, G-SIBs face several challenges on several fronts. One is the need to adapt to an increasingly complex regulatory environment.

Regulators are focused on enhancing resilience against systemic risks, as seen in the aftermath of banking sector challenges, including the collapse of Silicon Valley Bank in 2023. As regulators work to mitigate systemic risk, G-SIBs must navigate a web of new requirements, such as the Basel III reforms, which include higher capital and liquidity standards and the TLAC standard.

Another challenge for G-SIBs is the increasing adoption of digital technologies, such as blockchain and artificial intelligence, which some argue will disrupt traditional banking models. G-SIBs are investing in technology to remain competitive and meet changing customer expectations while managing the risks associated with these new technologies.

Climate change and the transition to a low-carbon economy also present challenges for G-SIBs. As investors and regulators increasingly focus on environmental, social, and governance factors, G-SIBs must align their strategies with sustainable finance principles. This may involve scaling back financing for carbon-intensive industries and increasing support for green projects and businesses. Mitigating the risks of climate change is but another way to mitigate systemic risk.

What Was Used Before the G-SIB Designation?

Before the G-SIB designation and the 2008 crisis, the regulation of large banks relied on the concept that critics called “too big to fail” and the Basel I and II accords. “Too big to fail” implied that some banks were so important that their collapse had to be prevented at all costs. The Basel Accords had guidelines for risk-based capital requirements and encouraged closer supervision of large banks.

However, these approaches lacked clear definitions for systemically important banks, leading to moral hazard and insufficient protection against collapse.

What Can Cause a G-SIB to Fail?

G-SIBs can fail because of excessive risk taking (such as investing heavily in volatile assets), inadequate capital buffers to absorb losses, interconnectedness with other financial institutions (meaning the failure of others could trigger their own problems), poor management, operational failures, fraud, or external shocks like a severe market downturn or macroeconomic shocks.

How Many G-SIBs Are There Worldwide?

As of the FSB’s November 2024 list, there are 29 G-SIBs worldwide. No banks were added or removed compared to 2023, but Groupe Crédit Agricole moved up (signifying a higher capital requirement) and Bank of America moved down (signifying a lower capital requirement).

Which Banks Are the Largest?

As of the last available data from 2024, the three largest banks globally in terms of total assets are the Industrial and Commercial Bank of China ($6.3 trillion), the Agricultural Bank of China ($5.6 trillion), and China Construction Bank Corp. ($5.4 trillion). The largest U.S. bank was JPMorgan Chase & Co. ($3.8 trillion).

The Bottom Line

G-SIBs are pivotal to the global financial system’s stability and have greater regulatory oversight to mitigate systemic risks. The complexity of their operations and interconnectedness with other financial institutions pose challenges. Enhanced capital requirements and risk management practices are in place that regulators hope can avoid future crises.

Fact checked by Suzanne Kvilhaug
Reviewed by Samantha Silberstein

About 47.4 million Americans are living with food insecurity, including 7.2 million children, according to a 2023 study from the U.S. Department of Agriculture. They make up about 13.5% of the nation’s households.

Food insecurity is a lack of confidence that a person will be able to get enough to eat from day to day to maintain good health.

Widespread hunger does not harm only the poor. The effects spread throughout the U.S. economy.

Key Takeaways

• Living with food insecurity means being unsure that food sufficient for healthy living will be available from day to day.
• The short-term consequences include illness and hunger.
• The long-term consequences include diminished lifetime earnings and poverty in old age.
• Food assistance programs are considered “automatic stabilizers” that deliver food to families while benefiting the grocery industry and its supply chains.

USAID and American Farmers

In 2023, the USAID program purchased more than one million metric tons of food from U.S. farmers for global distribution. In February 2025, President Donald Trump issued an executive order freezing the program for 90 days.

How Does Food Insecurity Impact the Economy?

When people cannot afford to buy enough good-quality food, it has significant negative effects on the economy, including, of course, affecting the health of the workforce.

For individuals, the malnutrition and sickness that food insecurity can cause leads to more absences from work. These illnesses, particularly when chronic, require massive resources for treatment. Food insecurity is also linked to low wages and neighborhood segregation.

Food insecurity is usually not fatal, as the so-called “extreme hunger” found in the poorest nations often is. Rather than a complete lack of food, food insecurity indicates a lack of access to nutritious food and a reliance on the cheapest and lowest-quality products.

Unlike extreme hunger, food insecurity is usually associated with low-income people living in advanced economies.  

Important

The effects of food insecurity can be severe for children. It can delay cognitive development, cause struggles with education and behavioral problems, and increase the risk of chronic illnesses.

Impact on the Workforce

Stronger economies have a higher labor force participation rate, which is the percentage of people of working age who are working or looking for work.

A healthy job market is one in which the labor force participation rate is high and the unemployment rate is low. Without enough sustenance, workers can find participating in the workforce to be extremely difficult.

Sustained food insecurity can lead to higher rates of chronic illness, causing both lost economic activity when people are kept from working and high healthcare bills. To participate at full capacity in the workforce, employees need enough nutrition.

Food insecurity in children impacts their parents’ ability to work. When children can’t go to school, parents may have to stay home with them, which can mean they are not contributing to the economy. The result is lost productivity.

Food insecurity can negatively affect the performance of childless people as well. It can increase presenteeism, when employees try to work through illness.

One way that companies calculate productivity is to measure output or units produced relative to total labor hours. Ultimately, food insecurity can reduce what a worker can produce and, therefore, reduce the competitiveness of their employer.

Impact on Children

Access to a stable food supply is critical for healthy physical and cognitive development in children. Not having food security can result in several physical and psychological harm. Education suffers when children cannot focus due to hunger.

Children who are suffering food insecurity are more likely to miss school or to try to work through hunger, which limits their performance. Absorbing information is more difficult when a student is distracted by hunger pains, regardless of age. 

Note

Students with food insecurity tend to fall behind in school. They can be unprepared for work later in life emotionally, socially, educationally, and even physically. This further harms the economy, as it affects the performance of future workers and, in turn, economic productivity.

Healthcare Costs

Food insecurity can result in significant healthcare costs. According to one analysis, food insecurity increases illness costs by tens of billions of dollars nationally while diminishing lifetime earnings. That includes lost work time and productivity and the cost of treating illnesses in people who are unlikely to be able to afford health insurance.

In the United States, diabetes is just one of the chronic illnesses exacerbated by food insecurity. The disease accounts for an estimated $1 of every $4 spent on healthcare in the country, including about a third of Medicare drug spending.

Diabetes accounts for high rates of complications and hospitalizations, along with a higher likelihood of comorbidities, including coronary disease. Economically, this translates to a large expenditure of resources on medical care. Chronic illnesses with other causes may also be exacerbated by food insecurity.

Impact of Food Insecurity Solutions

The attempts to solve food insecurity also carry economic consequences. 

Government Investments

Governments often spend money to try to reduce food insecurity. Their investments to stabilize access to food can positively impact the economy.

In the U.S., people who need access to food can get government-funded food stamps. Money spent by the Supplemental Nutrition Assistance Program (SNAP) delivers economic activity by triggering spending at farmer’s markets, grocery stores, and other locations where the benefit is accepted.

Federal studies have estimated that every $1 of federal spending increases gross domestic product (GDP) by $0.80 to $1.50, according to the U.S. Department of Agriculture (USDA), the federal agency that administers the SNAP program in America.

SNAP is considered an “automatic stabilizer” in economic recessions because the number of people who require assistance grows during economic downturns and shrinks during upturns.

Charitable Contributions

When addressing hunger is left to nonprofits, charitable contributions to those organizations are directed at hunger and food insecurity instead of other social issues. Anti-hunger advocates estimate that this money totals $17.8 billion in charitable contributions.

These donations represent an opportunity cost. That is, the contributions needed to address food insecurity displace money that would have gone to benefit other causes.

Why Is Food Important to the Economy?

Food production represents a significant chunk of the economy. In the U.S., food-related industries made up about 5.5% of gross domestic product as of 2023. It also made up 12.9% of household budgets, according to figures from the U.S. Department of Agriculture.

Where Does Food Insecurity Have the Greatest Impact?

In the U.S., food insecurity impacts more than twice as many Black and Latinx people as White people, according to the Food Research and Action Center, an anti-hunger advocacy group. Geographically, food insecurity is most common in Southern states, followed by the Midwest region.

How Does Food Waste Affect the Economy?

Food waste increases the price of food for consumers because it adds costs associated with transportation and disposal, which require labor, land, and energy. Wasted food can also represent a missed opportunity to provide nutrition to hungry people.

The Bottom Line

Food insecurity can affect current workforce participation and harm the future workforce, such as chronic school absences among children suffering from it. This insecurity also worsens chronic illnesses, which can carry staggering healthcare costs.

Some solutions to food insecurity, like social safety net programs, may boost the economy.