finance

Reviewed by Charlene Rhinehart
Fact checked by Yarilet Perez

Accrual vs. Accounts Payable: An Overview

Both accrual and accounts payable are accounting entries that appear on a company’s financial statements. An accrual is an accounting adjustment for items (e.g., revenues, expenses) that have been earned or incurred, but not yet recorded. Accounts payable is a liability to a creditor that denotes when a company owes money for goods or services and is a type of accrual.

Key Takeaways

• Accruals and accounts payable refer to accounting entries in the books of a company or business.
• Accruals are earned revenues and incurred expenses that have yet to be received or paid.
• Accounts payable are short-term debts, representing goods or services a company has received but not yet paid for.
• Accounts payable are a type of accrued liability.
• Both accruals and accounts payable impact financial analysis based on how they’re reported and interpreted.

Accrual

Under the accrual accounting method, an accrual occurs when a company’s good or service is delivered prior to receiving payment, or when a company receives a good or service prior to paying for it.

For example, when a business sells something on predetermined credit terms, the funds from the sale are considered accrued revenue. The accruals must be added via adjusting journal entries so that the financial statements report these amounts.

Say a software company offers you a monthly subscription for one of their programs, billing you for the subscription at the end of every month. The revenue made from the software subscription is recognized on the company’s income statement as accrued revenue in the month the service was delivered—say, February.

At the same time, an accounts receivable asset account is created on the company’s balance sheet. When you actually pay your bill in March, the accounts receivable account is reduced, and the company’s cash account goes up.

There are several different types of accruals. The most common include goodwill, future tax liabilities, future interest expenses, accounts receivable (like the revenue in our example above), and accounts payable.

Important

All accounts payable are actually a type of accrual, but not all accruals are accounts payable.

Accounts Payable

Accounts payable is a specific type of accrual. It occurs when a company receives a good or service prior to paying for it, incurring a financial obligation to a supplier or creditor.

Accounts payable represent debts that must be paid off within a given period, usually a short-term one (under a year). Generally, they involve expenditures related to business operations. They do not include employee wages or loan repayments.

Under the accrual accounting method, when a company incurs an expense, the transaction is recorded as an accounts payable liability on the balance sheet and as an expense on the income statement.

As a result, if someone looks at the balance in the accounts payable category, they will see the total amount the business owes all of its vendors and short-term lenders. When the expense is paid, the accounts payable liability account decreases, and the asset used to pay for the liability also decreases.

For example, imagine a business buys some new computer software, and 30 days later, gets a $500 invoice for it. When the accounting department receives the invoice, it records a $500 debit in the office expenses account and a $500 credit to the accounts payable liability account.

The company then writes a check to pay the bill, so the accountant enters a $500 credit back to the checking account and enters a debit of $500 from the accounts payable column.

Impact on Financial Analysis

Both accruals and accounts payable impact how managers, investors, and analysts interpret a company’s financial health. Accruals are revenue earned or expenses incurred before cash changes hands, which helps match revenue and costs to the correct period.

However, high levels of accrued revenue may signal that large amounts of a company’s sales haven’t yet been recognized. This could raise concerns about potential cash flow returns despite the strong recorded profits.

Accounts payable, on the other hand, directly affect a company’s liquidity. Increasing levels of accounts payable could indicate a company is purposely conserving cash by delaying payments, or it might spell financial trouble if a company is actually having a hard time making those payments.

Additionally, the timing of these entries is important, especially during reporting periods. Companies can speed up revenue recognition or delay expenses to alter financial results. While this is technically legal under accounting laws, it distorts the actual financial performance.

Understanding the timing and effects of accruals and payables is important for investors and analysts to make smart, thoughtful decisions.

How Do You Improve Accounts Payable?

Improving accounts payable is about paying your company bills on time. To do this, streamline the process to make it as efficient as possible. Automate invoice approvals, pay digitally rather than with physical money (cash/checks), set up automatic payment reminders, and automate payments. Additionally, make sure there’s a process to review your payments in order to avoid double payment or any other errors.

What Is Accrual in Accounting?

Accrual in accounting is a process that records revenue and expenses when they’re earned or incurred, rather than when cash actually changes hands. For example, you deliver milk to an ice cream company in July but are paid for it in August. You’ll record the revenue in July because that’s when you earned it, even if you receive the money in August. The same is true for expenses. The point of accrual accounting is to create an accurate picture of a company’s health.

What Is the Difference Between Accounts Receivable and Accounts Payable?

Accounts receivable and accounts payable are both line items on a company’s balance sheet. Accounts receivable is an asset and represents the money owed to a company from customers that bought goods or services on credit. Accounts payable is a liability that represents money a company owes its suppliers for goods and services it has received. Accounts receivable is money coming in while accounts payable is money going out.

The Bottom Line

Accruals and accounts payable are two important aspects of financial accounting, however, they both paint a different picture of a company’s financial position. Accruals help match income and expenses to the right period, which gives a clear picture of performance. Accounts payable track short-term debts.

Understanding the role each plays in accounting and a company’s business will help investors and analysts get real insight into the financial health of the company, helping them make informed decisions.

Aviation, healthcare, and renewable energy

Reviewed by Thomas J. Catalano

The General Electric Co. (GE) is one of the oldest industrial conglomerates in the U.S. It was founded by Thomas Edison in 1892, under the name Edison General Electric Company. By 2000, it had become the nation’s largest company, with a market capitalization of over $600 billion.

GE has been a leading innovator throughout its history. Starting with Edison’s first commercially-viable incandescent lamp, the company’s earliest products included light bulbs, an electric locomotive, X-ray machines, and an electric stove.

But GE produces more than just electrical machinery, and the company was once a major player in the world of banking, plastics, computers, and even television broadcasting. Today, GE’s holdings span the sectors of renewable energy, aviation, and healthcare. The company has been winding down in recent years through spinoffs and divestments, and recently split into three separate public companies in April 2024.

In the fiscal year that ended December 31, 2024, the company posted net earnings attributable to its common shareholders of $6.7 billion, on revenue of $39 billion. The company’s market cap was $198 billion, as of the close of trading on April 2025.

Below, we look at five of GE’s major business segments from the end of 2023 and how they’ve changed in 2024.

Key Takeaways

• The General Electric Co. (GE) is one of the oldest and largest industrial conglomerates in the U.S. It was founded by Thomas Edison in 1892.
• Originally a manufacturer of electrical equipment, GE later branched out into diverse areas including aviation, computers, plastics, banking, and even television broadcasting.
• GE Research has been responsible for major innovations such as the first American jet engine, the first commercial nuclear powerplant, and the first synthetic diamonds.
• Over the past decades, GE has sold or spun off most of its subsidiaries in order to reduce significant levels of debt.
• In 2024, GE completed a three-way split into GE Aerospace, GE Vernova, and GE Healthcare.

GE Aerospace

• Revenue (FY 2023): $31.8 billion
• Profit (FY 2023): $6.1 billion

GE has been a leader in developing aviation technology. The company built the first U.S. jet engine, the I-A, in 1942. In 1949, GE developed the J47, which would become the most-produced jet engine in history.

Today, GE Aerospace designs and manufactures commercial and military aircraft engines, engine components, and electric power and mechanical aircraft systems. The unit also offers aftermarket services to support its products. Following the spinoffs of GE’s renewable energy and healthcare units, GE is now solely focused on its aviation operations. This division, its biggest revenue generator, will be tied to its ticker (GE).

Note

GE is also an old hand in the entertainment business. In 1926, one of GE’s subsidiaries launched the National Broadcasting Corporation, better known today as NBC.

GE Power (now GE Vernova)

• Revenue (FY 2023): $17.7 billion
• Profit (FY 2023): $1.4 billion

Even before founding General Electric, Thomas Edison had already created the first electrical grid in 1882. His company played a pivotal role in developing the technology to generate and distribute energy.

Over the following decades, GE continued to lead in energy innovation, introducing the first commercial nuclear reactor in 1957. More recently, the company offered gas and steam turbines that use fossil fuels or nuclear power to produce electricity. Today, the GE Power segment was combined with GE Renewable Energy and GE Digital to form a new energy unit, GE Vernova (GEV), following a spinoff in April 2024.

GE Renewable Energy (now GE Vernova)

• Revenue (FY 2023): $15.1 billion
• Profit (FY 2023): -$1.4 billion

In addition to power and energy resources, the company develops and operates alternative forms of energy. GE Renewable Energy, which was a major GE business segment as of 2023, had over 400 gigawatts of installed capacity worldwide. GE is the largest producer of wind turbines in America, and the company’s wind and gas generators produce roughly 30% of the global share of electricity.

As mentioned above, the company combined GE Power, GE Renewable Energy, and its GE Digital business, which provides software that helps companies to analyze and optimize their operations, into GE Vernova in early 2024.

GE Healthcare

• Revenue (FY 2023): $19.6 billion
• Profit (FY 2023): $7.9 billion

GE has been a healthcare innovator almost since its founding. As early as 1896, the company was building electrical equipment for the production of X-ray machines.

Today, GE Healthcare comprises one of the company’s primary business segments. The company specializes in medical imaging, patient monitoring and diagnostics, drug discovery, and more. It operates in more than 160 countries and employs about 51,000 people worldwide.

GE spun off its healthcare unit into a separate public company in early 2023 while still retaining a 19.9% stake. The newly-formed company focuses on precision health, an approach to healthcare that accounts for patients’ unique genetic, behavioral, and environmental characteristics. It currently operates under the ticker (GEHC).

GE Capital

GE was once a major player in the banking and insurance industries, with half a trillion in total assets and over 35,000 employees worldwide in 2012. In fact, Money Magazine applauded GE Capital Bank for having the best savings account in the U.S. in 2013.

Starting in 2015, the company began to sell off most of its banking and finance arms. Over the following two years, further consolidation took place as additional business units were folded into other GE business arms, such as healthcare or aviation.

However, there are still a few remnants of GE’s financial empire, including GE Energy Services and GE Credit Union. However, revenues from GE Capital are no longer tallied as a separate business segment and were reported under “Corporate” in 2023.

Important

GE Capital suffered heavily in the 2008 Great Recession, due to its overexposure to commercial real estate and subprime lending. These losses prompted the company to shed most of its financial operations.

What Companies Does General Electric Own?

As of 2024, General Electric split into three distinct companies: GE Aerospace, GE Vernova, and GE Healthcare. GE Aerospace operates under its original ticker, (GE), while its energy unit GE Verona debuted as (GEV). GE Healthcare trades under the ticker (GEHC).

What Has GE Sold Off?

Following the 2008 financial crisis, GE was forced to sell off many of its peripheral businesses to other companies. GE Plastics was sold to Saudi Arabia in 2007; GE Transportation was sold to Wabtec; GE Appliances was sold to Haier, and most of the company’s financial operations were sold to Wells Fargo and other banks. The company also sold its last stake in NBCUniversal to Comcast in 2014.

Is General Electric Owned By China?

No. In 2016 General Electric sold GE Appliances to Haier Group, a Chinese conglomerate based in Qingdao. This sale was misreported on social media platforms as a direct purchase of GE by China.

Does GE Still Own GE Capital?

Although GE still owns the GE Capital name, it has sold most of its banking and finance operations to other companies. CEO Jeff Immelt announced in 2015 that the company would sell $200 billion of GE Capital’s assets, except for those parts used to fund the core operations of aviation, energy, and healthcare. The last division of GE Capital, GE Energy Financial Services, recently became a part of GE Vernova.

The Bottom Line

General Electric was once the largest conglomerate in the United States, and the name GE is still nearly synonymous with American entrepreneurship and ingenuity. However, the company has shrunk in recent decades, as company leaders have spun off or sold many of the company’s subsidiaries. After a three-way split in 2024, GE will become solely focused on the aviation industry following the spinoff of the company’s healthcare and energy divisions.

Fact checked by Timothy Li
Reviewed by Khadija Khartit

Jordan Belfort embodied Wall Street’s reputation for greed and ruthlessness. In 1999, Belfort pleaded guilty to multiple crimes related to stock market manipulation and a long-term scam involving penny stocks.

He leveraged his Wall Street experiences to become a prominent speaker and author. Belfort penned two memoirs, “The Wolf of Wall Street,” which inspired a major Hollywood film, and “Way of the Wolf.”

Key Takeaways

• Jordan Belfort is a former Wall Street trader and founded Stratton Oakmont, Inc.
• Belfort pleaded guilty to fraud and was sentenced to four years in prison, but served 22 months before his release.
• Belfort wrote two memoirs: “The Wolf of Wall Street ” and “Way of the Wolf.”

Education and Career

Born in 1962, Jordan Belfort grew up in Queens, N.Y. According to his memoir “The Wolf of Wall Street,” Belfort worked with a friend to sell Italian water ice desserts from inexpensive styrofoam coolers at a beach near his childhood home, earning $20,000 in the summer between high school and college.

Belfort studied biology at American University and planned to enroll in dental school. However, when the dean of the University of Maryland School of Dentistry warned students on the first day that dentistry was not a path to financial success, Belfort dropped out.

Belfort worked as a salesperson in Long Island and grew the business with a team, selling more than two tons of meat and seafood per week. At age 25, Belfort filed for bankruptcy when the venture failed. He launched his career as a stockbroker and at age 30, founded Stratton Oakmont Inc., an over-the-counter brokerage. Stratton Oakmont was linked to the IPOs of nearly three dozen companies, including the IPO for the footwear company Steve Madden.

Note

Footwear executive Steve Madden spent time in prison following his dealings with Belfort’s Stratton Oakmont. From 1991 through 1997, Madden participated in stock manipulations led by Stratton Oakmont and Monroe Parker Securities, Inc.

Convicted of Fraud

Illegal dealings as the leader of Stratton Oakmont ultimately sent Jordan Belfort to prison. Stratton Oakmont participated in pump-and-dump schemes to artificially inflate the price of penny stocks. The firm was considered a boiler room, with a team that pressured investors to invest in highly speculative securities.

Throughout Stratton Oakmont’s history, the National Association of Securities Dealers (NASD) pursued consistent legal actions against the firm. In 1996, the firm shuttered.

In 1999, Belfort and his associate Danny Porush were indicted for money laundering and securities fraud. Belfort pleaded guilty to fraud, which may have cost his investors as much as $200 million. He was sentenced to four years and ordered to pay over $110 million in restitution. Ultimately, he served 22 months.

Life After Prison

Following his release from prison in 2006, Belfort was required to pay 50% of his income to his defrauded former investors through 2009. Federal prosecutors filed a complaint in 2013 alleging that Belfort hadn’t paid the appropriate amount. Belfort reached a separate deal with federal authorities to complete the restitution payments. Reports suggest he repaid only about 10% of the restitution he owed.

Belfort faced criticism for profiting from his story of defrauding innocent people, while many of his victims were not fully compensated. Belfort reinvented himself as a motivational speaker. One of his primary topics was the distinction between greed, ambition, and passion on Wall Street. He runs corporate training focused on building effective sales teams.

Is “The Wolf of Wall Street” a True Story?

The movie is based on Jordan Belfort’s memoir. It details his time as a Wall Street stockbroker and his conviction for financial fraud.

Has Jordan Belfort Committed Crimes Since His Time in Prison?

Belfort has been the subject of fraud investigations since his release in 2006. In 2014, media outlets uncovered ties between Belfort and an Australian employee training company for a suspected scam involving government funding. However, no charges were filed.

What Is Securities Fraud?

According to the SEC, “securities fraud” includes crimes like the unregistered offer or sale of securities, Ponzi schemes, misappropriation of funds, and insider trading.

The Bottom Line

Jordan Belfort is a former Wall Street trader guilty of crimes related to stock market manipulation and fraud, serving 22 months of a four-year prison sentence. Belfort wrote two memoirs, one adapted for the movie “The Wolf of Wall Street.” Belfort reinvented himself as a motivational speaker and a corporate sales trainer.

Insights from a financial advisor

Estate planning is an important part of financial preparedness, yet it’s often overlooked. According to a survey conducted by Caring.com, the amount of Americans with a will declined from 33% in 2022 to 24% in 2025.

One key element of estate planning often overlooked is choosing an executor—the person responsible for carrying out your final wishes. This person will handle financial matters, communicate with beneficiaries, and ensure that your wishes are followed after you pass away. It’s a big responsibility, and it’s important to choose wisely.

Key Takeaways

• An executor is responsible for managing your estate and ensuring your will is followed.
• The best choice is someone responsible, organized, and financially savvy.
• Family dynamics should be considered—this can be stressful for loved ones, and choosing a neutral party may help avoid conflicts.
• A professional executor, such as a trust company or attorney, can be an alternative if needed.

What I’m Telling My Clients

Choosing the Right Executor

Many may think that their spouse or eldest child is the natural choice for executor by default, but that isn’t always the best decision. The ideal person for this role should be responsible, detail-oriented, and comfortable handling finances. Being an executor involves a lot of paperwork, from filing tax returns to settling debts and distributing assets. Someone who is well-organized and able to communicate clearly with beneficiaries will make the process much smoother.

Navigating Family Dynamics

Estate matters can be sensitive, and disagreements over money or property can create tension among family members. If selecting one child over another could lead to conflict, it might be better to name a neutral party, such as a trusted family friend or an attorney.

Having open conversations about estate plans ahead of time can also help minimize surprises. If beneficiaries understand the reasoning behind your decision, they’re less likely to feel hurt or left out when the time comes.

Tip

Review your estate plan every few years to ensure the executor is still the right fit for your needs.

Hiring a Professional Executor

Not everyone has a family member or friend who is the right fit for this role. In these cases, I discuss the option of hiring a professional executor. Banks, trust companies, and attorneys can act as executors, ensuring everything is handled legally and efficiently. While these services come with a fee, they can be worth the cost for those who want a neutral, experienced person to manage their estate.

Important

 It’s wise to name a backup executor in case your first choice is unable or unwilling to serve when the time comes.

The Bottom Line

Choosing an executor is one of the most important decisions in estate planning. The right person will help carry out your wishes smoothly and effectively. Taking the time to choose carefully—and clearly communicating your decision—can make a big difference in staying organized and avoiding family conflicts. This will ultimately give you and your loved ones peace of mind, knowing you have a well-thought-out plan in place.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal, and/or tax advice. Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor.

Fact checked by Vikki Velasquez

While some retirees envision settling along the coastline, others are looking for an alternative to crowded beaches. If you’d still like to enjoy a warm summer, mild winter, and sunny skies, it might be time to consider other up-and-coming retirement destinations along the country’s Sun Belt. 

In Longview, Texas, for example, retirees are finding a surprisingly affordable retirement destination with an active community centered around small-town charm and natural appeal. Located in Gregg County, with a population of just over 83,700, Longview is quiet enough to provide a relaxing retirement backdrop without limiting access to resources like health care, entertainment, and restaurants.  

Key Takeaways

• Longview, TX, offers a lower living cost than other parts of Texas and the U.S.
• Longview’s monthly housing costs are still less than half the national average ($1,017 vs $2,120 nationwide).
• The city boasts rich cultural and historical attractions that appeal to retirees, such as The Longview Museum of Fine Arts.
• Longview offers abundant outdoor and recreational activities with nearby lakes and parks.
• Gregg County, where Longview is located, is home to 10 hospitals and 330 health care establishments. 

Cost of Living in Longview, TX

The general cost of living in Longview, TX is lower than the national average, which is a benefit for those in retirement concerned about managing expenses on a fixed income. 

The median household income in Gregg County, where Longview is located, is $64,809, about $15,800 less than the national median. Median monthly housing costs for the county are relatively low as well, coming in at just a little over $1,000 a month. While the housing and rental markets vary greatly across different regions, Longview’s monthly housing costs are still less than half the national average ($1,017 vs $2,120 nationwide).

Even within the Lone Star state, Longview is a relatively affordable city compared to other larger, more metropolitan areas (like Houston and Dallas). While the state’s median home price is around $337,800, houses in Longview have a median value of $185,800. This is also less than the national average of $419,200. For budget-conscious retirees looking to make the most of their resources, Longview’s relatively low housing costs and home values can be an attractive option for retirement.

Health Care and Accessibility

When selecting your ideal retirement destination, be proactive and realistic about what type of care, support, and services you could require in the coming years. As adults age, they will likely need ongoing medical treatment and specialized care. Around 85% of adults 65 and older have at least one chronic disease, such as heart disease, that requires ongoing management and treatment. 

While Longview is a relatively small city, it offers retirees access to several large hospital networks. Gregg County is home to 10 hospitals and 330 health care establishments. 

Tip

Keep in mind that when you move to a new state or city, you may need to obtain new health insurance coverage, even if you’re on Medicare or Medicaid. As you consider providers and coverage options, take a look at what’s largely accepted in Longview. 

In terms of transportation, Longview’s options are limited. Owning and driving your own car may be best, considering the area surrounding Longview is relatively rural. You will, however, be able to access ride shares like Uber or Lyft if you don’t want to drive. Taxis are also available, but you’ll need to make arrangements ahead of time and expect longer wait times. Unlike major cities like New York or Los Angeles, they aren’t easily accessible from every street corner.

The Longview Transit bus system runs several routes daily, except Sundays and holidays. If you live outside the main city limits, however, you may have difficulties finding a stop near your home or destination, depending on where you’re headed.  

If you plan on traveling often (or plan to host family from out of town often), keep in mind the closest airport to Longview is in Dallas, about two hours away.

Lifestyle and Recreational Activities

What’s a retirement destination without fun things to do? Longview has more to it than meets the eye, and retirees may be pleasantly surprised at the variety of activities and community events happening all year. 

The residents of Longview celebrate big in true Texas fashion, from its springtime rodeo lineup to the Great Texas Balloon Race, Gregg County Fair, Fireworks & Freedom Fourth of July Celebration, and more. Longview hosts celebrations, festivals, and events every single month, making it an active, vibrant community hub for retirees looking to get involved and have some fun. 

If you enjoy a bit of learning while taking long, leisurely walks, you’ll want to visit must-see museums like:

• The Longview Museum of Fine Arts
• Gregg County Historical Museum
• The Longview World of Wonders

Or, when the sun’s shining, and you’re looking to spend some time outdoors, go for a stroll through the Longview Arboretum and Nature Center. 

For those looking for a little more activity in retirement, Longview is within easy driving distance to Lake O’ the Pines, an 18,700-acre lake encompassing 9,000 acres of forest and land that offers prime opportunities for camping, hiking, fishing, boating, and even bird watching.

Like many other southern cities, Longview boasts mild winters and hot summers, making it an optimal spot to enjoy outdoor activities nearly all year long. That said, those moving to Texas for the first time should be aware of the potential climate risks, including tornadoes, severe heat, and wildfires. Due to these potential concerns, FEMA ranks Longview’s climate risk as relatively moderate.

The Bottom Line

The Sun Belt region is home to many warm and inviting retirement destinations, but few offer the unique blend of affordability and entertainment that Longview does. With its sense of small-town community, combined with easy health care accessibility, it may just be an ideal destination for those looking to enjoy their retirement in a quiet and relaxed setting. 

Reviewed by Erika Rasure
Fact checked by Suzanne Kvilhaug

In most parts of the United States, a child becomes a legal adult when they turn 18 years old. This is known as the age of majority, meaning that your child is now legally entitled to both the rights and the responsibilities of adulthood.

The exceptions are Alabama and Nebraska, where the age of majority is 19, and Mississippi, which sets it at 21.

This changes your rights as a parent, even if your child is still a dependent. For example, if your 18-year-old were incapacitated due to an illness or injury, you would not automatically be able to make medical decisions on their behalf.

Some families may be ready for their 18-year-olds to take on full legal and financial responsibility for themselves. Others, however, may want or need to use the next few years to help their child transition to managing these decisions for themselves. If your child still wants your help managing their healthcare, finances, and education, the two of you need to put certain legal documents in place.

Key Takeaways

• In most states, your child reaches the age of majority at age 18, meaning they are now a legal adult.
• When your child reaches the age of majority, you are no longer entitled to information about their healthcare, finances, or education.
• Anyone age 18 and older must give written consent before another adult, even a parent, can see their medical information or make medical decisions for them.
• Medical power of attorney (POA) allows one adult to make healthcare decisions for another if the second adult becomes incapacitated.
• Durable POA allows you to make financial and legal decisions for another adult, while a FERPA release allows access another adult’s educational records.
• A living will authorizes one adult to make life-extending medical decisions for another adult, including decisions about organ donation.

HIPAA Authorization

The Health Insurance Portability and Accountability Act (HIPAA) was enacted to manage private medical information. It sets standards for how medical information is stored and shared to prevent fraud and protect patient privacy. HIPAA dictates that while some medical information about a person may be released to third party, it will only be under certain circumstances and only as much information as is required by those circumstances. For example, a hospital can send information about a medical procedure to a health insurance company in order to receive payment.

For parents of young adults, this means that you no longer have the right to view or access your child’s private healthcare information, even if they are on your insurance (though you can still see the information on any bills that you receive.)

Important

Many pediatricians will ask for consent from their adolescent patients, even before age 18, before sharing certain health information with parents unless disclosure is required by law. This confidentiality is designed to encourage positive healthcare outcomes and guide adolescent patients toward taking control of their own healthcare by the time they are a legal adult.

If you and your child agree that you should still have access to their healthcare information—for example, if you assist them with managing a chronic illness or potentially life-threatening condition—they can authorize the release of certain information to you with a HIPAA release form. Your child must be the one to sign the authorization, which will include an expiration date, and they have the right to revoke their consent at any point.

While you have the option to ask your child to sign a HIPAA release form, your child has the right to refuse. You may also decide that you don’t need one. If you have been teaching your child to take responsibility for their doctors’ appointments, and if you trust them to share important information with you, legal paperwork may not be necessary for you to continue helping them manage their healthcare decisions.

Note

If your child is age 24 or younger and a full-time student, you can still claim them as a dependent on your taxes. Otherwise, they stop being a dependent after age 19. However, children can stay on a parent’s health insurance plan until age 26, even if they are no longer a legal dependent.

Medical Power of Attorney

When your child turns 18, they can sign a form granting you medical power of attorney. Medical power of attorney—also known as healthcare power of attorney or a healthcare proxy—allows you to make medical decisions for your child if they are incapacitated or otherwise unable to do so.

This doesn’t give you the right to make all your child’s medical decisions. They can still, for example, consent to surgery, or choose a course of treatment on their own. However, if they are incapacitated, you will be able to serve as their personal representative.

For example, if your child is having surgery and is placed under anesthesia, you should be designated as their personal representative so you can make any necessary medical decisions. Medical power of attorney also applies in more extreme cases. A designated personal representative, for example, can make decisions for someone who is in a coma.

Both you and your child should designate someone who has medical power of attorney for you. Personal representatives can be a spouse, partner, friend, parent, or adult child.

Durable Power of Attorney

In addition to health care power of attorney, your child can grant you durable power of attorney. This allows you to manage financial and business matters for them if they are incapacitated or otherwise unable to do so themselves, such as accessing bank accounts, renewing a car registration, or signing a tax return on your child’s behalf.

For example, if your child is out of the country studying abroad and has a problem with their bank, durable power of attorney would allow you to resolve the issue on their behalf. Your child can also grant limited power of attorney and restrict which transactions or accounts you can access. Durable power of attorney can also be granted with a specific start and stop date.

If your child is at college and you want to be able to access their tuition or housing account, some schools will allow you to set this up without needing to have durable power of attorney. You also have the right to access any bank or credit card accounts of which you are a joint owner.

FERPA Release

The Family Educational Rights and Privacy Act (FERPA) provides parents with certain rights regarding their child’s educational records, such as grades, transcripts, and disciplinary records. Parents have the right to access these records, request that they be amended, or limit who they are shared with. However, these rights transfer to the child at age 18. At that point, FERPA requires that students provide written consent before their education records can be shared with parents.

This law applies to any school that receive funding from the U.S. Department of Education, so most public high schools, colleges, and universities, as well as some private ones, will notify parents of the requirement. If your child wants you to be able to access their records, they will need to sign a release granting you permission to do so.

Living Will

Finally, your child should put together a living will, also known as an advance directive. This document outlines their wishes regarding end-of-life medical decisions, such as life-extending treatments or organ donation. State law regarding living wills varies; some have a standard form, while others allow you to draft your document.

Having a living will in place can help avoid the anguish of different family members disagreeing about how to handle a tragedy, such as a car accident that leaves your child in a coma. It will only impact medical treatment in situations that involve life-continuing care, not routine medical care or medical conditions that are not life-threatening. A living will is only used when the person whose life is at stake is incapacitated or unable to make decisions.

The Bottom Line

As your child moves into adulthood, it’s important to consider which legal documents you need to have them sign and which you can do without. In some cases, such as seeing grades or health information, building a trusting and open relationship with your child may serve you better than insisting on legal access to their information, while also helping them learn to take responsibility for their own medical, academic, and financial responsibilities.

However, some legal documents should never be skipped. Every adult should designate a representative (or representatives) with medical power of attorney and durable power of attorney for emergency situations, and every adult should have a living will to ensure that their end-of-life wishes are honored. That doesn’t just mean your child. While you are helping them put these documents together, make sure your own paperwork is in order as well.

Reviewed by David Kindness

The three leading money transfer services are PayPal, MoneyGram, and Xoom, which have varying levels of fees that can be calculated online, such as the MoneyGram fee estimator. Typically, these companies charge varying fees based on the origin country and receiving country; the size of the transfer; whether the recipient account is a bank account, debit or credit card, or other transfer accounts; and whether the transfer is between family members or in payment for goods.

In this article, we’ll compare PayPal fees to MoneyGram fees and Xoom fees, all based on the type of transaction whether personal, commercial, or international.

Key Takeaways

• PayPal, MoneyGram, and Xoom are the three leading money transfer services that can be used to send money to recipients in the United States and overseas.
• PayPal does not charge a fee if both sender and recipient have a PayPal account and the funds come from a bank account or PayPal balance.
• MoneyGram fees range from $3.00 if no debit or credit card is used.
• Xoom charges fees that vary greatly based upon the amount being sent, from where the funds come, and how they will be received.
• These platforms aren’t the only way to transfer money and you can turn to other options as well.

Transfer Fees: PayPal vs. MoneyGram vs. Xoom

Transfer fees are standard charges collected by these money transfer platforms in order for them to be profitable. While some can be thought of as service charges, other transfer fees are derived from other fees, such as international currency exchange fees, that are passed on to the individual. Transfer fees ultimately allow PayPal, MoneyGram, and Xoom to be profitable.

PayPal Transfer Fees

PayPal does not charge a fee, either to the sender or recipient, when funds are sent within the United States. Both sender and recipient must have PayPal accounts. The funds must come from their PayPal balance or linked bank account.

Fees are only charged on PayPal if the money is coming from a linked credit or debit card, if money is being sent internationally, or if you are collecting payment as a merchant or vendor. If the funds are coming from a credit card, debit card, or PayPal Credit, the platform charges 2.9% of the transaction plus 30 cents. PayPal also does not charge a fee for shoppers, whether online or in stores, operating instead like a secure bank account to pay for goods and services.

MoneyGram Transfer Fees

MoneyGram fees tend to be higher than PayPal’s: for a direct transfer from a sender’s online bank account, debit, or credit card to a recipient’s debit card, the company charges a flat $1.99 fee. This fee applies whether the customer is sending $1 or the maximum $10,000. However, if the cash will be picked up in person at a MoneyGram location by the recipient, this fee jumps to $5.99 if coming from a bank account, and $13.99 if coming from a debit or credit card.

Xoom Transfer Fees

Xoom, which is owned by PayPal, charges a fee of 1% on all transactions up to $999, and $10 on transactions of $1,000 or more. Funding sources include PayPal USD, PayPal balance, bank account, debit card, or credit card (though additional fees may be charged by your card’s issuer for the latter two options). Transactions of $10,000 and up to $19,999 require 24-hours to process. Transactions of $20,000 and up to $29,999 require 30 days and any amount over $30,000 will need 180 days to process. To understand how Xoom money transfers work, users can also estimate fees at Xoom’s website.

PayPal Merchant Fees

PayPal offers a host of payment processing services for merchants. Its standard transaction fee is 3.49% plus 49 cents. If the PayPal account is located outside the U.S., the fee is 3.49% plus the fixed fee rate for the other country, plus an additional percentage-based fee for international commercial transactions of 1.5%.

International Transfer Fees: PayPal vs. MoneyGram vs. Xoom

When it comes to international transfer fees, a foreign currency exchange rate is involved, making the transaction more costly. In addition, platforms such as MoneyGram openly disclose that the company makes money off of the foreign currency spread, which fluctuates daily.

Important

When sending money abroad, the service provider typically earns money on the foreign currency spread in addition to the stated fees being charged.

PayPal International Transfer Fees

PayPal charges a 5% transaction fee when U.S. account holders send money to other PayPal account holders located outside the U.S. A minimum fee of $0.99 applies, and the maximum fee is $4.99. If the funding source is a credit card or debit card, the account holder pays an additional 2.9% of the transaction amount, plus a fixed fee based on the currency.

MoneyGram International Transfer Fees

MoneyGram operates in more than 200 countries and territories. It has digital capabilities in more than 150 countries and 400,000 physical locations that are either company-owned or operated by a business agent. When it comes to global money transfers, the company earns revenue in two ways: on the transaction fee and also on the foreign currency spread.

A customer sending $100 to a bank account in Mexico would pay $1.99 if the funds originate from a debit and $6.49 if from a credit card. If the funds are being sent for cash pick-up, the MoneyGram fee charged for debit would be $3.99 and fee charged for credit is $8.49. As of April 2024, MoneyGram is quoting an exchange rate of 17.38 pesos to the dollar.

Xoom International Transfer Fees

Xoom, which also makes money on foreign currency transactions, offers a slightly better exchange rate of 16.79 pesos to the dollar as of April 2024. In addition, its fee structure is comparable to MoneyGram’s.

On a $100 transfer, Xoom charges users $2.99 if the money comes from a PayPal balance or bank account and is deposited directly into a bank account, or $3.99 if the funds come from a debit or credit card. Fees for cash that is picked up by the recipient in person, no matter how it’s sent, will be charged $3.99 in fees.

Comparing Fees Between MoneyGram, PayPal, and Xoom

Transfer fees range based on the kind of transaction you are trying to make. As a rule of thumb, PayPal is the best option to transfer money between bank accounts, MoneyGram or Xoom are usually cheaper for transferring money from a sender’s debit or credit card to a recipient’s bank account, and MoneyGram has no fee for international transfers.

Transfer Fees: MoneyGram, PayPal, Xoom
Transfer Fees	PayPal	MoneyGram	Xoom
Within the U.S. (bank account → bank account)	No fee	$1.99	1% on all transactions up to $999, and $10 on transactions of $1,000 or more
Within the U.S. (debit/credit card → bank account)	2.9% of the transaction + $0.30 flat fee	$1.99	$1.99
International ($100 from U.S. to Mexico)	$5.00	No fee	$2.99

MoneyGram Fees FAQs 

What Are MoneyGram Fees?

MoneyGram fees are the service fees charged by the company in order to process your transaction. In the case of sending money internationally, MoneyGram fees also factor in a currency exchange rate fee. MoneyGram makes money from currency exchanges.

How Much Does It Cost to Send a MoneyGram at Walmart?

MoneyGram fees at Walmart are the same at any other MoneyGram location: typically a flat $1.99 for most transfers within the United States, if being sent directly to a recipient’s bank account or debit card.

How Much Does MoneyGram Charge to Send $200?

Fees vary. Within the United States, for example, MoneyGram charges $2.99 to transfer $200 from a sender’s debit card to a recipient’s online bank account.

Which Is Cheaper: Western Union or MoneyGram?

Within the United States, Western Union is cheaper than MoneyGram to send $100 via an online bank account: $0 for Western Union compared to $1.89 for MoneyGram. And Western Union doesn’t charge for sending via bank account or debit card, but does charge $2.50 for credit card funding. MoneyGram charges $6.59 for credit card funding.

How Do I Receive Money From MoneyGram?

Money can be received via MoneyGram through a direct online bank account or debit card deposit or picked up in cash at a MoneyGram location.

The Bottom Line

When using a money transfer platform, transaction fees vary greatly depending on how you are sending the money, where you’re sending it, and how it will be received. Online platforms aren’t the only way to transfer money, however: if these fees are too expensive for you, check out some other low-cost ways to transfer money.

Running a small business is not for the faint of heart

Fact checked by Ryan Eichler
Reviewed by Khadija Khartit

According to the Bureau of Labor Statistics, over 20% of small businesses fail within the first year. Only 35% of private-sector companies established in 2013 continued to thrive in 2023. That means approximately two-thirds failed during the ten years.

Common reasons small businesses fail to take hold include a lack of capital or funding, retaining an inadequate management team, a faulty infrastructure or business model, and unsuccessful marketing initiatives.

Key Takeaways

• Low capital and funding are a small business’s greatest risk.
• Outsourcing tasks can allow business owners to focus on operations.
• Creating and maintaining an accurate business plan is beneficial for small businesses.
• Poorly executed marketing campaigns can negatively affect revenue.

Financing Hurdles

Small businesses can fail due to a lack of funding or working capital. Business owners fund payroll, pay fixed and overhead expenses such as rent and utilities, and ensure outside vendors are paid on time.

Owners of failing companies may overestimate revenue generated by sales of products or services. Companies may underprice a product or service to entice new customers and beat competition in highly saturated industries. Small businesses have little choice but to close down when costs outweigh revenue.

Small companies in the startup phase face challenges in obtaining financing to bring a new product to market, fund an expansion, or pay for ongoing marketing costs. Angel investors, venture capitalists, and conventional bank loans are among the funding sources available to small businesses. The Small Business Administration also offers a variety of loan programs.

See Investopedia’s choices for Best Startup Business Loans.

Lack of Management Skills

A lack of business acumen on the part of the management team or owner can cripple a small business. The owner may have the skills to create and sell a viable product or service, but lacks the attributes of a strong manager and doesn’t have the time to successfully oversee other employees.

Mismanagement can lead to problems with finances, hiring, or marketing. If owners outsource activities like IT support, human resources, or payroll, they can focus more on operations.

Ineffective Business Plan

Entrepreneurs should have a solid understanding of their industry and competition before starting a company. Small businesses often overlook the importance of effective business planning before opening their doors. Creating and maintaining a business plan is key to running a successful company for the long term. A sound business plan should include:

• A clear description of the business
• Current and future employee and management needs
• Opportunities and threats within the broader market
• Capital needs, including projected cash flow and various budgets
• Marketing initiatives
• Competitor analysis

Marketing Mishaps

Business owners often fail to prepare for marketing needs in conversion-ratio projections. Having realistic projections of target audience reach and sales is critical because it may prove difficult for companies to secure financing or redirect capital from other business departments to supplement the costs associated with marketing campaigns.

What Emergencies Should Small Businesses Prepare For?

Every business has different weaknesses. Hazards like fire, natural disasters, or cyberattacks can negatively affect or close a company. The Small Business Administration and the U.S. Department of Homeland Security offer tips to help mitigate cyberattacks and prepare for emergencies.

What Are Signs That a Business Is Failing?

Signs that a business is failing include small levels or lack of cash, inability to pay back loans or vendors on time, loss of clientele, and an unclear business strategy.

How Do Small Business Owners Fund New Companies?

Business owners commonly establish a realistic budget for new company operations and are ready to provide initial capital from personal savings or loans from family or friends.

The Bottom Line

New businesses face several challenges when they first open their doors. Statistics gathered by the U.S. Small Business Association reveal a daunting failure rate. Running out of money and lack of experience are the greatest risks but new business owners have options to increase their odds of success. The Small Business Association offers and supports several loan programs. Seeking advice and education from experienced professionals can help, too.

Fact checked by Katrina Munichiello

Buying a home can feel overwhelming, but it doesn’t have to. This guide breaks down the steps you’ll take before, during, and after buying a home, so you can move forward with confidence. These include securing a mortgage, making a competitive offer, and scheduling a home inspection.

Key Takeaways

• Before you start house hunting, take some time to think about what your must-haves and deal breakers are.
• A trusted real estate agent can find listings on your behalf and help you determine an appropriate amount to offer a home seller.
• After closing on a home, ongoing maintenance and budgeting are crucial for protecting your investment.

What You Should Know Before You Start Shopping

Before you begin looking for a home, there are a few things you’ll want to think through first:

• Home type: There are a few different types of homes, including single-family homes, townhouses, condominiums, co-operatives, or multi-family properties. You’ll need to figure out which one best suits your lifestyle.
• Property features: Putting together a list of the key features you can’t live without, as well as those you’d like but aren’t essential, will make it easier to stay focused on what matters most to you during your home search.
• Mortgage amount: Use a mortgage calculator to get an estimate of what you can afford based on your income, outstanding debt, and expenses.
• Home price: In addition to your mortgage payment, consider how property taxes and homeowners insurance will factor into your total monthly housing cost. Lenders typically require that your housing expenses be less than or equal to 25%–28% of your gross monthly income.
• Down payment and closing costs: Plan to make a down payment between 3.5% and 20% depending on your loan type. Closing costs usually range from 2%–5% of the home’s purchase price.
• Real estate agent: Once you have all of the prior points figured out, a real estate agent can help you find listings, sift through offers, and navigate the transaction process.

Warning

First-time homebuyers may qualify for down payment assistance, grants, and more. According to the United States Department of Urban Development (HUD), you’re considered a first-time homebuyer if any of the following apply to you:

• You (or your spouse) haven’t owned a primary residence in the past three years.
• You’re a single parent who only owned a home with your former spouse while married.
• You’re a displaced homemaker who previously only owned a home with a spouse.
• Your previous home wasn’t attached to a permanent foundation.
• Your previous home wasn’t up to code and couldn’t reasonably be brought into compliance.

The 5 Steps to Buying a Home

1. Shop Around

Don’t settle for the first house on the market that you come across. In addition to exploring online listings, you can also find out about homes for sale via your real estate agent as well as referrals from friends or family. Once you’ve found a few places that you’re interested in, see if any of them have open houses or if you can schedule private showings.

Try to keep an open mind about properties that need minor improvements. Temporarily putting up with cosmetic flaws may mean getting an affordable home that otherwise perfectly suits your needs.

2. Find a Lender

In addition to shopping around for homes, you’ll also want to do the same when considering mortgage lenders, as this can help you find the best rates and terms currently available. Getting pre-approved with a few lenders will give you a better sense of how much you’ll be able to borrow. Not only that, but getting pre-approved shows sellers that you’re serious about buying a home—some lenders won’t even consider an offer without a pre-approval letter.

Warning

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).

Keep in mind that being pre-approved letter isn’t a guarantee, as the lender can always rescind its offer. This is especially likely to occur if your credit score lowers between receiving the pre-approval letter and the conclusion of the full underwriting process, so don’t take out any additional loans until you’ve closed on the home.

It’s a good idea to have pre-approvals from a few backup lenders to give you a better chance of securing funding.

3. Submit an Offer

Once you’ve found both the right home and the right lender, your real estate agent will help you determine a competitive offer based on the home’s market value. If the seller accepts, you’ll make a good-faith deposit to show you’re serious, and you’ll enter escrow. During this time, the seller will take the home off the market and make it available for inspection.

4. Inspect the Home

While not always required, it’s typically a good idea to have a home professionally inspected after a seller’s accepted your offer. That way, should any undisclosed issues be found, you can renegotiate or break off the agreement and keep your deposit.

Your lender will also arrange for a home appraisal to confirm the property’s value. If the home is determined to be less valuable than previously anticipated, then the lender will only provide you with a mortgage equal to that lower amount. As such, you need to find a way to cover that funding gap yourself, if possible.

5. Close on the Home

If everything looks good (or a new deal has been reached, if needed), you’ll then finalize your mortgage, sign the required paperwork, and pay your down payment and closing costs. Once all of that’s taken care of, you’ll receive the keys and officially own the home.

What to Do After Buying a Home

Now that you’ve closed on the property, there’s some work you’ll need to put in as a new homeowner in order to protect your investment.

• Stay on top of maintenance: Create a seasonal checklist to keep track of anything in your home that’ll require routine maintenance. It’s important to address minor problems before they become larger, more expensive ones.
• Start saving for rainy days: You should also consider building an emergency fund to pay for any unexpected repairs. Saving 1%–2% of your home’s value each year for this purpose is a good rule of thumb.
• Keep saving for retirement: Don’t rely solely on your home as your retirement plan. Once your mortgage is paid off, consider redirecting that money toward your retirement or investment accounts.

The Bottom Line

Buying a home is a big step, but it should feel less daunting once you understand the process. The more prepared you are, the better your chances of getting your ideal home while staying within your budget. Before beginning your search, consider consulting with a real estate or financial professional for more guidance on your specific situation.

Fact checked by Suzanne Kvilhaug
Reviewed by Julius Mansa

It’s an attractive proposition: Generate financial returns while backing companies committed to developing environmentally sustainable technologies, products, and services. Rather than relying solely on government policy or personal consumption habits to fight climate change, they let their money and the power of the markets go to work.

While often grouped under environmental, social, and governance (ESG) framework, green investing—also called eco-investing or sustainable investing—is focused on environmental sustainability, especially producing clean energy and reducing carbon emissions. Below, we take you through how exchange-traded funds (ETFs) are acting as a conduit for green investing.

Key Takeaways

• While environmental, social, and governance (ESG) investing includes an environmental component, green investing focuses on it: clean energy, sustainable infrastructure, and reducing carbon emissions.
• Green ETFs offer investors the chance to diversify while investing in sustainability and avoiding single-company risk in emerging sectors.
• While long-term returns for renewables-focused companies remain promising, investors are likely to face periodic volatility due to shifting political winds in the U.S.
• Beware of greenwashing if you’re committed to the fight against climate change. Some funds exaggerate the environmental credentials of the companies they’re invested in.

What Are Green ETFs?

Green ETFs let investors take on climate change by investing in companies engaged in that fight, whether by producing solar power and battery storage or developing green buildings. This investment is critical. According to one estimate, investment in renewable energy needs to triple during the 2020s if the world is to fight climate change effectively.

As the climate crisis worsens, the number of green ETFs has risen, but so too have claims of “greenwashing” by funds looking to attract money with exaggerated claims. Regulators have tried to clamp down on such practices, but investors still need to conduct due diligence to be sure they’re investing in the right ETFs. They also need to be aware of higher levels of volatility that can come with investing in industries that can be heavily affected by policy.

While some green ETFs track broad ESG indexes that lean toward environmental impact, most focus on environmental impact, offering an accessible way for institutions and individuals to align their portfolios with their environmental goals. The advantage of doing so via ETFs is that investors don’t have to research individual stocks or worry about picking winners and losers in emerging industries. They can immediately achieve diversification while enjoying the convenience and cost-effectiveness of buying and selling green ETFs on traditional exchanges.

As with ETFs in general, some green ETFs are more narrowly focused than others. You might invest in a broad range of companies across multiple sectors, or concentrate in “pure” play sectors—a handful of solar or wind-power companies, for example. Those that are more narrowly focused can be especially sensitive to any change in government policy because many rely on the support of government initiatives or carbon-emission regulations. That’s been the case in the mid-2020s, with cuts from the current administration.

Note

A survey of fund managers found that more than 60% say that companies that perform poorly on environmental or social issues metrics will lag behind companies that don’t.

Returns and Volatility

The idea that sustainable investing comes with weaker returns is increasingly being called into question. While green investing may underperform when other sectors are booming—think oil and gas immediately after the Russian invasion of Ukraine—the growing consensus among fund managers is that performance on environmental and social issues is linked with financial outcomes. In one survey, 67% of managers of sustainable funds and 61% of traditional fund managers said companies that perform poorly on environmental or social issues will lag companies that don’t.

But that doesn’t mean green investing won’t be a bumpy ride, especially in the short term. After several years of huge inflows, since 2022 many green funds have seen sharp declines in value as well as massive outflows. Several factors have driven these results. Higher interest rates have made financing clean energy projects more expensive, supply chain issues have slowed development, and inflation has pushed up costs. Some sectors, especially solar, have also struggled with overproduction.

Politics is also a risk. Much of the gains seen in the early 2020s were driven by green-friendly policies from the Biden administration. Some of these were canceled during the beginning of Donald Trump’s second term, which contributed to a wave of outflows from renewable-focused ETFs. The largest clean energy funds, including iShares Global Clean Energy ETF (ICLN) and Invesco Solar ETF (TAN), experienced sharp losses following the election.

Still, some analysts view the recent downturn as a mere correction from the days of peak ESG enthusiasm. They say rising capital costs could be a temporary setback rather than a long-term deterrent, and point to broad support for the clean energy transition both worldwide and among a significant share of Americans. The expectation is that the long-term growth trajectory remains intact, despite the mid-2020s bearishness.

‘Greenwashing’

With interest in sustainability investing surging, some fund managers have engaged in “greenwashing,” making false or exaggerated claims about the environmental merits of their funds, undermining both investor trust and the broader fight against climate change.

Regulators are beginning to crack down. In one high-profile case, New York-based WisdomTree agreed to pay $4 million to settle charges by the U.S. Securities and Exchange Commission (SEC) that three ETFs it had labeled as ESG had later invested in coal mining and natural gas extraction.

In another case, fund manager DWS Investments, which is controlled by Deutsche Bank (DB), agreed to pay $25 million to settle allegations that it overstated the ESG characteristics of its funds and violated anti-money-laundering rules.

To fight this, the SEC amended its “Names Rule” in 2023, requiring funds to invest at least 80% of their assets in line with the themes suggested by their names, including ESG strategies. Still, investors should carefully examine the holdings of any green ETF to make sure they’re getting into the kind of investments they’re promised.

Warning

While regulators are cracking down on “greenwashing,” investors who are committed to the fight against climate change should still scrutinize the holdings of any green ETF they’re considering.

Evaluating Green ETFs

There are several steps investors can take to verify a green ETF‘s environmental credentials.

• Read the fund’s prospectus. It will outline the stated investment strategy and objectives, including the criteria for selecting companies. Does it rely on proprietary analysis or widely accepted third-party screening systems? Does it use exclusionary screening—merely avoiding companies that don’t meet sustainability standards—or does it focus on “pure play” companies in green sectors?
• Look at the fund’s actual holdings. Make sure the holdings align with your values. Do you see companies that you personally consider objectionable for environmental reasons?
• Look at third-party certifications. A stamp of approval from organizations like Fairtrade, BioGro Organic, and B Corp lends credibility to the fund’s claim to green status. Compare how these different groups rate the fund and their criteria for doing so.
• Ask questions. Don’t be afraid to contact the fund provider and ask detailed questions about their holdings and how they select them.

The Bottom Line

Green ETFs offer an accessible, potentially impactful way for the average investor to support the battle against climate change while pursuing meaningful financial returns. But they come with their own risks, including greenwashing and policy-induced volatility, so it’s essential for all investors to do their homework.