financial education

KEY TAKEAWAYS

• President Donald Trump’s 25% tariffs on Canada and Mexico, and the doubling of levies on goods from China, took effect Tuesday—and Beijing and Ottawa immediately hit back.
• In response to the additional 10% in tariffs imposed by the U.S. on imports from China, Beijing slapped tariffs on a wide array of farm goods it buys from the U.S. and imposed export controls on some American defense companies.
• Canada hit back with 25% tariffs on C$30 billion ($27 billion) worth of U.S. goods, while tariffs on C$125 billion of products will come into effect in 21 days.

President Donald Trump’s 25% tariffs on Canada and Mexico, and the doubling of 10% levies on goods from China, took effect Tuesday—and Beijing and Ottawa immediately hit back.

U.S. stock futures are little changed, though stocks had closed sharply lower Monday as investors worried that Trump’s sweeping tariffs would escalate a trade war with America’s largest trading partners while hurting the economy.

Beijing retaliated with a slew of levies on a wide array of farm goods China buys from the U.S. and imposed export controls on more American companies—including several defense firms.

The Chinese Ministry of Finance announced 15% tariffs on imports of chicken, wheat, corn, and cotton from the U.S., as well as 10% tariffs on imports of sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products starting March 10. Beijing also added 15 American companies to an export-control list, including several U.S. defense firms. 

Canada Also Hits Back as Trump’s Tariffs Take Effect

Canada also retaliated after Trump’s tariffs took effect following a monthlong pause of their implementation.

Canadian Prime Minister Justin Trudeau said Ottawa would impose 25% tariffs on C$30 billion ($27 billion) worth of U.S. goods starting Tuesday, while tariffs on C$125 billion of products will come into effect in 21 days.

“Our tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Trudeau said.

Reviewed by JeFreda R. Brown

The eurozone, also called the euro area, is a union of 20 European Union member states that have officially adopted the euro as their primary currency and sole legal tender. These member states exist under one monetary authority, the Eurosystem.

At the beginning of 2018, Italy was the third-largest economy in the currency bloc. When Italy entered into a deep political and economic crisis, it was a concern for the European Union (EU) and the global markets. At the time, Italy accounted for 11% of the EU’s gross domestic product (GDP).

At the end of September 2018, the ruling coalition comprising the Five Star Movement (M5S)—a political party that espoused a populist, anti-establishment view (and was critical of the EU)—and the Lega Nord—also a political party in Italy—submitted their 2019 budget to the European Commission.

The proposed spending plan called for a deficit equal to 2.4% of the gross domestic product (GDP). At the same time, Italy’s total government debt was equal to 134% of the GDP (more than double the eurozone limit); the eurozone contingent had been pressuring Italy to decrease its debt. As a result, this move upset Italy’s eurozone partners.

Key Takeaways

• Italy’s political and economic crisis in 2018 caused problems in the eurozone and global markets, with its high debt and unstable government.
• Difficulties between Italy’s populist coalition and pro-EU leaders led to government instability.
• Italy’s economy has long struggled with slow growth, high debt, and unemployment, but recent years have exhibited improvement.
• The election of Giorgia Meloni as prime minister in 2022 has brought political stability, with her government focusing on tax cuts and a stronger role for Italy in the EU.

Failure to Form a Stable Government

Political chaos and the failure to form a stable coalition government were at the root of the problems in Italy. Despite several weeks of prolonged discussions and negotiations, an agreement failed to materialize between the EU-skeptic populist group, M5S, and the pro-EU establishment lawmakers. This left the country in a deep political and economic crisis.

After the March 2018 vote produced a hung parliament, Italy was without a proper government. At this time, the populist M5S party emerged as the largest contender; they attempted to join the far-right Lega Nord party to form a coalition government. While the two groups agreed on Giuseppe Conte, a law professor, to be their prime ministerial candidate, his surprise resignation shortly thereafter caused a stir.

This development was attributed to President Sergio Mattarella’s refusal to accept a euro-skeptic candidate, Paolo Savona, as economy minister. Savona had been an opponent of the single currency in the past, calling it a “German Cage.” He has also advocated for a “Plan B” alternative to EU membership.

Under the law, the Italian president has the authority to block individual cabinet appointments. As M5S and Lega Nord refused to offer a different choice for finance minister, the coalition went for a toss. Instead, President Mattarella appointed former International Monetary Fund (IMF) official Carlo Cottarelli as interim prime minister; this paved the way for another round of elections.

Cottarelli thus became responsible for planning the new elections, as well as for introducing the new budget. (Cottarelli has a reputation for significantly cutting down on public spending, which has earned him the title “Mr. Scissors.”)

Unfortunately, this decision by the president did not bode well with the M5S and Lega Nord parties. Mattarella, who was instituted by the earlier pro-EU government, faced calls for impeachment from the leaders of M5S, as a result of Mattarella’s refusal to accept Savona as economy minister, appointing Cottarelli as interim prime minister, and mandating fresh elections.

At the time, Lega Nord’s leaders did not support the impeachment that the leaders of M5S were calling for. When these political developments hit the Italian economy, it caused further turmoil.

Weak Fundamentals in the Italian Economy

Many of Italy’s economic problems were longstanding, including a high number of problem loans on its central banks’ balance sheets, combined with decades of slow growth.

The country ranks among the countries with the highest government debt to GDP. Its total debt level was $2.5 trillion in 2019 ($3.2 trillion in 2025), and the country has been facing high unemployment since before the 2007-2009 financial crisis made things worse. The unemployment rate has significantly decreased since 2014, however, when it was 12.77%, and as of 2024, it is 7%.

In fact, after the 2008 financial crisis, Italy never made any significant strides towards a recovery. Greece and Italy were the two of the advanced economies carrying the highest debt burden at the beginning of the crisis; in subsequent years, only Greece suffered a more severe and more protracted economic depression. 

Note

The countries with the highest debt to GDP as of 2023 are Sudan, Japan, Lebanon, Greece, Singapore, Argentina, and Italy.

Political Shifts and Improvements

Italy’s politics took a dramatic shift in 2022 when Giorgia Meloni was elected as the country’s first female prime minister. Her party, Brothers of Italy, formed a right-wing coalition with Lega and Forza Italia, focusing on nationalistic agendas.

She has focused on stricter immigration policies, tax cuts, and a stronger role for Italy in the EU. In December 2024, the government passed the budget for 2025, valued at $31 billion, which involved tax cuts and social security benefits for low-income citizens.

While the Italian economy has been improving, it also continues to face challenges. Economic growth in 2024 was a meager 0.7%, below the 1% target; however, the budget deficit fell from 7.2% of GDP in 2023 to 3.4% in 2024. Public debt remains high at 135% of GDP but has significantly come down from 146% in 2021.

Though the country still has many obstacles to face, the economy and stability of the nation have improved since 2018.

Is Italy Doing Well Economically?

Italy’s economy is complicated. While the country is the fourth-largest economy in Europe, and its unemployment and budget deficits have decreased, the country still faces significant challenges. Economic growth has been slow and public debt as a percent of GDP is extremely high. Tourism, luxury goods, and manufacturing are the highlights of Italy’s economy but low productivity and continued challenges in political stability are a drag on the nation.

What Is the Largest Economy in Europe?

The largest economy in Europe is Germany, followed by the United Kingdom, France, Italy, Russia, and Spain.

What Is Italy’s Biggest Industry?

Italy’s biggest industry is services, which accounts for over 70% of GDP. This includes tourism, retail, and finance. Italy is one of the most visited countries in the world thanks to the fame of its cities and regions like Rome, Florence, Venice, and Tuscany. It is also home to many luxury brands, including Ferrari, Lamborghini, Prada, Versace, Gucci, and Armani.

The Bottom Line

Italy has come a long way from the political and economic instability in 2018 that caused problems for the country and the eurozone. While the country still struggles with high debt and slow growth, political shifts with Meloni’s election have brought some stability.

Budget deficits have shrunk, unemployment has decreased, and despite only modest economic growth, Italy is on a stronger footing than it was in 2018.

Warren Buffett, the renowned billionaire investor and CEO of Berkshire Hathaway Inc. (BRK.A), has long been a vocal advocate for tax equity, emphasizing that the wealthy and large corporations should pay their fair share.

In recent statements, Buffett has made clear that his company’s outsized tax payments—at $26.8 billion in 2024, it was the largest tax payment in U.S. history—are a point of pride for him, revealing further his philosophy about corporate responsibility and growth.

Key Takeaways

• Warren Buffett believes that fair taxation from large corporations and wealthy individuals would reduce the tax burden faced by ordinary Americans.
• He argues balancing the tax system would allow the U.S. to manage the increasing fiscal deficit and provide enough funding for public services and infrastructure.

Buffet’s Statements on Corporate Taxes

At Berkshire Hathaway’s 2024 annual meeting, Buffett argued that federal taxes could be effectively zero for every American if some 800 companies had paid their fair share of taxes while also noting that his company paid over $5 billion at a 21% federal rate for 2023. That figure would vastly increase for the 2024 tax year—the $26.8 billion U.S. federal tax bill, he said, was the equivalent of 5% of all corporate taxes owed that year. Added together, Buffett said, Berkshire Hathaway’s total cash payments to the IRS over the years have been more than $101 billion.

While his statement is largely rhetorical—he’d need to specify what he means by “fair” to test the ability of 800 companies to pay all U.S. income taxes—he has long emphasized the potential contributions missing from large corporations.

Breakdown of 2023 Federal Tax Revenue
Revenue Source	Amount ($ Trillions)	Percentage of Total
Individual Income Taxes	$2.18	48.7%
Payroll Taxes	$1.63	36.6%
Corporate Income Taxes	$0.421	9.4%
Other (Customs, Excise, etc.)	$0.169	3.8%
Total	$4.47 trillion	100%

Billionaires and the “Buffett Rule”

In addition to criticizing corporate tax, Buffett has come out against ultrawealthy individuals. “The wealthy are definitely undertaxed relative to the general population,” Buffett remarked in a 2019 CNBC interview. He contends that the current tax system—by granting preferential rates and many loopholes—allows billionaires like himself to pay only a fraction of what they reasonably should, ultimately shifting an unfair burden onto ordinary Americans.

Buffett has said his own low effective tax rate (around 0.1% between 2014 and 2018) isn’t an endorsement of the current system—it’s exactly the problem he highlights. In his view, the current tax code disproportionately favors the ultrawealthy and allows them to pay far less, percentage-wise, than ordinary workers.

His advocacy for increasing the earned-income tax credit (EITC) and addressing dynastic wealth stems from a broader desire to level the playing field. If the tax code were reformed to eliminate loopholes and preferential rates, even someone like Buffett would pay a higher, fairer rate.

Buffet’s position gained attention when he supported tax legislation that emerged in 2011 during President Obama’s administration. The regulation would have imposed a minimum 30% tax for people who made more than $1 million each year, and became known as the “Buffett Rule” because Warren Buffet revealed that he paid taxes at a rate of only 17.4% while his secretary paid 35.8% due to differential tax rates on capital gains versus ordinary income. 

Critics, however, argued that the Buffett Rule was effectively a capital gains tax rate hike that would hurt business growth. Ultimately, the bill didn’t receive enough votes in Congress to pass.

Buffett has famously remarked that he wants his kids to have enough money to pursue their goals but not so much they don’t need to work.

The Bottom Line

Through his persistent arguments and public statements, Warren Buffet has argued that the current tax system in the U.S. disproportionately benefits wealthy individuals and corporations and supports changes that would raise their tax obligations to bring about a fairer system, even if that means he would also have to pay a higher tax bill.

These self-made women have risen to the top of a variety of industries

Reviewed by JeFreda R. Brown
Fact checked by Pete Rathburn

In recent decades, several women have risen to the top of their fields, building impressive businesses and brands. Below is a list of 10 of the most successful women entrepreneurs who have made a significant mark in various industries.

This list is in no particular order and is by no means exhaustive—it simply strives to recognize women who have built world-renowned brands.

Key Takeaways

• More and more women are becoming business leaders and innovators.
• While there are a handful of woman founders from the past, such as Estée Lauder, the last few decades have marked a great upsurge in self-made women in business.
• Women entrepreneurs are historically most known for running fashion houses or cosmetic companies, but more recently, many have made their mark in other industries, such as real estate and pharmaceuticals.

Real Estate

Zhang Xin

Zhang Xin is co-founder of SOHO China, a real estate development firm in China that went public in 2007. Known as “the woman who built Beijing,” she was a factory worker before graduating from Cambridge University with a master’s degree in economic development. Zhang worked for Goldman Sachs before launching her company. She has since amassed a $1.1 billion fortune, as of March 2025.

Biotechnology

Kiran Mazumdar-Shaw

Kiran Mazumdar-Shaw is the founder of Biocon, a global biopharmaceutical company. She began Biocon out of a rented shed and grew it into India’s largest listed biopharma firm in terms of revenue. Biocon went public in 2004 and became the second Indian company to reach $1 billion on its first trading day. Mazumdar-Shaw has a net worth of $2.8 billion, as of March 2025. 

Workforce Management

Janice Bryant Howroyd

Janice Bryant Howroyd is the founder and CEO of ActOne Group, the first Black female-led company to bring in more than $1 billion in annual revenue. ActOne is a Los Angeles-based employment agency and consultancy with more than 17,000 clients in 33 countries. Like many of her counterparts on this list, Howroyd started from very humble beginnings, launching her company with just $1,500 in 1978.

Entertainment and Media

Oprah Winfrey

Media mogul Oprah Winfrey has built a large media empire throughout her career. Winfrey, a TV personality turned entrepreneur, co-founded Oxygen Media in 2000. She continued hosting her talk show until 2011, subsequently creating OWN: Oprah Winfrey Network, which she leads as CEO. In 2015, Winfrey bought an equity stake in Weight Watchers International and was a spokeswoman for the popular subscription weight loss program. She stepped down from the board of Weight Watchers in February 2024. Winfrey has a net worth of $3 billion as of March 2025, according to Forbes.

Beyoncé Knowles-Carter

The singer-songwriter, who began her career in the mid-1990s as a member of Destiny’s Child, has since become a top-selling solo artist. Beyoncé signed a $50 million endorsement deal with PepsiCo in 2012. In 2010, she founded Parkwood Entertainment, a management, production, entertainment company and record label. In 2019, she landed a three-project contract with Netflix worth $60 million.

Arianna Huffington

Arianna Huffington launched the news website The Huffington Post in 2005. She sold it to AOL in 2011 but continued to guide it and grow the Huffington brand overseas. In that same year, Time Magazine included her in its list of the world’s 100 most influential people. In 2016, she stepped down from The Huffington Post to launch health and wellness startup Thrive Global, which she leads as CEO. Huffington has also authored 15 books.

Note

In the U.S., businesses owned by women are growing at more than double the rate of all other firms. Women-owned businesses contribute nearly $3 trillion to the economy and are directly responsible for 23 million jobs, according to the World Bank.

Fashion and Beauty

Tory Burch

Founder of her namesake company, Tory Burch launched her U.S.-based clothing and fashion line in 2004. She was included in Forbes’ 50 Over 50 (Lifestyle) in 2022 and America’s Self-Made Women list in 2023. Burch is also a philanthropist who launched the Tory Burch Foundation to support women entrepreneurs.

Sara Blakely

The inventor of Spanx undergarments for women and men, Blakely started with only $5,000 of her own money, an idea, and pure drive. Today, the brand is sold in more than 50 countries. Blakely also has a foundation to help women worldwide. To support women entrepreneurs during the 2020 economic crisis, she teamed up with GlobalGiving to launch the Red Backpack Fund, which awarded more than a thousand $5,000 awards to women business owners.

Katie Rodan and Kathy Fields

The co-founders of skincare company Rodan + Fields felt so strongly about eradicating acne for all ages that they joined together to develop their flagship product, Proactiv, in 1995. The makers have since taken the dermatologic knowledge that helped them conquer the acne market to the anti-aging skincare market. Kathy Fields has a net worth of $500 million as of May 2024 and Katie Rodan has a net worth of $440 million as of May 2024. Both are included in Forbes’ 2024 America’s Richest Self-Made Women list.

Rihanna

Just 37 years old, Rihanna is the youngest woman on this list. The superstar singer has made most of her $1.4 billion fortune (as of March 2025) from Fenty Beauty, a cosmetics line she co-owns with luxury goods group LVMH. She also co-owns Savage X Fenty, a lingerie line, with investors. Her foundation, the Clara Lionel Foundation, distributed $7.1 million across 10 regions in 2023. Rihanna headlined the Super Bowl LVII halftime show in 2023, revealing that she was pregnant with her second child.

Who Are the Top Women Entrepreneurs?

Women entrepreneurs have shaped many industries. Zhang Xin is known as “the woman who built Beijing” thanks to her work in real estate as co-founder of SOHO China. Kiran Mazumdar-Shaw founded Biocon, the largest listed biopharmaceutical company in India based on revenues. Janice Bryant Howroyd co-founded ActOne Group, a workforce management firm with over 17,000 clients in 33 countries. ActOne was the first Black-owned company to achieve $1 billion in annual revenues. Ariana Huffington, The Huffington Post founder, sold the publication to AOL for $315 million in 2011. Rihanna, singer and business owner, runs Fenty Beauty, a billion-dollar company.

Who Are the Top Women Entrepreneurs in Entertainment?

With a net worth of $2.8 billion, Oprah Winfrey is one of the most famous entrepreneurs in media and entertainment. Winfrey runs the multinational cable network OWN and co-founded Oxygen Media. Ariana Huffington, Rihanna, and Beyoncé are among the top entrepreneurs in media and entertainment.

Who Are Notable Women Entrepreneurs?

Behind the scene of many well-known companies and brands are women founders and entrepreneurs. 23andMe, a DNA testing company, was co-founded by Anne Wojcicki in 2006. Robotics firm Automation Anywhere was co-founded by Neeti Mehta in San Jose, California. Computer security company CloudFlare was co-founded by Michelle Zatlyn in 2009, while Payal Kadakia co-founded subscription marketplace ClassPass in 2013.

The Bottom Line

Women have been successfully building businesses for decades. From Estée Lauder, who launched her cosmetics company in the 1940s, to Ruth Fertel, who aspired to have the best steak restaurant when she opened Ruth’s Chris Steak House in 1965, women entrepreneurs have been able to withstand economic and business pressures to be the best. In recent decades, more women entrepreneurs have risen to prominence in a wide range of industries.

Reviewed by JeFreda R. Brown
Fact checked by Pete Rathburn

Founded in 1998 by a group of tech superstars, including Elon Musk, Max Levchin, and Peter Thiel, PayPal became the go-to brand name in online money management and was bought by eBay in 2002.

As of 2025, PayPal accounts for 45% of the global payments market and its transaction volume was $6.6 billion in Q4 2024.

Key Takeaways

• As of 2025, PayPal accounts for 45% of the global payments market.
• PayPal helps keep transactions secure by not sharing financial information with sellers and also monitors transactions 24/7.
• Popular alternatives to PayPal include Venmo, Apple Pay, Stripe, and Skrill.

PayPal Main Features

One advantage that PayPal has is its large, multi-service platform with diverse offerings that many other digital payment systems lack. PayPal (PYPL) offers the following features:

• PayPal lets you pay for your favorite things at millions of online stores in the U.S. and across global markets.
• PayPal allows for making recurring payments to monthly bills and subscriptions.
• PayPal charges different fees depending on the transaction.
• PayPal earns fees from each merchant checkout transaction.

PayPal is not alone in the growing digital money space as consumers are turning to online payment systems in record numbers every year.

Here are 9 popular alternatives to PayPal:

1. Skrill

• Skrill has different fees based on the type of transaction, such as deposits, withdrawals, sending/receiving money, account levels, services, the country of operation, etc.
• In the U.S., there is no fee for local or global deposits.
• There is a withdrawal fee of $5.50 for ACH transactions.
• There is no fee to send money between Skrill accounts.
• There is no fee when receiving money from U.S. customers but if not a U.S. customer, there is a 3.99% foreign exchange fee.
• There is a service fee of $5 if you don’t log in or make a transaction at least once every 12 months.

2. Payoneer

• Payoneer operates in more than 190 countries.
• Receiving payments from another Payoneer customer’s balance is free.
• Payoneer has many different fee setups based on the specific details of the transaction, such as where the payment or charge is coming from, the country of operation, if the other party has a Payoneer account, and how the payment is being made.

3. Stripe

• Stripe is supported in 46 countries, with more availability planned.
• Fees are very clear; Stripe charges 2.9% plus 30 cents on every transaction.
• The checkout process for Stripe is self-hosted and occurs on the business owner’s site rather than sending customers to an external site such as PayPal.
• The Stripe network automatically deposits the funds into an outside bank account.

4. Venmo

• Venmo is a checkout option with several apps and websites, including Uber and GrubHub.
• When you withdraw money from your Venmo balance, it can take a few business days to transfer money to your bank account. If you need money faster, Venmo offers instant transfers for a 1.75% fee, with a minimum of $0.25 and a maximum of $25.
• Venmo doesn’t have regular fees, like monthly or annual fees.
• Venmo includes popular features from social networks, including likes, comments, and messages attached to each payment. 

Note

After PayPal, Stripe has the second-highest market share of payment processors on websites worldwide at 17% as of January 2025.

5. Apple Pay

• Apple Pay is built into the iPhone, Apple Watch, Mac, and iPad.
• Apple Pay is accepted by 85% of retailers in the U.S.
• Apple does not charge any fees when you use Apple Pay, whether in stores, online, or in apps.
• Apple Pay enables you to make secure, contactless purchases using Apple Cash, Apple Card, and any other credit and debit cards that you add to your Wallet.

6. Square

• A retail platform that allows retailers to sell in-person and online.
• Options for point of sale, eCommerce, invoices, and contactless payments.
• Free to use but retailers can add tools as needed including those for payroll and timecards for employees.
• Square’s Intuitive Dashboard keeps a retailer’s business data in one place.

7. Amazon Pay

• Using Amazon Pay does not add fees, including transaction fees, membership fees, and currency conversion fees, to purchases on sites and organizations accepting Amazon Pay.
• Transactions are safe and secure, and everything can be tracked with an Amazon account.
• Amazon Pay accepts credit and debit cards. 
• Donations, movie tickets, and more can be made with voice connection through Amazon’s Alexa.

8. QuickBooks Go Payment

• Requires a credit card reader for retailers to take payments right from a mobile phone or tablet.
• Swipe rates starting as low as 1.6% for pay-as-you-go or monthly plans are available starting at $19.95.
• It works with iPhones, iPads, Android phones, and Android tablets.

9. Shopify Payments

• Requires a Shopify account to accept Shopify Payments.
• Customers can use their preferred payment methods such as Visa, Mastercard, or Apple Pay.
• Includes a built-in fraud analysis feature and flags potentially fraudulent orders.
• Pricing plans for Shopify account sellers range from $29/month to $299/month.

Does PayPal Provide Protection for Buyers?

PayPal helps keep transactions secure by not sharing financial information with sellers and also monitors transactions 24/7. PayPal also monitors fraud prevention and helps with dispute resolution, putting a hold on funds until the issue is resolved.

Who Is the Largest Payment Processor?

The largest payment processor in the world is PayPal with a global market share of 45%.

What Is a Cryptocurrency Payment Gateway?

A cryptocurrency payment gateway is a payment processor for digital currencies, similar to the payment processors, or gateways, that banks or credit cards use. Cryptocurrency gateways enable you to accept digital payments and receive fiat currency immediately in exchange.

The Bottom Line

While PayPal may have almost half of the global payments market, there are plenty of other payment options out there that may be better suited to individuals and businesses based on their specific needs and budgets.

Fact checked by Suzanne Kvilhaug
Reviewed by Andy Smith

Real estate banking provides the critical financial services the sector requires for buying and owning properties. These bankers offer financing, mortgage lending, advisory services, and investments.

A major part of real estate banking focuses on sizable real estate capital markets transactions. Real estate investment bankers help assess significant commercial properties and portfolios for public real estate investment trusts (REITs), private equity firms, investment managers, and commercial developers.

Key Takeaways

• Real estate banking offers financing and advisory services for real estate transactions including those for sales and development.
• Real estate investment banking zeros in on significant capital market transactions and advisory services, playing a vital role in REITs and large-scale developments.
• These bankers manage complex deals and they value real estate assets.
• The sector is evolving as it digitizes more of its services.
• More attention to sustainability is influencing its approach to investments and management.

The Role of Real Estate Banking

Real estate bankers finance commercial and residential investors, developers, and property owners. Many large national and regional banks have specialized real estate banking divisions. Their expertise includes construction lending, mortgage financing, refinancing, REITs, and commercial real estate loans. Real estate banking may also include advisory services, equity investing, sales and trading of property, and helping to manage mergers and acquisitions.

The capital made available through real estate banking fuels new construction projects and property investments. This enables the industry to meet rising housing demand and support critical business activities across many sectors given real estate’s central role in the global economy.

Real Estate Investment Banking

Large-scale real estate transactions are complex and involve many parties and assets. Real estate investment bankers are crucial in structuring these deals. They determine the most suitable financing mix.

Investment banking is a subsector of real estate banking. It’s at the intersection of finance and property and it focuses on large real estate capital markets transactions and advising services. It primarily advises REITs, land developers, and property management firms. This advisory role extends to structuring deals and valuing real estate assets that are critical for successful investment and development.

Advising on REIT equity and debt issuance enables REITs and real estate companies to raise capital through public offerings or private placement deals. These firms also provide valuations of companies and real estate purchases.

This subsector also advises buyers and sellers of major commercial real estate assets or portfolios in structuring, valuation, and negotiations in mergers and acquisitions. It designs financial models to structure joint venture partnerships, leasebacks, and complex real estate transactions. It works with real estate private equity firms to raise funds from institutional investors and limited partners.

Note

Top investment banking firms such as JPMorgan Chase & Co. and Bank of America have specialized teams that work with real estate private equity funds, REITs, commercial brokers, and developers. They leverage quantitative models and industry knowledge to package deals for their clients.

The investment bank might structure a deal in a large development project to have a loan cover the immediate construction costs and equity investments that provide long-term working capital. Getting this mix right ensures that the project has enough funding to keep its debts manageable.

Real estate investment bankers also value real estate. This requires understanding the market, its trends, sector and geographic projections, and the specific character of each property. Bankers use different models and methods to determine these values.

These include two main methods: the income approach which involves estimating the future cash flow for the property and the comparable sales approach. This assigns a value based on similar properties that have recently sold. Valuation is critical not only for setting the sale price but also for how the deal will be structured.

Real Estate Investment Banking Careers

Careers in real estate investment banking can be lucrative and fast-paced for those who are interested in high-impact real estate deal-making and number crunching. Professionals work on sophisticated financial transactions that fuel large-scale property investments and developments.

Investment banking analysts are entry-level professionals who support senior bankers by conducting research, financial modeling, preparing presentations, and analyzing deals. Analysts generally have an undergraduate business degree and a solid financial modeling ability.

Associates with two to four years of experience get more responsibility for advising clients, structuring deals, and building client relationships. An advanced degree is usually required for this role.

Vice presidents are intermediate-level bankers who lead small teams and run transactions and client accounts. They typically have five to 10 years of experience is typical.

Managing directors and partners are senior executives who oversee all real estate banking practices. These individuals have a track record of successful deal-making, deep sector expertise, and strong institutional client relationships.

Key Skills Needed

• Financial modeling
• Complex data analysis
• Excel and presentation software
• Communication and relationship-building
• Strong work ethic and attention to detail

Hours and Pay

Real estate investment bankers work long hours given the demand for transactional deal volume. It’s often necessary to work on weekends when transaction milestones are coming up or at the end of reporting periods. The intense workload pays off through above-average industry salaries and bonuses, however.

The average pay for a real estate analyst was about $80,000 a year in the United States as of March 2025, according to the Economic Research Institute. The institute predicts that this average will increase to almost $90,000 in 2030.

Benefits of Real Estate Investment Banking

Real estate investment banking benefits institutional real estate investors and high-net-worth individuals (HNWIs) who are looking to enter the sector. It does so by providing a variety of services.

• Expertise in the market: Offers clients in-depth finance and real estate market knowledge, guiding investors through complex investment landscapes.
• Portfolio diversification: Provides institutional investors with prospects to diversify investment portfolios, cut risk, and potentially stabilize returns.
• Improves real estate deals: Creates financial structures for real estate that increase returns and lower risks including favorable loan and equity arrangements.
• Professional asset management: Helps with efficiently managing real estate, covering development, maintenance, and tenant management, freeing up the investor for other projects.
• Enables large-scale projects: Helps with planning and executing substantial projects like residential complexes, infrastructure projects, and commercial centers.
• Reduces risk: Puts insurance policies and structured financing into place to balance risk and reward, offering more stable real estate investment options.

Risks and Challenges in Real Estate Investment Banking

Real estate banking has certain unique drawbacks given the volatility of the real estate market. Real estate prices fluctuate based on economic factors, interest rates, and market demand. They periodically experience cycles of expansion and contraction tied to macroeconomic trends and this creates further problems for banks and their customers.

Borrowers risk defaulting on loans or backing out of deals and this affects the bank’s financial stability. The real estate sector is subject to assorted local, state, and federal regulations that can change and do change periodically, influencing investment strategies and project viability. Bad valuations of real estate assets can lead to poor investment decisions and financial losses and real estate assets are relatively illiquid.

Important

The potential for environmental liability or legal disputes related to a property can also cut into investment returns and delay projects.

Mitigation Strategies

Real estate banks use prudent risk management to navigate these inherent industry risks.

They diversify across geographic regions and asset classes to insulate the bank from market downturns that are isolated to a few sectors or locations. Conservative loan underwriting criteria, enforced loan covenants, and reasonable loan-to-value limits can help guard against credit losses. Rate locks and interest rate hedges can help shield against short-term rate changes.

Putting aside a good-sized capital cushion that’s above regulatory minimums helps banks absorb occasional losses while continuing to lend. Banks can mitigate losses by also stress testing loan exposure, matching asset and liability timing, and securing backup sources for funds through government programs, securitization, and credit.

Developing and maintaining strong client relationships and hands-on asset management also help bankers quickly address issues with underlying properties. Real estate banks can be resilient with layered risk monitoring, contingency planning, and prudent capital reserves.

Trends in Real Estate Banking

Emerging trends and technologies are significantly shaping the future of real estate banking which is mainly influenced by sustainability, digitalization, and changing consumer preferences. These trends reflect a shift in the industry’s investment, financing, and property management approach.

A key trend in the real estate sector was the change in the office market after the COVID-19 pandemic. Remote work was widely adopted and the demand for office space decreased notably, leading to a bifurcated market. This had profound implications for office owners, managers, brokers, and urban development.

Some industry leaders indicate that not all office buildings can be economically converted to other uses. They suggest that demolishing buildings and repurposing the land might be more viable for some. There’s been a growing interest in reimagining office spaces while learning how other industries survived radical change such as when the retail sector adapted to ecommerce​.

Note

Rising interest rates significantly affect the real estate market, resulting in a slowdown in purchases and lending across many sectors including industrial, office, retail, hospitality, multifamily, and senior living. This slowdown primarily occurs because of the increased costs of borrowing.

​The financing landscape in real estate is evolving. Mortgage debt funds have increased, particularly in North America and Europe. These funds are increasingly important for developing more transactions when acquisition stagnates. The launch of new debt funds and the dominance of top firms in private real estate debt fundraising highlight the growing influence of this means of finance​.

Environmental, social, and governance (ESG) factors are driving changes across many sectors. Real estate firms are incorporating ESG practices into their operations. This shift underscores the growing significance of roles like head of ESG and other sustainability-focused positions in real estate banking.

What Is the Role of Real Estate Investment Banks in the REIT Sector?

Real estate investment banks help REITs raise capital, conduct initial public and secondary equity offerings, facilitate mergers and acquisitions, and provide debt financing. They advise on property value for reporting and transactions.

What Is the Role of Real Estate Investment Bankers in Major Deals?

Real estate bankers structure joint ventures, mezzanine debt, preferred equity issuance, leasebacks, and recapitalizations for their own and their clients’ property needs.

How Has Technology Changed Real Estate Investment Banking?

Technological advances have profoundly affected real estate banking operations and client services. The integration of technologies such as big data analytics, artificial intelligence, and blockchain have been used in property valuations, risk assessments, and purchases.

Clients can use digital platforms and online tools to apply for loans, do virtual property tours, and manage their digital contracts. Property technology like machine learning analytics can also be used for estimating property values, remote online notarization, and drone property assessments.

The Bottom Line

Understanding real estate banking is essential for meeting this sector’s needs for investment capital for purchases and development. Real estate banking includes financing, mortgage lending, advising, and investment. The industry supports those in commercial and residential real estate, providing capital for new construction projects and investments.

Real estate investment banking, a specialized subset, additionally focuses on large-scale transactions and advisory services for entities like REITs and developers. Real estate investment banking guides significant investments and developments with its deal structuring and asset valuation expertise while offering finance professionals lucrative career prospects.

Life insurance can provide financial security to your loved ones even when you’re still alive

Fact checked by Vikki Velasquez

Life insurance is a product that provides your loved ones financial support in the event of your passing. Life insurance can also offer several benefits while you are still alive. What you’ll get from a policy depends on the type of coverage. By understanding the benefits, you can find the right fit for your family’s needs. 

Key Takeaways

• Life insurance provides financial protection for your family during your life and after your death.
• Benefits are generally tax-free, ensuring your beneficiaries receive the full amount to cover expenses without tax deductions.
• Life insurance can help replace lost income, pay off debts, and fund future goals like education or childcare, offering financial stability for your family.
• Policies can be tailored to meet your family’s specific needs, whether it be for chronic illness, long-term care, or other specialized coverage.
• Most permanent life insurance combines a death benefit with a savings component. Term policies just have the death benefit.

Types of Life Insurance

There are two umbrella types of life insurance: term and permanent. Term life insurance covers you for a set period and then expires if you outlive the term. Permanent insurance covers a lifetime as long as you make the premium payments.

Permanent life insurance policies can also include cash value, which is money you can take out while alive. Term policies do not include this extra benefit. In exchange, term policies are much cheaper than permanent policies.

Now that you understand the fundamentals let’s look at the main benefits of life insurance for families.

1. Coverage for Final Expenses

According to the National Funeral Directors Association, the median cost of a funeral is $8,300 for a burial with a casket and $6,280 for a cremation. Additional final expenses that many do not consider are medical bills resulting from your passing and estate settlement costs. These bills are significant for many families with already tight budgets, and life insurance can alleviate the burden of these expenses during this difficult time.

TIp

While thinking about your funeral is not probably making the top ten list of daydreams, planning for it when you’re young means better health when you apply and cheaper premiums. 

2. Financial Security for Your Family

In addition to paying for final and funeral expenses, replacing lost income and death repayment are the other most common reasons people get insurance. 

According to financial advisor Prince Dykes, “Unfortunately, the risk of death is certain and, in the event of the untimely death, the family will have the necessary funds to cover living expenses, debts, and future financial goals, such as children’s education.” 

If you’re your family’s primary earner, a policy that covers essential expenses like mortgage payments, utility bills, debt repayments, and daily living costs can offer you tremendous peace of mind that your family can maintain their standard of living in the event of your passing. 

When deciding how much life insurance you need, a general standard is to have coverage at least ten times your income. This safety net is enough for most families to continue on comfortably while they navigate life without you. 

There is a common misconception that stay-at-home spouses do not need life insurance because they do not contribute financially to their families, but that is simply not true.

“Life insurance protects families from financial shocks due to the loss of an income earner OR stay-at-home parent said Sybil S. Slade, President of IntegriVest Wealth Advisors.

Note

The death benefit from life insurance can help cover household expenses, childcare costs, and other financial needs after losing a stay-at-home spouse. 

3. Life Insurance Payouts Are Income Tax-Free

“Life insurance death benefits paid out to beneficiaries are generally tax-free, meaning that the full amount can be used for financial support without tax implications,” said Dykes. The Internal Revenue Service (IRS) does not charge income tax on life insurance death benefits.

While the IRS could charge estate taxes on life insurance death benefits, these only apply to the very wealthy. In 2025, you can leave up to $13.99 million of property at death to your heirs, including the life insurance payout, without owing estate taxes. For this reason, most heirs receive everything tax-free.

Because your loved ones don’t have to worry about paying taxes on your death benefits, every dollar of your policy can support their financial needs, whether for current expenses or future plans like education planning.

4. Coverage for Chronic and Terminal Illnesses

Many policies allow you to add riders to your policy to provide benefits for chronic or terminal illnesses. These riders will enable you to receive some of your death benefits while you’re still alive to cover medical treatments, caregiving, or other related expenses. These expenses may include day-to-day living expenses if you are unable to work.

Accelerated benefits riders are one rider that allows you, as the policyholder, to access part or all of your death benefits before you pass away. Accelerated benefits riders are designed to protect those who suffer from terminal illnesses, chronic illnesses, or other medically incapacitating conditions.

Another common rider is one for long-term care (LTC). These LTC riders pay for the expenses that medical insurance typically does not cover. These expenses include skilled nursing facilities, long-term care facilities, and home healthcare support. LTC policy riders may have a waiting period before benefits start. You may receive benefits after this waiting period (typically 90 days) as a lump sum payment or a monthly percentage of your death benefit. 

5. Cash Value

Permanent life insurance products accumulate cash value over time. The cash value in your permanent policy acts like a savings component that grows with every passing year from your premium payments and an investment return. The steady growth in the account will likely not rival the stock market, but it can provide a safety net for families that need cash.

Dykes reminds us that “cash value accumulated in whole life insurance policy grows on a tax-deferred basis, meaning policyholders won’t pay taxes on the growth until they withdraw it. In certain cases, policyholders can borrow against their cash value without triggering a tax event, provided the policy remains in force.” This tax-advantaged status may make borrowing against life insurance preferential to withdrawing funds from investments subject to capital gains taxes. 

While life insurance is part of a comprehensive financial plan, not the entire one, cash-value loans are still viable for unexpected emergencies or other expenses like car purchases, home down payments, or college costs. Though you will pay interest on your loan, you may find that the rates are exceptional compared to other financial institutions or student loan providers.

What Are the 5 Types of Life Insurance?

Term life, whole life, universal life, variable life, and final expense are the five main types of life insurance. Each policy is unique in its features, benefits, and costs. You may need more than one policy or more than one type of policy to cover your financial needs cost-effectively. 

What Is the Best Age To Get Life Insurance?

Some people think you don’t need life insurance until you have people depending on your income, but that’s not exactly true. Your health, age, and your policy specifications determine premiums. Therefore, the younger you get your life insurance, the lower your premiums. Buying early also sets your coverage up for future goals and would give your loved ones money to cover your final expenses, an important need even if you don’t have any dependents. 

How Do I Name Beneficiaries?

You must designate a beneficiary for your policy when you apply for your insurance. You may also choose to designate contingent beneficiaries as a backup. You should review these named beneficiaries regularly and update them as necessary. It is imperative that your beneficiary on your policy accurately reflects who you want to receive the money because the name listed on the account paperwork overrides any beneficiary listed in the will.

How Do Beneficiaries Receive Their Money?

When you die, your loved ones will contact the life insurance company holding your policy and fill out their paperwork. Once complete, the insurance company pays your family the death benefit, less any outstanding loans, in a lump sum payment. The death benefit is typically tax-free for your beneficiaries.

How Is the Price of Life Insurance Determined?

The key factors influencing premium costs are age, health, lifestyle habits, gender, policy type, and coverage. Generally speaking, the longer the life insurance company expects you to live from the date of application, the lower your costs.

The Bottom Line

Life insurance is a tool to help you protect your family’s future whether you’re no longer around or need some support reaching your goals together. It can cover final expenses and provide tax-free payouts after death. Furthermore, it can also help pay your bills while you’re still alive, support your medical needs, or even pay for college. Life insurance provides a safety net for the unexpected and builds stability for your loved ones while you’re around to enjoy it. 

Fact checked by Suzanne Kvilhaug

What is success, and how do you achieve it? Experts suggest that it means different things to different people. However, there is a commonly held belief that success is related to accomplishment. This can mean achieving personal, financial, educational, and/or career goals. While luck and fortune may have a hand in your success, forming good habits can get you there quicker. We’ve highlighted some key habits successful people form and what you can do to adopt them into your own life and career.

Key Takeaways

• Organization, taking action, and getting up early can help keep you on track to meet your goals.
• It’s important to take time for personal care and relaxation while having a positive attitude.
• Don’t forget that networking, collaboration, reading, and continuing education can help you achieve your goals.
• There’s nothing wrong with being frugal, but don’t forget to give back to help foster a sense of purpose and community.

1. Organization

If you want to be successful in any aspect of your life, you need to be organized. When you’re organized, you can manage your time better, and you can remain focused on your priorities. Organized people tend to be planners, are generally neat and orderly, and often have a sense of control.

2. Relaxation and Meditation

There’s a saying that the road to success is paved with failure, which can be very frustrating. And it’s no secret that money can be stressful. In fact, some 47% per Americans say money has negatively impacted their mental health.

One way many successful people navigate turbulent times is by relaxing and meditating. Meditative techniques can help you focus, tap into your creativity, and promote overall well-being.

“Healthy active rest is a vital part of brain and body care,” said Allison Task, a life coach in Montclair, New Jersey. “People who are continually stressed wear themselves down and ultimately get less done.”

Apple (AAPL) co-founder Steve Jobs used Zen meditation to combat his stress and help him achieve success. He suggested sitting cross-legged on a low pillow, closing your eyes, and listening to your thoughts.

3. Taking Action

Being proactive is pivotal to success in your personal or professional life, regardless of the endeavor you take. Taking action can boost your confidence, help you make and set very clear goals, and push you to move forward to achieve them. To accomplish this, ensure you identify and manage your fears, and most importantly, don’t wait until tomorrow to begin.

It’s also important to be clear about what you want. Task said it’s important to be intentional about what you want and follow that with perseverance.

4. Personal Care

Take the time you need to take care of yourself as you head down the path to success. Some of the ways you can explore personal care are to:

• Eat well
• Exercise
• Manage your stress
• Get enough sleep, which is roughly eight to 10 hours per day for people between 18 and 64

Sleep, in particular, is vital for professional performance. Sleep deprivation negatively impacts working memory, result in riskier decisions, and lead to aggressive workplace behavior.

Taking care of yourself can boost your productivity and self-esteem, build strong relationships, and prevent burnout.

5. Positive Attitude

Psychology plays a big part in how people build their success. Having a positive attitude can boost your performance and self-confidence. You’ll come across hurdles that may test your optimism. But, understanding that challenges are a natural part of the journey can help keep you on track rather than derail you.

Falling into a negative headspace can lead you down a narrow path. You tend to focus on the problem(s) you encounter rather than how to move forward. When you have a positive attitude, you tend to think of the bigger picture and look for solutions to the issue(s).

“That doesn’t mean being happy-go-lucky, it means being able to maintain a healthy balance of putting yourself out there and not letting yourself get taken advantage of,” according to Philadelphia-based coach, speaker, and consultant Rita Friedman. “I’d count being true to yourself as part of having a good attitude—knowing what you are working for and what quality means.”

There are other benefits to remaining positive, even when you’re faced with adversity, including benefits to your mental and physical well-being. You may also notice that you’ll connect well with others, too, if you carry your head high.

6. Networking and Collaboration

Some people find success on their own, while others find that networking and collaboration play a big part in their success. Developing and maintaining important relationships allows you to learn, share ideas and knowledge, and leverage strength from others.

Task said it’s important to remember that “you can only get so much done on your own.”

Note

Networking and collaboration can help you develop new ideas and improve your communication and problem-solving skills.

7. Frugality

Frugality is defined as being careful or economical with your resources. Put simply, it’s a form of discipline. Being frugal is especially important if you want to be financially successful. Some of the wealthiest people, such as Warren Buffett in the world are known for their frugal approach to money. People in this category are careful about how they spend their money and use their resources, including their time and energy.

8. Early Rising

You’ve probably heard the adage about the early word catching the worm. If you get up early, you have more time to get things done (meditating, eating, and exercising to name a few) and become more productive.

“There’s something mentally healthy about waking up before the sun, journaling, exercising, greeting the bracing cool air,” Task said. “It’s a different vibe than late night, which tends to be bawdier.”

Consider doing the following to become an early riser:

• Go to bed at a reasonable hour and get enough sleep
• Don’t hit the snooze button and get up when your alarm goes off
• Establish (and stick to) a morning routine
• Set up a schedule of tasks for the morning, such as meetings and appointments

9. Giving Back

Some of the world’s most successful people are among the most philanthropic. Bill Gates, Warren Buffett, George Soros, and Michael Bloomberg give a lot of their wealth to various causes. But it isn’t just about money. Rather, it’s also about giving up your time.

When you give your time to your community, you gain new skills, sharpen your leadership skills, and, more importantly, foster a sense of purpose.

Friedman considers Dolly Parton a great example of someone who’s found success and paid it forward. “She’s contributed to disease research efforts and provided millions of free books to kids in need. Throughout her career, she has found new ways to engage with her own music and collaborate with other artists.”

10. Reading and Continuous Learning

Reading is often considered to be a vital key to success. You can continue to learn on your own, take a class, pursue your education, or just read books. The goal is to access information, develop your critical thinking skills, and boost your personal growth whether you want to advance in your career or to achieve financial success.

“Continuing education is one of my favorite ways to keep pushing yourself and growing in ways that you might not even know you’re craving yet. It’s also a fantastic way to expand your network,” Friedman said. 

The Bottom Line

We all define and measure success in different ways. While it isn’t uncommon to associate success with fame or dollars and cents, Friedman suggests it can be as simple as holding down a job or doing a monthly neighborhood cleanup. At the same time, Task says it’s important to find joy and contentment by making a commitment that uses your skills and talents.

Regardless of what you want to accomplish, living a healthy life and developing some (if not all) of the habits above can help you achieve success both personally and financially. If you’re stuck, look around you for examples of successful people whose habits you think you can adopt yourself.

Fact checked by Vikki Velasquez

Your net worth can say a lot about your financial life. It is easy to calculate and is a quick way to compare yourself to others at your income level. Just what is net worth?

“Net worth is a key measure of financial health. It’s the difference between what you own and what you owe. It reflects not just how much money you make but how well you manage, save, and invest your resources,” says Inna Rivilis, the founder of and a certified financial planner at Sunflower Financial Planning.

Key Takeaways

• To measure net worth, you subtract the total of how much you owe from the total of how much you own.
• As of 2022, the average net worth in the United States was $1,063,700, an increase of 23% from just three years earlier, according to the Federal Reserve.
• Checking net worth once every quarter is a good way of monitoring your finances.

How Do You Calculate Net Worth?

To calculate your net worth, you’ll need to make a list of your assets and liabilities.

“Calculating net worth is straightforward: List all your assets—such as savings, investments, retirement accounts, and real estate—and subtract all your liabilities, including mortgages, car loans, and credit card debt. The result offers a clear snapshot of where you stand financially,” Rivilis says.

How Does Your Net Worth Compare to Others?

According to the Pew Research Center, in 2021 (the most recent data available), upper-income households had a median net worth of $803,400, middle-income households had a median net worth of $204,100, and lower-income households had a median net worth of $24,500.

According to the Federal Reserve, the average net worth in the United States was $1,063,700 as of 2022, an increase of 23% from just three years earlier. The median net worth rose 37% to reach $192,200 in that same year.

The most common locations where Americans held assets were transaction accounts such as checking accounts (98.6%), vehicles (86.6%), their primary residence (66.1%), and retirement accounts (54.3% ) in 2022.

2022 Average and Median Net Worth For Different Income Levels
Income Percentile	Average Net Worth	Median Net Worth
Less Than 20%	$129,700	$14,000
20% to 39.9%	$218,700	$71,000
40% to 59.9%	$385,400	$159,300
50% – 79.9%	$636,800	$307,200
80% – 89.9%	$1,264,700	$747,000
90% – 100%	$6,629,600	$2,556,200

How does your net worth compare for your income level? If it is lower than you would like, there are things you can do to improve it.

“Improving net worth comes down to two core principles: increasing your assets and reducing your liabilities. Save regularly, invest for long-term growth, and focus on paying off debt efficiently. Avoiding unnecessary expenses frees up more money to grow your savings and investments,” Rivilis says.

Why Is Net Worth an Important Measure of Your Finances?

Measuring your net worth is a great way to track how well you are doing financially.

“Net worth serves as a financial progress report. Even if your income changes from year to year, a growing net worth indicates you’re building financial security,” Rivilis says. “Tracking it helps you see if your spending, saving, and investment habits are aligned with your long-term goals.”

How Often Should You Check Net Worth?

Plan on calculating your net worth four times each year to see if you are on track with your financial goals.

“Reviewing your net worth every quarter is a good balance. It allows you to track progress without stressing over short-term market fluctuations. If you’re working toward specific financial goals, more frequent check-ins can help you stay motivated and on track,” Rivilis says.

The Bottom Line

Your net worth is a useful measure of your financial life. Taking stock of your net worth every three months will help you see how well you achieve your financial goals.

To improve your net worth, bolster your assets, and pay down debts. You’ll have a stronger financial picture in no time.

Fact checked by Vikki Velasquez

Life insurance is a financial tool for protecting your family in the event of your passing. It ensures your family can maintain their standard of living, pay off debts, and cover future expenses without your income. 

Insurance experts usually recommend getting at least 10 times your annual income, but many factors could change that number. Too little coverage may leave your family financially vulnerable, and too much could stretch your budget unnecessarily. Here’s how to calculate how much life insurance your family truly needs.

Key Takeaways

• Life insurance coverage should be sufficient to cover your family’s immediate and future financial needs, including debts, income replacement, and education costs.
• Factors like family size, financial obligations, and lifestyle are significant in determining the right amount of coverage.
• Some methods to calculate life insurance needs include the human-life approach, multiplying income by 10, and the DIME formula.
• Regularly reviewing and updating your life insurance policy ensures it aligns with your family’s evolving needs.

What Should You Consider When Calculating Life Insurance?

When calculating how much life insurance your family needs, start by assessing your current circumstances and financial responsibilities. The two main factors to consider are:

• Your family size and status
• Your current financial obligations

Your Family Size and Status

Your family structure is one of the most significant factors in choosing the amount of life insurance coverage you need. Consider the following:

• Marital status: If you’re married or in a long-term partnership, your spouse may depend on your income to maintain their lifestyle. Life insurance helps replace your lost income to continue covering shared expenses like housing, utilities, and daily living costs.
• Number of children: If you have children, you’ll need to account for their future expenses, such as education, childcare, extracurricular activities, and other daily costs.
• Other dependents: If you support aging parents, siblings, or other relatives, their needs should also be factored into your calculations.
• Stay-at-home parents: Even if you don’t earn an income, your contributions to the household, including childcare, cooking, and cleaning, have substantial financial value. A life insurance policy can help your family cover the cost of hiring services for childcare, housekeeping, and other domestic responsibilities, in addition to funeral expenses.

Your Current Financial Obligations

Life insurance should cover all your financial obligations to keep your family free of debt and expenses after your passing. Key considerations include:

• Income replacement: Your policy should provide enough coverage to replace your income for some years. This helps your family maintain their standard of living. A common recommendation is to cover 5 to 10 years of income.
• Mortgage or rent: Include the outstanding balance on your mortgage or future rent payments in your calculations to ensure your family can keep their home without you.
• Outstanding debts: Factor credit card debt, car loans, and personal loans you’d like to pay off in your coverage amount.
• Child education costs: If you have children, estimate the cost of their future education: college tuition, books, and other education-related expenses.
• Funeral and final expenses: The average funeral costs over $8,000 in the United States. Be sure you include these expenses in your calculations and that your policy covers them.
• Other lifestyle expenses: Consider ongoing costs like groceries, transportation, healthcare, and entertainment.

By accounting for these factors, you can rest assured your life insurance policy provides comprehensive financial protection for your loved ones.

How To Calculate the Amount of Life Insurance You Need

There are several methods to calculate how much life insurance your family needs. The following are most common:

The Human-Life Approach 

The human-life approach calculates the amount of life insurance you need based on your lifetime earning potential. It considers factors like your current income, age, retirement age, and inflation. The goal here is to replace the financial value you provide to your family. For example, if you earn $50,000 annually and plan to work for 20 more years, your estimated insurance need would be $1,000,000 (before adjusting for inflation and other factors).

Tip

This method is thorough but can be complicated to calculate manually. Tools like the GEFCU Life Insurance Calculator can help simplify the process.

Multiplying Your Income by 10, Plus College for Each Child

A simpler method is to multiply your annual income by 10 and add the estimated cost of college for each child. For instance, if you earn $80,000 per year and have two children, you might calculate $800,000 (10 x 80,000) + $200,000 (estimated college costs). This will give you $1,000,000 in coverage. While this method is straightforward, it may not account for all financial obligations.

The DIME formula (Debt, Income, Mortgage, and Education)

The DIME formula is a comprehensive method that considers four key areas:

• Debt: Include all outstanding debts, such as credit cards, car loans, and other personal loans.
• Income: Multiply your annual income by the number of years your family would need support (e.g., 10–20 years).
• Mortgage: Add the remaining balance on your mortgage.
• Education: Estimate the cost of college or other education expenses for your children.

The total sum of those four factors is your number. For example, if you have $50,000 in debt, earn a yearly income of $80,000, and have a $200,000 mortgage and $100,000 in future education costs, you would need $1,330,000 in coverage (assuming 10 years of income replacement).

This method provides a more tailored estimate but requires careful calculation. A life insurance agent or financial adviser could help with this calculation.

How Much Life Insurance Does the Average American Have?

The average new life insurance policy purchased in 2023 was for $206,000 of coverage, though this amount may not work for all families. Finance experts often recommend higher coverage (up to 20 times your salary before taxes) based on individual needs.

What Percentage of Your Salary Should You Spend on Life Insurance?

The ideal life insurance premium is not simply a set percentage of your salary—it’s unique to your financial situation. When considering your coverage amount, you need to factor in your financial responsibilities and dependents.

If you have substantial debt or multiple dependents who require financial support, you may need higher coverage and, consequently, higher premiums. If, on the other hand, you have fewer financial obligations, you may find sufficient coverage with a smaller policy and lower premiums.

The type of life insurance impacts the cost. Term life insurance starts out much less expensive than permanent life insurance for the same death benefit. This is because term is temporary coverage, while permanent can last your entire life. By adjusting the type of coverage, you can find a solution that meets your salary and financial goals. A financial adviser or insurance professional can also help you find the right balance.

How Much Does Life Insurance Cost per Month?

The cost of life insurance varies based on factors like age, health, and coverage amount. A healthy 35-year-old male might pay around $40 a month for a 10-year term policy with $250,000 of coverage, according to quotes from Aflac. To calculate the specific amount, use tools like the GEFCU Life Insurance Calculator.

What Is the Minimum Amount of Life Insurance You Can Get?

The minimum coverage amount varies by insurer but is typically between $25,000 and $50,000. This death benefit will not be large enough for most families. However, the right amount depends on your specific financial obligations and family needs.

How Much Life Insurance Should a Stay-at-Home Parent Get?

A stay-at-home parent might need between 15- to 20-year life insurance policy with a minimum coverage of $250,000–$400,000 to account for childcare, household duties, and other contributions. This coverage amount also depends on the family’s needs.

The Bottom Line

Figuring out how much life insurance coverage you need for your family is crucial in securing your financial future. Considering family size, financial obligations, and long-term goals helps tailor your policy to meet your family’s unique needs. Whether you use the human-life approach, multiply your income by 10, or apply the DIME formula, the goal is to protect your family and loved ones from financial hardship.

Ultimately, the best life insurance coverage is the one that gives you peace of mind, knowing your family will be taken care of no matter what happens. Remember to regularly review and update your policy to ensure it remains aligned with your family’s evolving needs.