financial education

Legendary investor Warren Buffett has smart estate-planning advice for all parents, regardless of their wealth level: Let your adult children read your will before you sign it.

In a revealing November 2024 letter to shareholders, the Berkshire Hathaway (BRK.A) CEO explained that this simple act could prevent family conflicts and strengthen relationships after a parent’s death.

“Over the years, I have had questions or commentary from all three of my children and have
often adopted their suggestions,” Buffett wrote. “There is nothing wrong with my having to defend my thoughts. My dad did the same with me.”

Key Takeaways

• Warren Buffett recommends letting adult children review your will before signing it to ensure they understand your decisions and their future responsibilities.
• Buffett said he takes questions and comments from his three children and has often adopted their suggestions when updating his will.
• Open discussions about inheritance plans can prevent family conflicts and jealousies that often arise after a parent’s death.

Why Sharing Your Will Matters

Buffett’s advice stems from decades of observing families torn apart by unexpected or confusing inheritance decisions. When children discover the contents of a will only after their parent’s death, questions about fairness and childhood memories of favoritism can surface, potentially damaging sibling relationships forever.

“While it’s important to have well-written estate documents, we see most estate planning go awry because of emotional issues,” Mitchell Kraus, a certified financial planner at Capital Intelligence Associates, told Investopedia. “For most families, the best way to make sure there aren’t fights after death is to have cross-generational conversations.”

Buffett said parents should be prepared to defend their choices and listen to their children’s input while they are still alive—just as his father did with him.

Note

Buffett has been candid about his views on limiting generational wealth transfers through inheritance. “I’ve never wished to create a dynasty or pursue any plan that extended beyond the children,” he wrote in the November 2024 letter, explaining his “belief that hugely wealthy parents should leave their children enough so they can do anything but not enough that they can do nothing.”

Making Changes and Taking Feedback

The “Oracle of Omaha” practices what he preaches. He said he updates his will every couple of years, sometimes making minor adjustments based on conversations with his three children. He said this has helped his family maintain strong relationships while managing the responsibilities that come with inheriting significant wealth. Indeed, Buffett believes that discussing inheritance plans openly can help families grow closer rather than drift apart.

“Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death,” Buffett wrote. “If any have questions or suggestions, listen carefully and adopt those found sensible. You don’t want your children asking ‘Why?’ in respect to testamentary decisions when you are no longer able to respond.”

Note

Up to 3% of wills are contested in the United States. Will contests can be emotionally devastating and financially draining for families. Legal battles over inheritances can take years to resolve in probate court and can cost thousands of dollars in legal fees.

The Bottom Line

“The biggest stumbling block is often older generations not wanting to address that there might be problems,” Kraus said. Buffett suggests that parents disclose their wills to their children before finalizing them to prevent future family conflict. This reflects his broader beliefs about inheritance management and family communication: Parents who openly discuss such decisions and solicit input from their adult children can avoid misunderstandings and build stronger family connections while ensuring their wishes are well understood.

Buffett’s estate planning strategy can be a chance for meaningful family discussions instead of potential discord. But what if your family relations are already pretty heated? The professionals have a way to deal with that, too. “For more dysfunctional families,” Kraus said, “we recommend professionals who will run family meetings and make sure things do not get out of control.”

Fact checked by Hans Daniel Jasperson
Reviewed by Thomas Brock

Most people who read the financial press or watch financial news will have heard the term “beat the street.” This refers to companies posting earnings results that are better than the forecasts for earnings made by investment and financial analysts.

Wall Street analysts’ consensus earnings estimates are used by the market to judge stock performance. Here we offer a brief overview of consensus earnings forecasts, and what they can mean to investors.

Key Takeaways

• Large brokerages hire analysts to publish reports on various corporations’ upcoming profit announcements, including earnings-per-share and revenue forecasts.
• Consensus earnings estimates refer to the average or median forecast of what a company is expected to earn or lose for a given period of time, typically quarters and full years.
• While there are some flaws in the system, consensus estimates are perceived as significant for understanding a stock’s valuation.
• They are monitored by investors and the financial press.
• Whether a company meets, beats or misses forecasts can have an impact (usually short term) on the price of its underlying stock.

What Are Consensus Earnings Estimates?

Investors measure stock performance on the basis of a company’s earnings power.

To make a proper assessment, investors seek a sound estimate of this year’s and next year’s earnings per share (EPS), as well as a strong sense of how much the company will earn even further down the road.

That’s why, as part of their services to clients, large brokerage firms employ legions of stock analysts to forecast companies’ earnings for the coming years.

Consensus earnings estimates or forecasts are normally an average or median of all the forecasts from individual analysts tracking a particular company and its stock.

Consensus earnings estimates are far from perfect, but they are watched by many investors and play an important role in measuring the appropriate valuation for a stock.

Various Forecasts, One Average

When you hear that a company is expected to earn $1.50 per share this year, that number could be the average of 30 different forecasts.

On the other hand, if it’s a smaller company, the estimate could be the average of just one or two forecasts.

A few companies, such as Refinitiv and Zacks Investment Research, compile estimates and compute the average or consensus.

Consensus numbers can also be found at a number of financial websites, such as Yahoo! Finance. Individual estimates are found by looking up a particular stock, such as Amazon.

Some of these sites also show how estimates get revised upward or downward.

Important

Consensus earnings estimates are not fixed. Analysts typically revise their forecasts as new information comes in, such as company news, or regulatory or industry-specific information.

Forecast Coverage

Consensus estimates of quarterly earnings are published for the current quarter, and forward for about eight quarters.

In some cases, forecasts are available beyond that. Forecasts are also compiled for the current and next 12-month periods.

A consensus forecast for the current year is reported once the actual results for the previous year are released.

As actual numbers are made available, analysts typically revise their projections within the quarter or year they are forecasting.

Calculating Earnings

The basic measurement of earnings is earnings per share. This metric is calculated as the company’s net earnings—or net income found on its income statement—minus dividends on preferred stock, divided by the number of outstanding shares.

For example, if a company (with no preferred stock) produces a net income of $12 million in the third quarter and has eight million shares outstanding, its EPS would be $1.50 ($12 million/8 million).

The Importance of Earnings

Investors can keep an eye on consensus numbers to gain an idea of how a stock is likely to perform.

Many investors, including sophisticated institutional investors such as mutual fund and pension fund managers, rely on earnings forecasts to gauge a company’s growth potential and to time their trades.

Stocks are assessed according to their ability to generate and increase earnings as well as to meet or beat analysts’ consensus estimates for earnings.

This influences a company’s implicit value (the personal perceptions and research of investors and analysts), which in turn can affect whether a stock’s price rises or drops.

Analysts’ forecasts also are critical because they contribute to investors’ valuation models.

Institutional investors can move markets due to the volume of assets they manage. They follow analysts at big brokerage houses to varying degrees.

Earnings vs. Other Results

Why does the investment community focus on earnings rather than other metrics such as sales or cash flow?

First, any finance professor will tell you that the only proper way to value a stock is to predict the long-term free cash flows of a company, discount those free cash flows to the present day and divide by the number of shares.

But this is much easier said than done, so investors often shortcut the process by using accounting earnings as a substitute for free cash flow.

Secondly, accounting earnings are a much better proxy for free cash flow than sales. They’re also fairly well defined. And public companies’ earnings statements must go through rigorous accounting audits before they are released.

As a result, the investment community views earnings as a fairly reliable, not to mention convenient, measure.

Note

Most investors, including large institutions, lack the resources to track thousands of publicly-listed companies in detail, or even to keep tabs on a fraction of them. So they welcome consensus earnings forecasts.

The Basis of Analysts’ Forecasts

Earnings forecasts are based on analysts’ expectations of company growth and profitability. To predict earnings, most analysts build financial models that estimate revenues and costs.

Many analysts will incorporate top-down factors such as economic growth rates, currencies, and other macroeconomic factors that influence corporate growth.

They use market research reports to get a sense of underlying growth trends. To understand the dynamics of the individual companies they cover, really good analysts will speak to customers, suppliers, and competitors.

In addition, companies themselves offer earnings guidance that analysts build into the models.

Revenues

To predict revenues, analysts estimate sales volume growth and the prices companies can charge for products.

On the cost side, analysts look at expected changes in the costs of running the business. Costs include wages, materials used in production, marketing and sales costs, interest on loans, and more.

Important

Consensus estimates are so consistently tracked by so many stock market players that when a company misses forecasts, it can send a stock tumbling. Similarly, a stock that merely meets forecasts might get sent lower, as investors have already priced in the in-line earnings.

Actual Earnings vs. Consensus Estimates

Consensus estimates of earnings are so powerful that even small deviations between estimates and subsequent reports of actual earnings can send a stock higher or lower.

If a company exceeds its consensus estimates, it is usually rewarded with an increase in stock price. If a company falls short of consensus numbers—or just meets expectations—its share price can take a hit.

With so many investors watching consensus numbers, the difference between actual and consensus earnings is perhaps the single most important factor driving share price performance over the short term.

This should come as little surprise to anyone who has owned a stock that missed the consensus by a few pennies per share and, as a result, tumbled in value.

For better or for worse, the investment community relies on earnings as its key metric. Stocks are judged not only by their ability to increase earnings quarter over quarter but also by whether they are able to meet or beat a consensus earnings estimate.

Why Do Earnings Matter?

One reason they matter is because a company with growing net income, or earnings, is growing in value. Investors who own the stock of such a company should see the price of their shares rise. That, in turn, increases the overall value of the investors’ portfolio and their wealth.

How Can Analysts Forecast a Company’s Earnings?

Publicly traded companies are required by the Securities and Exchange Commission to make financial details public. In addition, companies often provide guidance for analysts and investors concerning their future financial results. So analysts can research a wealth of data to come up with their estimates for earnings.

How Do Companies Give Earnings Guidance?

A good source of earnings guidance is the Management Discussion and Analysis (MD&A) section of the annual report. There you’ll find information on a company’s financial condition and results of operations, including analysis and financial projections.

The Bottom Line

Financial analysts provide earnings forecasts in advance of actual earnings reports so that investors can gauge a company’s performance and stock valuation.

For convenience, the figures of many forecasts are averaged and become a consensus earnings forecast that investors may use to size up their investments and to make trade decisions.

An In-Depth Look at the Economic and Market Influences on Gold

Gold has captivated human kind for millennia-serving not only as a symbol of wealth but as a cornerstone of the global financial system.

Understanding what drives gold prices is crucial for investors, economists, and anyone interested in the value of this precious metal. This guide explores the factors that drive its price.

Key Takeaways

• Gold’s price is influenced by central bank reserves and their purchasing trends.
• Economic and political instability increase demand for gold as a safe haven.
• Global gold production and mining challenges affect gold’s supply and price.
• Demand for gold in jewelry and technology sectors also impacts its price.

Understanding Gold as an Asset

Gold’s distinctive characteristics set it apart from other investments. Beyond its luster, the metal’s limited supply and indestructible nature have contributed to its stability as a long-term store of value. Gold cannot be printed like currency or created out of thin air. Its scarcity and permanence have made it a hedge against currency devaluation or inflation and economic instability.

Unlike stocks or bonds, gold is tangible. It maintains high liquidity across global markets and is universally recognized as valuable, regardless of political or economic conditions. Its value tends to rise when confidence in other financial assets declines, particularly during periods of high inflation, economic uncertainty, or geopolitical instability.

These properties make it an attractive part of diversified investment portfolios.

Historical Price Trends of Gold

The modern era of gold pricing effectively began in 1971 with the end of the Bretton Woods system, which had previously fixed gold’s price to the U.S. dollar. Gold prices have been allowed to float freely, leading to significant volatility throughout the 1970s as stagflation drove investors toward safe havens. The decade culminated in January 1980 with gold reaching what remains its inflation-adjusted peak of about $3,300 in today’s dollars. The metal would then enter a lengthy decline through the 1980s and 1990s, bottoming at just $253 per ounce in 1999 amid a strong global economy.

The 21st century ushered in a new chapter for gold prices, marked by several dramatic rallies tied to major economic crises. The 2008 financial crisis saw gold surge from $730 to $1,300 between October 2008 and October 2010, while the European sovereign debt crisis pushed prices to $1,825 by mid-2011. More recently, the pandemic triggered another significant rally. High inflation kept that rally going, and political instability kept the trend going once inflation pulled back from the highs in early 2020. Gold ultimately reached a new nominal record high above $2,900 in February 2025.

When viewing gold’s performance in a broader context, however, it’s important to take a comparative approach. If you invested $100 in gold in 1972, that would have grown to about $4,500 by 2024, an impressive return, until you compared investing the same $100 invested in the S&P 500, which would have grown to over $18,500. The chart below compares the annual returns for gold and the S&P 500 over time:

This historical perspective reveals gold’s dual nature: while it serves as a useful hedge during specific conditions like high inflation or market uncertainty, it may underperform other assets during periods of stability and growth.

Key Factors Influencing Gold Prices

Gold Supply and Mining Production

As with any produced commodity, the law of supply and demand fundamentally drives the price of gold. Yet, gold is fairly unique because new supply each year is small compared with the total existing stock, making prices particularly sensitive to fluctuations in demand or sentiment rather than production levels.

Annual mine production adds approximately about 2% to 3% to the above-ground gold stock. However, changes in production levels, whether due to discoveries, technological advances, or regulatory constraints, still influence prices. For example, environmental regulations and increasing extraction costs have made new mining projects more challenging, potentially constraining future supply growth.

Major gold producing countries include China, South Africa, the United States, Australia, Russia, Ghana, Indonesia, and Peru.

Central Bank Reserves

Central banks influence gold prices through their reserve management policies. They hold about one-fifth of all gold ever mined.

Central banks buy gold to maintain stability and credibility in their monetary systems and preserve national wealth against various economic risks-and when they do make large purchases, their actions can drive up global gold prices by both reducing available supply and signaling confidence in gold as a strategic asset.

In recent years, there has been an increase in gold purchases by central banks, particularly from emerging market economies seeking to diversify their reserves away from the U.S. dollar.

Inflation and the Value of the U.S. Dollar

Since gold is often dollar-denominated on world markets, its price tends to exhibit an inverse relationship with the U.S. dollar.

Gold is comparatively less expensive for foreign buyers when the dollar weakens against other major currencies, potentially increasing demand and driving up prices. Conversely, a stronger dollar often corresponds with lower gold prices.

Relatedly, when U.S. interest rates are low, the opportunity cost of holding gold (which pays no yield) decreases, making it more attractive to investors. When interest rates rise, gold demand may fall. This relationship becomes particularly important during periods of high inflation. If rates lag behind inflation, creating negative real interest rates, gold often benefits as investors seek to preserve purchasing power.

That said, in the mid-2020s, gold prices continued to rise even as interest rates and inflation have come down.

Economic Uncertainty and Safe Haven Demand

Market volatility, geopolitical tensions, and economic crises often drive investors toward gold as a safe haven asset. During periods of uncertainty, gold’s historical stability and lack of correlation with other financial assets make it particularly attractive.

In this way, gold has often served as a sort of insurance against extreme market events and systemic risks that could impact traditional investment portfolios. Gold’s physical nature and its 5,000-year history as a store of value make it uniquely suited to satisfy this deeply rooted human instinct for security during turbulent times. This psychological anchor helps explain why gold often experiences increased demand precisely when other assets are sold in a panic, creating characteristic countercyclical price movements.

Investor Demand Through ETFs and Mutual Funds

Investment demand for gold through specialized mutual funds, exchange-traded funds (ETFs), and other investment vehicles has emerged as a major force in the gold market since the early 2000s, fundamentally changing how both institutional and retail investors access gold. These financial products allow investors to gain exposure to gold prices without the logistical challenges of storing and securing actual bullion, effectively democratizing gold investment.

When investors buy shares in gold ETFs, the funds typically purchase and store physical gold to back up these shares, creating a direct link between fund flows and physical gold demand.

As of the first quarter of 2025, SPDR Gold Shares ETF (GLD), one of the largest gold ETFs, along with its lower-cost sister fund GLDM, collectively held more than 31.6 million ounces of gold—worth more than $90 billion.

Consumer Demand for Gold: Jewelry and Technology

The jewelry sector traditionally dominates gold demand, accounting for approximately 50% of annual consumption. This demand is deeply rooted in cultural traditions and economic behavior, which is particularly evident in markets like India and China, where gold jewelry serves a dual purpose as both fashion/adornment and as a store of wealth. The cultural significance of gold in these markets creates distinct demand patterns, such as predictable spikes during wedding seasons in India or Chinese New Year celebrations.

While industrial applications consume smaller quantities of gold, they represent an increasingly significant and more stable source of demand, primarily due to gold’s unique physical properties that make it difficult to substitute in critical applications. The electronics industry uses gold for its superior electrical conductivity and resistance to corrosion, making it important in manufacturing sophisticated devices, from smartphones to medical equipment.

Investment Demand

Gold also sees demand from ETFs. These are securities that hold the metal and issue shares that investors can buy and sell, just like stocks. The SPDR Gold Trust ETF is the largest and it held about 863 tons of gold in September 2024.

When expected or actual returns on bonds, equities, and real estate fall, the interest in gold investing can increase, driving up its price. Gold can be used as a hedge to protect against economic events like currency devaluation or inflation.

Important

While some ETFs represent ownership in the actual metal, others hold shares of mining companies rather than actual gold.

The Bottom Line

Gold prices are determined by a range of factors, from central bank policies to industrial demand and investor sentiment. Understanding these drivers is crucial for anyone considering gold as an investment or seeking to comprehend its role in the global financial system.

Fact checked by Vikki Velasquez
Reviewed by Chip Stapleton

The S&P 500 consists of 500 companies that have issued a total of 504 stocks. Some companies such as Alphabet have issued multiple classes of shares. The top 10 largest holdings are listed on the official S&P Global website. An S&P 500 company must meet specific requirements to be included as a constituent within the index.

S&P doesn’t provide the total list of holdings, however, at least not for free. Subscribers to S&P’s research unit, Capital IQ, can get access to the entire list. S&P 500 companies represent the top companies within their industries and they’re a gauge of U.S. economic activity.

Key Takeaways

• The S&P 500 includes some of the top companies that are leaders within their industries and represent a gauge of the U.S. economy.
• Companies must meet certain requirement criteria determined by the publishers of the index before being added to the S&P.
• The S&P 500 index is market capitalization-weighted so it gives a higher percentage allocation to companies with the largest market cap.
• A stock must meet certain criteria including a total market cap of $14.5 billion to join the S&P 500.
• Companies can be removed from the S&P 500 if they deviate substantially from these standards.

S&P 500 Inclusion Criteria

The S&P 500 was created in 1957 and it’s one of the most widely quoted stock market indexes. S&P 500 stocks represent the largest publicly traded companies in the U.S. The S&P 500 focuses on the U.S. market’s large-cap sector.

An S&P 500 company must meet a broad set of criteria to be added to the index:

• It must have a total market capitalization of at least $14.5 billion.
• Must be a U.S. company
• A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75
• A positive sum of the most recent four consecutive quarters of trailing earnings
• Positive earnings for its most recent quarter
• Must meet certain liquidity requirements

Companies may be removed from the S&P 500 if they deviate substantially from these standards.

$53.7 Trillion

The total combined market cap of the 504 constituents in the S&P 500 as of Feb. 25, 2025.

S&P 500 Calculation

The S&P 500 is a free-float market capitalization-weighted index. Market capitalization represents the total dollar market value of a company’s outstanding equity shares. Market cap is calculated by multiplying the total number of outstanding shares of stock by the company’s current stock price. A company with 20 million shares outstanding in which its stock is selling for $100 per share would have a market cap of $2 billion.

The more valuable an individual company’s stock becomes, the more it contributes to the S&P 500’s overall return as a result. It’s not uncommon for three-quarters of the index’s return to be linked to only 50 to 75 stocks.

The addition or subtraction of smaller companies from the index therefore doesn’t have a noticeable impact on the overall return of the index. The removal or addition of even just one of the largest stocks can have a major effect, however.

S&P 500 Sector Breakdown

These are the top sectors and their weightings within the S&P 500 index as of Feb. 25, 2025.

Being aware of the S&P’s sector weighting is important because sectors with a smaller weighting may not have a material impact on the value of the overall index. This can be the case even if they’re outperforming or underperforming the market.

If oil prices are rising and leading to increased profits for the energy sector, those stocks represent only 4.4% of the S&P 500. Oil stocks may not lead to a higher S&P if the more heavily weighted information technology sector is underperforming.

Important

S&P 500 components are weighted by free-float market capitalization so larger companies can affect the value of the index to a greater degree.

Top 25 Components by Market Cap

The exact weightings of the top 25 components aren’t available from S&P directly so the weightings below are from the SPDR S&P 500 Trust ETF (SPY). SPY is the oldest exchange-traded fund (ETF) that tracks the S&P 500. It holds $625.5 billion in assets under management (AUM) as of Feb. 25, 2025 and is highly traded.

The SPY’s portfolio weightings provide a good proxy for investing in the underlying S&P 500 index as a result. The two may not be exactly the same, however. These are the 25 largest S&P 500 index constituents by weight as of Feb. 25, 2025:

1. Apple (AAPL): 7.35%
2. NVIDIA (NVDA): 6.29%
3. Microsoft (MSFT): 5.91%
4. Amazon (AMZN): 3.91%
5. Meta (META), formerly Facebook, Class A: 2.86%
6. Alphabet Class A (GOOGL): 2.06%
7. Broadcom (AVGO): 1.91%
8. Tesla (TSLA): 1.81%
9. Berkshire Hathaway (BRK.B): 1.79%
10. Alphabet Class C (GOOG): 1.69%
11. JPMorgan Chase (JPM): 1.44%
12. Eli Lilly (LLY): 1.36%
13. Visa Class A (V): 1.19%
14. Exxon Mobil (XOM): 0.96%
15. Costco (COST): 0.90%
16. Mastercard Class A (MA): 0.90%
17. UnitedHealth Group (UNH): 0.83%
18. Netflix (NFLX): 0.83%
19. Walmart (WMT): 0.80%
20. Procter & Gamble (PG): 0.79%
21. Johnson & Johnson (JNJ): 0.77%
22. Home Depot (HD): 0.74%
23. AbbVie (ABBV): 0.70%
24. Bank of America: (BAC): 0.58%
25. Salesforce Inc. (CRM): 0.58%

How Many Companies Are in the S&P 500?

There were generally 500 companies within the index but that number has grown to 504 stocks as of Feb. 25, 2025 because some companies such as Alphabet have multiple classes of equity shares.

How Are Companies Selected for the S&P 500?

A company must meet certain requirements for inclusion in the S&P 500, which include:

• A market cap of at least $14.5 billion
• Must be a U.S. company
• A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75
• Positive earnings over the most recent four consecutive quarters summed together
• A profitable earnings report for the company’s most recent quarter
• Liquidity requirements

How Can I Buy the S&P 500?

The S&P 500 is an index so it can’t be purchased directly but exchange-traded funds that mirror or track the index can be purchased. They include the State Street Global Advisors’ SPDR S&P 500 Trust ETF (SPY).

The Bottom Line

The top 25 companies in the S&P 500 are some of the most well-known companies in the world. A large portion of the top 10 are tech companies such as Apple, Microsoft, and Google. Investors can purchase the individual stocks of the companies or invest in a fund that tracks the S&P 500.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info.

Here’s how to use your donations to save on taxes

Fact checked by Vikki Velasquez

What Is the Charitable Contribution Deduction?

The Internal Revenue Code (IRC) includes a tax break for charitable giving. However, claiming the charitable contribution deduction is subject to numerous rules. For instance, your donation must be made to a qualifying organization, and the deductions for some contributions are limited.

You must also itemize to claim this deduction, but that’s not always the best option for every taxpayer. Learn more about charitable giving rules and how to use these deductions to minimize your tax bill.

Key Takeaways

• The charitable contribution deduction is an itemized deduction that’s claimed on Schedule A of the Form 1040 tax return.
• Taxpayers can’t claim the standard deduction for their filing status if they itemize.
• The fair market value of anything you receive in exchange for your gift must be subtracted from the amount of your deduction.
• Only donations made to qualified charities are eligible.
• Deductible contributions are limited to a percentage of the taxpayer’s adjusted gross income.

Rule #1: You Must Itemize

The Internal Revenue Code requires taxpayers to either itemize their deductions or claim the standard deduction for their filing status. They can’t do both. A primary consideration is which option subtracts more from their incomes so they don’t end up paying tax on more than they have to.

However, you’re not comparing just your charitable contribution to your standard deduction. Itemizing requires completing Schedule A and submitting it with your tax return. This schedule also includes other expenses you can deduct, such as home mortgage interest and state and local taxes paid during the tax year. Compare the total of all your deductions on Schedule A to the standard deduction you’re entitled to claim to decide which one makes sense for you.

The standard deductions for the 2024 tax year are $14,600 for single taxpayers, $21,900 for those who qualify as head of household, and $29,200 for married taxpayers who file jointly. They increase to $15,000 for single taxpayers, $22,500 for heads of household, and $30,000 for married taxpayers filing jointly for the 2025 tax year (filing in 2026).

Note

The Internal Revenue Service adjusts the standard deductions annually to keep pace with inflation.

Rule #2: You Can’t Be Rewarded

Deductible donations are subject to what the IRS calls quid pro quo adjustments. You must subtract the value of anything you receive in return for your gift.

Let’s say you contribute $500 to a raffle conducted by a charitable organization to raise money and win the prize, which is a $95 tablet. You must subtract its fair market value (FMV) from your charitable contribution: $500 – $95 = $405. Thus, you can only claim $405 as a deduction.

Rule #3: The Charity Must Qualify

Paying your out-of-work neighbor’s utility bill this month won’t result in a charitable contribution deduction. Your gift must be made to a qualified, tax-exempt organization under IRC rules. Eligible organizations include religious groups (churches, synagogues, temples, or mosques), war veterans’ groups, the Salvation Army, United Way, and certain homeless shelters.

The IRS takes the headache out of this rule by providing a Tax Exempt Organization Search tool on its website. You can enter the name of the organization you’re considering or its employer identification number (EIN) if you have it. You can search by city, state, or country.

Rule #4: Cash Gift Limitations

The IRS limits cash contributions to no more than 60% of a taxpayer’s adjusted gross income (AGI). You’ll need a written “contemporaneous” receipt from the organization if you donate more than $250. The acknowledgment must state the amount of cash you gave and any property you might also have donated. The receipt must also be provided to you when you contribute.

You’ll also need proof of your payment. This can be a canceled check, a credit union or bank statement, a credit card statement, or an ETF receipt.

Rule #5: Non-Cash Gifts

The 60% of AGI rule doesn’t apply to non-cash gifts you make to a qualifying organization. The limits for this type of donation are less: 20%, 30%, or 50%. Each percentage covers several categories of gifts depending on the nature of the organization you give to.

Clothing and household items must be in “good used condition or better,” according to the IRS. An exception exists if your gift will result in a deduction of more than $500. You can provide a qualified appraisal of its value and submit it to the IRS along with IRS Form 8283.

The deduction for a vehicle with an FMV of more than $500 is limited to what the organization receives for it when it’s sold or its fair market value as of the date you donated it, whichever is less.

Written documentation of the gift will be required in virtually every case and for every type of non-cash gift. Donating an item with a fair market value of more than $5,000 needs a written, contemporaneous receipt, an appraisal, and Form 8283.

The Bottom Line

Giving is golden and can be gratifying, but the IRC imposes numerous rules and limitations. You should claim a tax benefit for your generosity if it’s available to you and if itemizing your deductions works to your advantage; however, you should check with a tax professional to make sure you get all the rules and requirements right.

Fact checked by Kirsten Rohrs Schmitt
Reviewed by JeFreda R. Brown

Individual investors seeking income, preservation of capital, capital appreciation, and diversification often consider adding bonds to their portfolios. 

Unfortunately, they can be unaware of the potential risks associated with investments in debt instruments.

In this article, we’ll take a look at seven common mistakes and issues sometimes overlooked by fixed-income investors.

Key Takeaways

• Bonds and other fixed-income investments are often portrayed as more conservative and less risky than stocks, but they have specific risks.
• Uninformed investors can make costly mistakes when investing in the bond market.
• Interest rate volatility is considered to be the primary risk associated with bonds.
• If you plan to hold a bond until it matures, interest rate risk poses no threat (unless the bond is called).
• Investors also face risk from inflation because it can erode the value of income provided by bonds.

Bond Basics

Bonds are debt instruments. Debt instruments include fixed and variable bonds, debentures, notes, certificate of deposit, and bills.

Those who issue bonds are known as issuers and investors who buy bonds are bondholders. Bondholders act as lenders.

In return for their loaned money, bond issuers promise to pay lenders interest and the bond’s par value on a specific future date.

Debt securities are issued by governments and companies to raise funds to finance operations, activities, and projects. Companies that need such funds may choose to issue debt rather than shares of stock to avoid diluting the ownership percentages of existing shareholders.

Debt securities can offer different rates of return. The higher the rate, the greater the risk of financial loss.

Other important features of debt securities include:

• Coupon rate: The annual rate of interest to be paid to the bondholder.
• Maturity date: The date on which the security will be redeemed.
• Call provisions: The options the company has to pay back the debt before the maturity date.

Calls

Investors should understand how a bond’s call provisions work and the potential impact on them. (Look for the details in a bond’s prospectus.)

In general, a bond with a call can be redeemed by the issuer prior to the maturity date on the call date. That means the issuer will pay you back your principal early and stop all interest payments.

Issuers often call bonds when interest rates drop and they can issue new bonds (borrow money) at lower rates of interest.

So, the income you’re expecting to receive for perhaps years to come can dry up unexpectedly. You’ll get your investment money back but if interest rates have dropped, as is likely the case, you’ll have to invest it at a lower rate of interest.

Let’s now look at the seven mistakes bond investors often make.

1. Ignoring Interest Rate Moves

Interest rates and bond prices have an inverse relationship. As interest rates go up, bond prices decline, and vice versa.

This means that before a bond matures, the price of the issue may vary widely as interest rates fluctuate.

So if you plan to sell your bond before it matures, you may find that its price is less that what you bought it for, if rates have risen.

However, if you plan to hold the bond until maturity, you face no risk from a change in interest rates.

Bear in mind that, as with stocks, you don’t have to sell your bond investment to get your principal back or to realize a return. By holding it to maturity (as long as it’s not called or defaulted upon), you will receive all the interest to which you’re entitled and the bond’s par value.

2. Not Noting the Claim Status

Not all bonds are created equal.

Senior notes are often backed by collateral (such as equipment). They usually take precedence over other debt and bondholders’ payments should bankruptcy and liquidation occur.

Subordinated debentures are unsecured debt that is junior to other types of debt. Holders of subordinated debentures don’t get paid until the senior bondholders are paid in full.

Before you buy any bond, be sure you understand which type of debt you’re considering and the potential impact in case of bankruptcy. Again, look to the bond prospectus for this information. Your broker may also have the details.

3. Assuming a Company Is Sound

Despite a company having a solid reputation in the investment community, there is no absolute guarantee that a bond you’ve purchased will come through with interest payments or the return of principal. Investors should bear in mind that default is always a possibility.

Rather than simply assume that a bond investment is sound, review the company’s financial statements and look for any reason that it won’t be able to service its obligation.

Examine the income statement and then take the annual net income figure and add back taxes, depreciation, and any other non-cash charges.

This will help you to determine how many times that figure exceeds the annual debt service number. A figure of at least two times coverage can offer some assurance that the company has the ability to pay down its debt.

Note

You can buy bonds when they’re issued (on the primary market) or on the secondary market through a broker, after they’ve been issued. Treasury bonds can be purchased directly from the U.S. government, or through a brokerage or bank.

4. Misjudging Market Perception

As alluded to above, bond prices can and do fluctuate. While interest rates play a role in that, another source of volatility is the market’s perception of the issue and the issuer.

If other investors don’t like an issue or think the company won’t be able to meet its obligations, or if the issuer suffers a blow to its reputation, the price of the bond can drop. The opposite is true if Wall Street views the issuer or the issue favorably.

A good tip for bond investors is to take a look at the issuer’s common stock to see how it is being perceived. If it is disliked, or there is unfavorable research in the public domain on the equity, that could spill over and affect the price of the bond, as well.

5. Failing to Check Past Performance

It is important for an investor to consider a company’s past performance for a history of solid earnings and to verify that it has made all of its interest, tax, and pension plan obligation payments.

Specifically, read the company’s management discussion and analysis (MD&A) section of an annual report. Also, read the proxy statement. Both can yield clues about problems a company may have had meeting its financial obligations.

They may also indicate future risks that could adversely impact a company’s ability to service its debt.

The goal of this due diligence is to gain information that a company has paid its debts in the past and is likely to do so in the future. Such research can confirm that the bond you may purchase is likely to be honored.

6. Ignoring Inflation Trends

When bond investors hear reports of inflation trends, they need to pay attention. Inflation can erode a fixed income investor’s future purchasing power.

For example, if inflation is growing at an annual rate of four percent, then each year it will take a four percent greater return to maintain the same purchasing power.

This is important, particularly for investors who buy bonds at or below the rate of inflation, because they are actually guaranteeing they’ll lose money when they purchase the security.

Nominal Yields and Real Yields

Take a moment and consider nominal yields and real yields. A nominal yield is the coupon rate—the rate the issuer promises to pay an investor for the life of the bond. The real yield is the nominal yield minus the inflation rate.

If you are considering or own a bond with a 6% nominal yield and the inflation rate is 3%, then your real yield, without inflation’s impact, is 3%.

If inflation drops, your real yield increases. If it rises, your real yield decreases. A higher coupon rate also helps maintain a higher real yield as long as inflation remains stable.

Corporate bonds usually offer higher yields than U.S. Treasuries because the former aren’t backed by the full faith and credit of the government.

In addition, specific high-yield bonds are worth considering but remember that the higher rate indicates a higher level of risk, so do your research.

Asset diversification also can help investors to defend against inflation. For example, including equities, with their historically higher rate of return, along with bonds in your portfolio is considered a smart move.

7. Failing to Check Liquidity

Liquidity refers to how quickly and easily you can sell your bond at a price you like if you need or want to.

Financial publications, market data/quote services, brokers and company websites may provide information about the liquidity of the issue you hold. More specifically, one of these sources may yield information about the daily volume of bond trades.

Generally speaking, the stocks and bonds of large, well-financed companies tend to be more liquid than those of smaller companies. The reason for this is simple—larger companies are perceived as having a greater ability to repay their debts.

However, other factors can affect any company’s bond liquidity, including periods of market volatility, interest rate volatility, credit upheavals, and any other reasons for heavy bond selling. The status of a dealer’s bond inventory may also impact liquidity.

If an issue is traded daily in large volumes, is quoted by brokerages, and has a fairly narrow spread, it is probably liquid.

Are Bonds Less Risky Than Stocks?

You often hear that bonds are less risky than stocks. Certain bonds, such as those issued by the U.S. government, are virtually free of any risk of default. Also, bonds offer a guaranteed return where stocks do not. And they’re usually less volatile than stocks. But stocks outperform bonds over time, and have more upside potential. Whether bonds are less risky for you in particular depends on the risks that concern you. Risks to bonds include changes in interest rates, inflation, potential default, and more.

Can I Lose Money by Buying Bonds?

Yes, you can. For example, if the company that issues your bond defaults on its payment obligation, you can lose the money you invested plus the promised interest payments. If interest rates rise, the price of your bond will drop and you’ll lose money if you have to sell your bond for less than your purchase price.

Why Buy Bonds?

Bonds offer income, capital preservation, and the potential for some capital appreciation. They can also serve as a hedge against losses due to equities. They offer useful benefits if you seek to diversify your portfolio.

The Bottom Line

Investors may not realize that, while bonds are considered more conservative than stocks, they come with risks. These include interest rate risk, inflation risk, default risk, and more.

Be sure that you understand all the risks involved in bond investing before buying debt securities. Proper research can help you to make the most of what bonds offer and to avoid the mistakes that could produce low or negative returns.

Minority groups are significantly underrepresented in the U.S. judicial system

Reviewed by Charles Potters

The judicial system in the United States has historically been dominated by a virtually all-white judiciary. Having judges who represent the diversity of the nation is important for justice, but it still has largely not been achieved.

The first person of color to serve as a federal judge was Black attorney and former Virgin Islands Gov. William H. Hastie, who was appointed to serve on the U.S. Court of Appeals for the Third Circuit by then-President Harry Truman in 1949. He served until 1971 and was named chief justice of the U.S. Court of Appeals in 1968.

Today, more members of minority groups serve as judges but are still vastly outnumbered. Minority group members make up just 20% of all state supreme court justices.

This assessment starts with examining the history of the U.S. legal and judiciary system, what the situation is today, and where the nation can go from here.

Key Takeaways

• Today, members of minority groups make up 20% of all state supreme court justices.
• At the highest level of the judiciary, the U.S. Supreme Court, only four of the 116 justices in U.S. history have been people of color.
• Even when slavery ended, continued legal barriers and pervasive race discrimination delayed the progression of non-white Americans into the judiciary until the 20th century.

A History of Racism

When Macon Bolling Allen tried to become a lawyer in the U.S. in 1844, he faced many difficulties. Even though the only requirement for that position in Maine at the time was to have good character, he was denied because, as a Black person, he was not considered a citizen. To overcome this barrier, he passed the bar exam and did become a lawyer, but was not able to find work because few people were willing to hire a Black attorney. Many historians believe Allen moved to Maine to pursue a legal career because it was an anti-slavery state.

During the Reconstruction era, which began in 1865 after the Civil War ended, attempts were made to rectify the injustice of slavery, but changes didn’t come to the judiciary for a number of years. Several barriers had to be removed first. While the 13th Amendment abolished slavery in 1865, it wasn’t until the 14th Amendment in 1868 that Black and other non-white people born in the U.S. were considered citizens. And it wasn’t until the 15th Amendment in 1870 that non-white male citizens were legally given the right to vote.

By then, laws were in place setting barriers to keep non-white men from voting. (Women did not gain the right to vote until the 19th Amendment was ratified in 1920.) The struggle for minority men and women to vote continues to this day, as recent debates about voting rights concerning legislation like the Freedom to Vote Act and the SAVE Act demonstrate.

First Inroads: The Legal Profession

Judges generally start out by becoming lawyers. The legal profession was where members of minority groups made their first inroads into the U.S. legal system.

In 1869, George Lewis Ruffin became the first Black American to graduate from Harvard Law School. Ruffin later served on the Boston City Council, was elected to the Massachusetts legislature, and became a municipal judge in Charlestown, Massachusetts, in 1883.

As members of minority groups began to go to law school, they faced severe racism and other roadblocks. In 1872, Charlotte E. Ray became the first woman of color to be a lawyer in the U.S. She graduated from Howard University, a historically Black college. However, racial prejudice made it impossible for her to sustain her practice, and she eventually became a teacher.

In 1886, Hong Yen Chang became the first Asian American to graduate from Columbia University, and in 1888, he became the first Asian American to become a lawyer in the United States. The Chinese Exclusion Act, a law prohibiting the immigration of all Chinese laborers, initially prevented him from being admitted to the bar, but the New York State Legislature passed a law allowing him to be admitted. When Chang moved to California to practice law, he was denied the right to practice in California. His case eventually went to the California Supreme Court, where he was still denied the right to practice law in that state.

Albert Gallatin McIntosh is believed to be the first Native American lawyer in the U.S., admitted to practice in 1899 after studying law under E.W. Turner of Carthage, Oklahoma. He was a member of the Creek People, or Muscogee, a group of indigenous peoples of the Southeast Woodlands. McIntosh served as superintendent of schools in connection with his legal practice and was a member of the Sequoyah Constitutional Convention, a Native American-led attempt to secure state territory for Native Americans. It was rejected by the government, despite winning the popular vote.

The first Latino/Latina attorney to argue a case before the U.S. Supreme Court was Gustavo Garcia in 1954. He won Hernandez v. Texas, a case that extended constitutional rights to Mexican Americans.

Moving Into the Judiciary

The judicial branch of the federal government, separate from state courts, was established by the Judiciary Act of 1789, one of the first acts of the U.S. Congress. It was signed into law by President George Washington.

It took 160 years, until 1949, for a person of color, the previously mentioned William H. Hastie, to be appointed to serve as a judge at the federal level. It took even longer for the first non-Black jurists of color to be appointed to the federal bench:

• In 1961, Reynaldo Guerra Garza became the first Latino/Latina federal judge. He was appointed by then-President John F. Kennedy and served on the district court in the Southern District of Texas, later serving as the chief judge of the court.
• Herbert Choy became the first Asian American federal judge when he was appointed by then-President Richard Nixon in 1971. He was a circuit court judge in the Ninth Circuit.
• Billy Michael Burrage was the first Native American judge. He was appointed to the district courts by then-President Bill Clinton in 1994.

At the federal level, all judges are appointed by the president of the United States and confirmed by the U.S. Senate. The judicial race barrier was breached much earlier at the state level, where some judges are appointed and many are elected, depending on each state’s rules. The stories of two of these early jurists vividly show the barriers that they faced.

According to political encyclopedia website Ballotpedia, the first African American became a justice of a state court in 1870. That’s when Jonathan Jasper Wright, the first Black attorney in Pennsylvania—who had moved to South Carolina and become involved in Republican politics—was appointed to the South Carolina Supreme Court. He served until 1877, when he resigned after the post-Reconstruction legislature, controlled by Democrats, tried to impeach him on corruption charges.

James Dean, a Black attorney in Florida, is believed to be the first elected judge of color. He was elected at the county (not state) level in 1888. Dean was suspended from his position less than eight months later by the governor of Florida for breaking anti-miscegenation laws for issuing a marriage license to a couple of Cuban descent, who allegedly were of two different races. In 2002, then-Florida Gov. Jeb Bush reinstated his judgeship through a proclamation.

Lawyers Today: How Diverse?

A U.S. Bureau of Labor Statistics report shows low racial diversity among lawyers as of 2024. Of the total number of lawyers in the country, 7.0% are Black, 6.3% are Asian, and 6.5% are Latino/Latina.

This job report did not include information on Native American lawyers. However, a separate study reported by the American Bar Association states that Native American attorneys in the U.S. make up just 0.5% of lawyers.

Federal Court Judges: Racial Diversity Today

The U.S. federal court system is made up of three main levels: district courts (the general trial courts), circuit courts (the court of appeals), and the Supreme Court (the highest court in the judicial system).

Here’s a breakdown of how racial diversity plays out at all levels of the federal system.

District Courts

The district court system is where the general trial courts are. All federal court cases begin in the district courts, including civil and criminal cases.

There are 94 district courts across the country. White jurists make up 65.2% of the total judges at the district court level, and jurists from other population groups make up 34.8%.

Circuit Courts

The circuit court system is the appellate court system, or the court of appeals. Once a ruling is made in a district court, the case can be appealed to the circuit court. It is a higher level of court where the decision of the district court can be reviewed and potentially changed.

There are 13 U.S. circuit courts. They are organized into 12 circuits covering different regions of the country. These circuit courts hear the appealed cases of the district courts. The 13th circuit is the Federal Circuit Court of Appeals, which has nationwide jurisdiction over special subject matters.

Across these 13 circuit courts, white jurists make up 67% of the total at the circuit court level, or just over two-thirds. Members of minority groups make up 33% of judges, about a third. There are no Native American judges on the circuit courts.

Supreme Court

The U.S. Supreme Court is the highest level of the federal court system. Once a ruling is made in a circuit court, the case can be appealed to the Supreme Court, which has the final say on the matter.

Nine justices serve on the Supreme Court. Currently, six of these justices are white, two are Black, and one is Latino/Latina, meaning one-third are people of color.

Note

On April 7, 2022, the U.S. Senate confirmed the appointment of Ketanji Brown Jackson to the U.S. Supreme Court by a vote of 53-47. She became the first Black woman to serve on the court when she succeeded retiring Justice Stephen Breyer.

In 1967, Thurgood Marshall was the first Black jurist appointed to the Supreme Court, 178 years after the federal judicial system was established. The second Black justice, Clarence Thomas, who still sits on the court, was appointed in 1991, after Marshall’s retirement. In 2009, Sonia Sotomayor became the first person of Latin descent appointed to the Supreme Court.

Of the 116 justices who have served on the Supreme Court, only these three and new Justice Kentanji Brown Jackson have been people of color, a meager 3.45%.

State Court Justices: Racial Diversity Today

The charts below show the racial diversity at the three different levels in the state court system. The state court system varies state by state, but most states follow a structure similar to the federal system and have several levels, which include a general trial level, an appellate level, and a state supreme court level. Overall, there is even less diversity in the state system than at the federal level.

The data shows that white jurists make up 80% of state court judges at all levels of the system. At the highest levels of the state courts, state Supreme Courts, racial minority groups hold only 20% of judgeships.

Judges of the Future

Although minority groups have made progress in the federal and state judiciary, there is still work to do to make sure that the judiciary represents the diverse U.S. population.

Attending law school and becoming a lawyer is not the only way to become a judge on the federal judiciary, but it is where many future judges get their start. Admitting more members of minority groups to law school can help open paths to a more diverse and representative judiciary.

Federal judges are appointed for life; the courts and districts over which they preside can be heavily influenced by the appointed judges. The position that these judges hold and the authority they have are a vital part of the American government. Appointing and electing members of minority groups to these positions is the most obvious and direct way to diversify the judiciary.

With minority group jurists representing less than a quarter of the members of the judiciary, racial diversity must keep progressing to ensure inclusivity and fairness for all the people whom the courts serve.

How Diverse Is the Judiciary?

Across each level of the judiciary, racial diversity remains low.

For example, at the U.S. Supreme Court level, just three of the nine justices are people of color: Clarence Thomas, the second Black justice in U.S. history; Sonia Sotomayor, the first Latino/Latina Supreme Court justice; and Ketanji Brown Jackson, the first Black woman Supreme Court justice.

Across the federal court system and in state supreme courts, there are similarly low levels of diversity.

Why Is Diversity Important in the Judiciary?

Given the diverse U.S. population, many have argued that the judiciary should reflect the population that it serves. Not only that, but the presence of a diverse judiciary can also have consequences in terms of case outcomes, public morality, and confidence in the state’s fairness and legitimacy.

For instance, one study shows that Black judges are more likely to vote for affirmative action programs than non-Black judges.

Second, when there is increased diversity, it allows for broader perspectives that speak to the contours of political-moral questions, new resolutions, or new developments.

Finally, trust in the judicial system is far lower among Black Americans, where men are almost six times more likely to be incarcerated during their lifetime than white men.

Is the Federal Judiciary Diverse?

Each level of the federal judiciary lacks racial diversity, a trend that has persisted over history.

Within district courts, 34.8% of judges are diverse. Like district courts, 33% of circuit court judges identify as being a member of minority groups. One-third of the U.S. Supreme Court is racially diverse, with three of nine justices being non-white.

The Bottom Line

The diversity of jurists in both state and federal court systems doesn’t yet reflect the diversity of the U.S. population, but progress is slowly being made. In the federal circuit courts in March 2020, 77% of the jurists were White, 10% were Black, 7% were Latino/Latina, and 6% were Asian American. But as of 2024, 67% of federal circuit court judges were White, 14% were Black, 10% were Latino/Latina, and 8% were Asian American.

As for the state courts, the percentage of people of color on state high court benches increased by one percentage point to 20% from 2023 to 2024, according to the Brennan Center for Justice. However, in 19 states, there is no state supreme court justice who identifies as a person of color, and 15 states have never had a Black supreme court justice.

Men and women are almost identical in many of their credit habits

Fact checked by Amanda Jackson
Reviewed by Katie Miller

You likely know what your own credit score is, but you probably don’t know how it compares to others’ credit scores, especially when it comes to gender differences. Is there a gap, like the gender wage gap, between women’s and men’s credit scores?

Legally, there shouldn’t be, thanks to the Equal Credit Opportunity Act (ECOA) of 1974, which bars lenders from discriminating against groups based on factors such as race, color, nationality, religion, sex, age, and receipt of public assistance. The ECOA largely prohibits the use of demographic information, including gender, in credit underwriting, pricing, reporting, and scoring. That makes gathering data on gender differences in credit difficult.

However, Experian, one of the three major credit reporting agencies, looked into this topic in “Women and Credit 2020: How History Shaped Today’s Credit Landscape,” a report that examined credit scores and usage by gender. It remains the most recent detailed source available on the subject. Here is some historical background to help provide context for the numbers.

Key Takeaways

• Women faced many hurdles in accessing credit as late as the early 1970s, requiring male cosigners and large down payments to get loans.
• The Equal Credit Opportunity Act of 1974 prohibited several practices that restricted women’s access to credit and their ability to be financially self-reliant.
• The average credit score of the two genders was nearly identical in 2020.
• Men and women carried essentially the same level of credit card debt.
• Men carried more debt than women overall, including in every category except student loans.

The Equal Credit Opportunity Act of 1974

It’s hard to believe that women weren’t allowed to take out a loan or apply for credit without a male cosigner as recently as the 1970s. What’s more, when buying a home they were typically required to make a larger down payment than male applicants with a similar credit history.

But, that hasn’t changed. Women continue to face challenges when it comes to mortgage approvals. There are many contributing factors, including the gender-based wage gap, according to the National Association of Realtors. In 2023, on average, women earned 83.6 cents for each dollar earned by men. That translates to median full-time weekly earnings of $1,005 for women compared to a median full-time weekly wage of $1,202 for men for 2023.

The ECOA was a major milestone in trying to end gender discrimination as it relates to accessing credit. The Experian report showed that credit availability and usage for women and men became largely aligned as of 2020. The table below delineates the divergence in scores and the average debt balance according to type for men and women.

Source: Women and Credit 2020: How History Shaped Today’s Credit Landscape

This isn’t to say there were no differences in how men and women applied for and used debt and credit. Men carried more overall debt than women, including across most debt categories. On the other hand, women carried more student loan debt and often had more credit cards.

704 and 715

The average credit score for women as of the fourth quarter of 2019 and the average consumer credit score in the U.S. for 2024.

Credit and Debt for Women vs. Men

Any parity that exists between men’s and women’s average credit scores is not entirely new. The numbers were similarly close in the mid-2010s, and both averages rose 10 points from the second quarter of 2015 up through the last quarter of 2019. In modern-day credit scoring models, however, there is no consideration of gender factors, thanks to the ECOA.

There were some differences in the Experian report in how men and women accumulated their ongoing debt. Men had about 9% more debt on average than women: approximately $338,000 compared to $310,000 in total debt balances. This difference came from holding more debt than women in every debt category but one. Men held 9.7% more mortgage and home equity line of credit (HELOC) debt, 16.3% more auto loan debt, and, most strikingly, 20% more personal loan debt.

Women held slightly more student loan debt on average (2.7%) than men, and they also tended to have more credit cards, averaging 4.5 cards as opposed to 3.6 cards for men. When it came to credit card balances, the difference was just $125 between the genders (about 2%), which is not considered statistically significant.

Are the Average Credit Scores for Men and Women Different?

Not materially. As of 2020 women had an average credit score of 704, while the average score for men was 705.

What Is the Equal Credit Opportunity Act?

Passed by Congress in 1974 and signed into law by President Gerald R. Ford, the ECOA did its best to level the playing field when it comes to women’s access to credit. Prior to the law, women weren’t allowed to take out a loan or apply for credit without a male cosigner. Women were also typically required to have a larger down payment when buying a home than men were.

What Is the Gender Wage Gap?

Women still earn less than men for comparable work, something known as the gender wage gap. In 2023, women earned 83.6 cents for each dollar earned by men.

The Bottom Line

Legislative changes in 1974 allowed for greater access to credit by American women, enabling them to take out loans and credit cards without relying on male cosigners or being unfairly penalized when taking out a home loan. As of 2020 women had largely climbed to credit and debt equity, achieving average credit scores that were identical to men’s.

The makeup of debt did differ between genders, with men taking on more debt for housing, cars, and other items, while women as a group took on slightly more student loan debt. Although the total average debt balance of men was about 10% higher than women’s, the identical average credit scores implied that there was a similarly responsible approach to the handling of credit across genders.

Fact checked by Ryan Eichler
Reviewed by Anthony Battle

Over the last several decades, automated teller machines (ATMs) have become commonplace, from bank lobbies to shopping centers to gas stations. As of 2025, there are more than 3.5 million ATMs around the world. As a result of their ubiquity, people casually use these virtual cash dispensers without a second thought. The notion that something could go wrong never crosses their minds.

Unfortunately, things are not always as they seem at the ATM. Most ATM scams involve criminal theft of debit card numbers and personal identification numbers (PINs) from innocent users of these machines. There are several variations of this confidence scheme, but all involve the unknowing cooperation of the cardholders themselves. Let’s explore some common ways people get ripped off at ATMs. 

Key Takeaways

• ATM scams can involve stealing your debit card number or personal identification number.  
• Popular scams that thieves use include using a counterfeit device for access to the door to the ATM and using a false façade on the front of the machine. 
• Some criminals can swipe data from free-standing ATMs using cracking programs. 
• Other forms of ATM scams include good old-fashioned stealing the entire ATM, or placing a fake deposit receptacle at the ATM, and putting an “out of order” sign on the machine. 

1. Every Little Thing It Does Is Magic

One common scheme begins when a bank customer swipes their debit card in the device that opens the door to the ATM vestibule typically found in a bank’s inner doorway. Because most people are unaware of precisely what this magnetic reader should look like, criminals can place a counterfeit device that reads and copies card numbers on the outside door without being detected by customers.

Once the customer is inside, a hidden surveillance camera records PINs as customers enter them on the ATM keyboard. The result of this information gathering is the illegal creation of a duplicate card that thieves quickly use to withdraw all the funds in the connected bank accounts as quickly as possible.

Detection of this particular fraud is difficult for the average consumer as there are several dozen manufacturers of legitimate swiping devices. Attempting to distinguish a real one from a fake is almost impossible.

Tips to Prevent/Avoid This Scam

To avoid this scam, you should adopt vigilant practices whenever you use an ATM. This includes visually inspecting the ATM for any abnormalities, covering the keypad while entering the PIN, and using ATMs in well-lit and secure locations. You should regularly monitor your bank statements for unauthorized transactions and enable transaction alert notifications so you can be alerted to detect suspicious activity when it happens. You can also choose ATMs affiliated with reputable banks that may monitor their own ATMs and use contactless payment methods when possible.

2. Don’t Stand So Close to Me

Another method of trickery involves the attachment of a false façade over the ATM machine. Though the machine looks normal, in reality, the attachment will “eat” your card and display an error message. Your PIN is usually recorded by a hidden camera, or in some cases, by a “helpful” person standing nearby who suggests that you try to enter your PIN again. Of course, this person is actually a criminal, and moments after you leave, they will retrieve your card from the false front of the ATM and walk away with both your card and the access code.

Other times, an overlay will “skim” the card without destroying it, collecting its information along with the pin code and other data you may enter. For the user, it appears to be a normal transaction, but the thieves now have your card number. In 2021, for instance, the FBI identified an ATM skimming fraud of almost $600,000 throughout the Midwest.

Tips to Avoid/Prevent This Scam

To prevent falling victim to this cam, carefully inspect the ATM for any irregularities, loose parts, or unusual attachments before inserting your card. If the machine or surrounding area looks suspicious or displays an error message after inserting the card, do not re-enter your PIN and report it to the bank immediately. You should also be wary of any person nearby offering help as they may be accomplices to the scam.

Important

There is government legislation that protects ATM users. For example, The Department of Financial Services in New York State has established the ATM Safety Act which applies to all Federal and State chartered banking institutions that operate ATM facilities in the state. The Act requires certain ATM facilities to meet standards to ensure they are safe to use.

3. Ghosts in the Machines

Freestanding ATMs are also subject to criminal activity. These devices are located in areas as varied as airport terminals and self-service gasoline pumps. In some situations, criminal hackers are able to capture account information by using WiFi scanners and cracking programs to download transaction data when the systems fail to be protected by high-level encryption software. 

The most audacious of ATM scams is the installation of machines whose only purpose is to steal information. This criminal confidence scheme was once a popular activity of organized crime circles. Seemingly normal ATMs would be placed in small shops, bars, and other venues. The machines were never actually loaded with funds, but instead were there solely to entice users to swipe their cards and enter their PINs. After collecting this information, an error message would appear. These seemingly innocent devices provided criminals with a steady flow of stolen banking information. Because of their placement in high-traffic areas, users did not realize that all users were unsuccessful at withdrawing funds.

Tips to Avoid/Prevent This Scam

When using such ATMs, especially those in high-traffic areas like airport terminals or self-service gasoline pumps, avoid using machines that appear suspicious. It can be tricky, but see if you can tell if the ATM is equipped with high-level encryption software to protect against WiFi scanners and hacking attempts by criminal hackers. If an ATM appears to be malfunctioning or displays an error message after a transaction (or is having any sort of software issue), refrain from using it and report the issue to the ATM owner.

4. Making the Best of What’s Around

An old-fashioned scam that still reaps profits for criminals is the placement of a deposit receptacle in an ATM vestibule with a sign over the automated machine stating it is out of order. Here, the scammer’s goal is to capture cash deposits that were intended for the more secure electronic banking machine. While it may seem obvious that depositing money in this unsecured fashion is a bad idea, the comfort, and trust that people have when entering a financial institution often allows them to suspend their suspicions as they believe that there is no safer place than a bank.

Tips to Avoid/Prevent This Scam

In addition to a lot of the advice above, confirm with bank staff or official channels to ensure the ATM is functioning properly. Avoid depositing cash in unsecured or suspicious locations, opting for well-maintained and secure deposit options you’ve confirmed with your bank. If you come across an ATM marked as “out of order,” report it to the bank immediately and refrain from making any transactions.

5. Demolition Men

Finally, criminals who are too impatient to go through the complex process of stealing bank accounts and personal identification numbers will simply steal an entire ATM. Typically, this crime occurs in the overnight hours inside a business, such as a supermarket. The thieves will break-in, use the store’s forklift (which is normally used for the benign purpose of moving cases of beer and soda) to rip the ATM off the floor and load it onto a waiting truck. As a fully loaded ATM can hold tens of thousands of dollars, these have become prime targets.

Tips to Avoid/Prevent This Scam

This one can be tricky, but you can still take steps to protect yourself. Like the other tips above, ensure the ATM is located in a well-lit and secure area, preferably with surveillance cameras. Inspect ATMs to make sure whether they are affixed to a wall or the ground (or at least that it may be difficult to move). If you do see suspicious activity such as someone scoping out how to move it, report it to the property authorities.

How Many ATMs Are There in the World?

As of 2025, there are more than 3.5 million ATMs around the world.

Are Bitcoin ATMs Safe?

Bitcoin ATMs are terminals or kiosks where individuals can anonymously buy or sell Bitcoins electronically. Even though they are connected to the internet, experts agree that today’s Bitcoin ATMs are safe since they use high-level encryption. Moreover, Bitcoin itself uses a public-private key pair, and nobody can steal or move your bitcoins without your personal private key. The machines are also built with safeguards against physical or hardware malfunction as well as software protections against malware.

Will Entering My PIN # Backwards Alert the Authorities to a Possible Threat?

No. Despite the prevailing urban myth, entering your PIN in reverse (or in any other combination) will not alert the police or the bank. This idea gained popularity in the mid-2000s through the 2010s as viral social media posts suggested this emergency measure. However, it has been confirmed to be false.

The Bottom Line

Don’t let a simple transaction like withdrawing money from an ATM be a way for thieves to get the best of you. To avoid scams like these, listen to the cautionary voices in your head and be careful when something seems amiss. Even in what seems like normal circumstances, shield the keyboard with your other hand when entering your PIN—it’s no fun to be driven to tears by a crime you could have prevented. And of course, if you spot a scam in action, don’t apprehend the criminals yourself—let the police deal with that.

Reviewed by Robert C. Kelly

The “Candle Makers’ Petition” is a satire of protectionist tariffs, written by French economist Frèdèric Bastiat. In many ways, it expanded on the free market argument against mercantilism set forth by Adam Smith, but Bastiat targeted government tariffs that were levied to protect domestic industries from competition.

In Bastiat’s “Petition,” all the people involved in the French lighting industry, including “the manufacturers of candles, tapers, lanterns, sticks, street lamps, snuffers, and extinguishers, and from producers of tallow, oil, resin, alcohol, and generally of everything connected with lighting,” call upon the French government to take protective action against unfair competition from the sun. It argues sarcastically: “We candlemakers are suffering from the unfair competition of a foreign rival.”

Key Takeaways

• The “Candle Makers’ Petition” is a complaint written by French economist Frèdèric Bastiat to his government to oppose import tariffs.
• Bastiat instead favored free markets for international trade and competition and argued that tariffs would have negative unintended consequences.
• Despite the economic theory underlying Bastiat’s argument, protectionism remains a tool used by governments in the global market.

Unintended Consequences

Bastiat argued that forcing people to close “all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds—in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses”—would lead to a higher consumption of candles and related products. In turn, he reasoned, the industries that those in the lighting industry depend on for materials would have greater sales, as would their dependent suppliers, and so on—until everyone is better off without the sun.

This satirical essay suggests that forcing people to pay for something when a free alternative is available is often a waste of resources. In this case, the money people spend on additional lighting products would indeed boost the candle makers’ profit, but because this expenditure is not required, it is wasteful and diverts money from other products. Rather than producing wealth, satisfying the candle makers’ petition would lower overall disposable income by needlessly raising everyone’s costs.

Argument Against Tariffs

Similarly, Bastiat argued, using tariffs to force people to pay more for domestic goods when cheaper foreign imports are available allows domestic producers to survive natural competition, but costs everyone as a whole. Additionally, the money put into an uncompetitive company would be more efficiently placed into an industry in which domestic companies have a competitive advantage.

Bastiat concluded with the following remark:

Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!

Protectionism Remains

Despite the economic theory in Bastiat’s argument, protectionism remains a tool used by governments in the global market.

Tariffs are just one form of protectionism. Others include import quotas, which are nontariff barriers put in place to limit the number of products that can be imported over a set period of time, and product standards, which are a barrier that limits imports based on a country’s internal controls.

Who Was Frèdèric Bastiat?

Frèdèric Bastiat (1801–1850) was a 19th century philosopher and economist famous for his ideas about the role of the state in economic development. He was known for identifying flaws in protectionism and for his use of satire to shed light on political and economic principles.

What Were Bastiat’s Works?

The “Candle Makers’ Petition” was among a series of essays Bastiat wrote for a book titled “Economic Sophisms,” published in 1845.

Bastiat is also known for two works published in 1850, the year of his death:

• An essay titled “Ce qu’on voit et ce qu’on ne voit pas,” which translates as “What Is Seen and What Is Not Seen,” in which he introduced a concept that would eventually be coined as opportunity cost, by Austrian economist Friedrich von Wieser, 60 years later.
• A book titled “The Law,” in which he outlined how a free society can develop through a just legal system.

What Are Tariffs?

A tariff is a tax imposed by one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages. Tariffs often result in unwanted side effects, such as higher consumer prices.

What Is Protectionism?

Protectionism refers to government policies that restrict international trade to help domestic industries. Protectionist policies are usually implemented with the goal of improving economic activity within a domestic economy, but they can also be implemented for safety or quality concerns.

The Bottom Line

The “Candle Makers’ Petition” is a staple in economics education today. It is often used to teach students about the principles of free trade and the pitfalls of protectionism.

Bastiat’s petition is frequently referenced in discussions about trade policies, thus highlighting the enduring value of its message regarding consideration of broader economic impacts beyond specific industries’ interests.