Master the Market with Proven Investment Strategies

Many people have a lot riding on their investments. It arguably provides the best chance to achieve long-term financial goals, whether generating enough money to retire, giving children or grandchildren a big helping hand as they begin their adult life, or something else entirely.

With so much money at stake, it’s crucial to have a plan. Selecting the right investments is important, but there’s more to it than that. You should also craft a set of guiding principles and learn about how financial markets work. Doing so can reduce the risk of making mistakes in the heat of the moment and maximize your returns.

This article looks at 10 key rules for making the most of your investments.

Key Takeaways

• Knowing how markets work and having a plan makes dealing with volatility and bear markets easier.
• Impulse buying and selling often ends badly.
• The more you plan ahead, the better prepared you’ll be to make the right calls under pressure.
• Don’t just follow the crowd. Do your research and aim to buy low and sell high.
• Buying for the long term and standing by your convictions is generally the best strategy.

Rule 1: Understand Market Cycles

Asset prices generally rise, fall, then rise again. And it’s not all random. These phases of expansion and contraction form part of a cycle that regularly repeats itself.

In good times, companies invest, consumers spend, banks lend money at reasonable rates, and most stocks rise in value. The good times don’t last forever (indeed, a sign that it’s coming to an end is seeing some claiming they never will.) Eventually, costs rise too much and investments fetch more than their historical norms. At this point, a “correction” begins as the economy weakens and investors retreat, paving the way for the cycle to repeat again.

The key takeaway from this is not to panic when prices start dropping. Over time, the stock market should continue its upward trajectory—historically, it always has, but that’s cold comfort in the moment.

Rule 2: Avoid Emotional Investing

One of the main reasons investors are advised to establish guidelines before investing is to reduce the chance of emotions getting the better of them. When investors log in to their accounts during bouts of volatility, they tend to be impulsive, buying more of the winners and dumping the losers. Often that turns out to be a mistake.

“The worst investment decisions are those driven by fear or greed,” said Alex Campbell, head of communications at U.K.-based financial technology company FreeTrade. “Take some time to consider the drop in light of your investment strategy and reflect on the move that you feel is right based on the available information.”

Rule 3: Sometimes It Pays To Be a Contrarian

“Buying low and selling high” means being a contrarian—buying or selling when others are not. It requires a lot more research on your part. It’s not just a case of buying everything out of favor. The market is generally right and most stocks are cheap for a reason.

To be successful, you’ll need to scrutinize the data, be a critical thinker, and not get distracted by what others say. A good starting point is learning to recognize overcorrections. For example, investors can sometimes excessively punish the entire market when the economy is stuttering or oversell specific stocks because of adverse temporary factors.

Advisor Insight

Asked what he tells newer investors, Yvan Byeajee, author of Trading Composure: Mastering Your Mind for Trading Success, was succinct: “Cultivate a deep embrace of uncertainty.” He added, “It’s not enough to acknowledge uncertainty or risk intellectually; you need to accept it emotionally and allow them to guide your decision-making without fear or resistance.”

Rule 4: Know When To Exit

Normally, a long-term buy-and-hold strategy is considered the best way to go. However, sometimes it’s necessary to walk away earlier than planned. Byeajee said too many investors approach some investments like the lottery.

“This mindset can be disastrous, leading to behaviors like chasing trends, panic selling, or overleveraging—all of which will likely wipe out gains and erode confidence,” he said. “Sustainable investing is about playing the long game, respecting the process, and allowing compounding to work its magic over time.” 

To avoid making mistakes, it’s sensible to draw up an exit strategy at the onset before the investments are made. Common methods include setting price targets, loss limits, and time frames for your investment. You should also consider triggering events that could make you lose confidence and that your risk tolerance could change over time.

Rule 5: Diversify Your Portfolio

Investors are regularly advised to spread their money across numerous investments. “For most people in most situations, a long-term, buy-and-hold, diversified, low-cost investment approach is likely more suitable than active trading,” said David Tenerelli, a certified financial planner at Values Added Financial Planning in Plano, Texas. “This is because it helps the investor ignore the ‘noise’ and instead focus on a disciplined approach.”

The logic behind diversification is that different assets will react differently to the same events. In theory, that means if one investment does badly, its impact will be limited as the other assets in the portfolio should perform better.

Rule 6: Follow Broader Market Indicators

Stock market indexes track the performance of a selection of publicly traded companies and so function as a barometer of segments of the stock market. There are a variety of indexes to keep tabs on. Some focus on specific sectors or the country’s biggest companies by market cap. For a representation of the entire U.S. stock market, a good place to look is the Wilshire 5000 or Russell 3000.

Rule 7: Recognize Bear Market Patterns

Bear markets—when there’s a steep drop in asset prices—are less scary when you understand how they work.

These periods of prolonged price declines are usually broken down into four distinct phases, which SteelPeak Wealth, a Los Angeles-based wealth management firm, describes as follows:

1. Recognition. Prices start fluctuating yet most investors shrug it off as normal ups and downs. Eventually, they begin to realize a bear market is impending and stop buying on the dips.
2. Panic. Prices plummet, the media reports doom and gloom, and investors panic sell.
3. Stabilization. Stocks halt their decline but the outlook remains grim and any rally triggered by optimists is usually knocked back.
4. Anticipation. The recovery begins.

Timing the market is extremely difficult. For most investors, the best way to behave during bear markets is to not panic, focus on the long term, and take advantage of dollar cost averaging.

Rule 8: Be Skeptical of Forecasts

The internet is littered with predictions from so-called gurus. You’re best off ignoring them. A study from the CXO Advisory Group found that their accuracy was, on average, just under 47%. That’s worse than flipping a coin.

“Market forecasts should be ignored, regardless of whom they come from—professional economists or market gurus,” wrote Larry Swedroe, a consultant and outsourced chief investment officer, in response to that report. “Instead, investors are best served by having a well-thought-out plan, including rebalancing targets, and sticking to that plan.”

Rule 9: Prepare for Market Volatility

Market volatility is scary. Seeing your holdings are shedding value could make you want to dash for the exit and ignore your well-thought-out convictions. That’s the last thing you should do. Remember, markets go through ups and downs but generally rise in value over the long run.

Rule 10: Enjoy Bull Markets, Prepare for Bear Markets

Markets and prices move up and down. When they are rising, it can be tempting to be overconfident and throw more money at the winners. And when they plummet, you might want to do the opposite and dump everything, especially the laggards. Knowledge of how markets work will hopefully prevent you from panicking or being greedy.

If anything, you want to buy when assets you are convinced about are out of favor and sell when everyone is raving about them. Or better yet, do nothing and stick to your strategy. It’s time in the market rather than timing the market that often generates the best returns.

The Bottom Line

There are no guarantees of success in investing. However, if you understand market cycles and how indexes and bear markets work, avoid impulse buying or selling, adopt a contrarian mindset, draft an exit strategy, and maintain a diversified portfolio, you’ll have a much better chance of coming out on top.

“To succeed, traders and investors must trust the process even when the outcomes are temporarily unfavorable,” Byeajee said. “This mindset shift isn’t just important; it’s foundational. It’s the difference between reacting emotionally and acting strategically—not once or twice, but consistently.”

When you need to borrow money quickly, easy-approval loans can be an attractive option. Many of the easiest loans to get don’t require a credit check, have minimal requirements, and offer quick funding. 

While these emergency loans can be a simple go-to for unexpected expenses, there are some downsides. They often come with high interest rates and have short repayment terms. Understanding the risks and exploring alternatives can help you make an informed borrowing decision.

Key Takeaways

• Easy-approval loans offer fast access to cash with minimal approval requirements but often have high interest rates and fees.
• Borrowing limits vary by loan type and affect your options.
• Compare the cost of alternatives like banks, credit unions, and online lenders to choose the best option.

Payday Loans

Payday loans are short-term loans that must be repaid by your next payday. They typically don’t require a credit check, making them easy to qualify for, and they offer instant or same-day approvals. Loan amounts are low—typically in amounts of $500 or less. To guarantee repayment, borrowers provide a postdated check or authorize an automatic withdrawal when your paycheck or monthly government benefits deposit arrives.

There are no universal laws that define payday loans, according to the Consumer Financial Protection Bureau (CFPB). State laws vary, but many payday lenders operate online to get around strict regulations.

Payday loans generally come with extremely high APRs, often exceeding 400%. Because payday loans are due in one lump sum, many borrowers struggle with repayment and fall into a debt cycle.

Warning

Using rollover or renewal options allows you to extend your loan for an additional fee. However, this can quickly lead to a cycle of debt.

No-Credit-Check Loans

No-credit-check loans are designed for individuals with bad or no credit history who may not qualify for traditional personal loans. Loan amounts vary depending on the lender and your income.

While these loans offer easy approval because there’s often no minimum credit score, they come with high interest rates, sometimes as high as 195%. Some no-credit-check loans have origination fees, late payment penalties, or prepayment fees, which adds to your borrowing cost.

These loans have short repayment terms, which can make them difficult to manage. Because of the high interest rate and fees, no-credit-check loans carry a potential for predatory lending practices. On the plus side, you can repay these loans with fixed monthly payments, which makes it easier to budget for.

Unsecured Personal Loans

Unsecured personal loans don’t require collateral but require individuals to have fair credit, generally between 580 and 669 to qualify. Loan amounts often range from about $1,000 to $50,000, but the exact range will depend on lender. Some have higher interest rates and may carry origination fees, while others may have no fees and competitive interest rates. 

Borrowers with higher credit scores can qualify for a better interest rate, while those with lower credit scores may only qualify for high-interest-rate loans. Personal loans have fixed monthly payments, which makes them easier to manage compared to loans with short repayment terms.

For instance, OneMain Financial offers loans with rates up to 35.99% and origination fees up to 10%.

Retirement Plan Loans

Retirement plan loans allow you to borrow up to 50% or $50,000 from your vested 401(k) or other retirement account without a credit check. Interest rates are typically lower than personal loans or credit cards. Many employers allow you to repay your loan through automatic payroll deductions.

You typically have five years to repay a 401(k) or other retirement loan, unless you’re using the loan to purchase a primary residence. If you leave your job, you may have to repay the loan in full or risk having the loan taxed as a withdrawal. 

Note

Borrowing from your retirement savings can reduce your long-term savings and investment growth.

Pawnshop Loans

Pawnshop loans allow you to borrow money by using personal valuables—like jewelry or electronics—as collateral. Approval is instant and there’s no credit check required. Loans are based on the value of your pawned item, but you can only borrow a portion of the item’s resale value.

You typically have 30 to 90 days to repay the loan, depending on your state law. If you repay the loan on time, you get your item back. However, if you don’t repay, the pawnshop keeps your item and resells it.

There’s no credit check required for a pawnshop loan, which makes approval easier. However, a major drawback is the potential for high APRs, sometimes as high as 300%.

Alternatives to Easy-Approval Loans

Before opting for an easy-approval loan, consider a few alternatives:

• Banks and credit unions: Some financial institutions offer personal loans or short-term borrowing options with better terms. If you have an existing relationship with a bank or credit union, that’s a good place to start.
• Borrowing from family or friends: A trusted family member or friends may be willing to lend money to you, with minimal or no interest or fees. Repayment terms are more flexible, but it’s important to be clear to avoid conflicts. To avoid misunderstandings, put the loan terms in writing.
• Credit cards: You may be able to tap into an existing credit limit, by using your credit card for a purchase or taking a cash advance. Cash advances do come with a 3% to 5% fee and interest starts accruing immediately. The interest rate for cash advances is generally higher than for purchases, but still less expensive than payday loans.
• Online lenders: Many online lenders have more flexible lending requirements compared to traditional loans and they allow borrowers to pre-qualify. This makes these loans a good option if you don’t have the best credit. The application process is straightforward and you can often receive a quick decision on your loan application.
• Payment Plans: Some businesses, like medical providers or utility companies, offer payment plans instead of requiring you to pay upfront. Payment plans may be offered through third-party lenders or card issuers, so be sure to ask about the application.

The Bottom Line

Easy-approval loans provide quick access to cash but have risks and high costs. However, be aware that they can trap you in cycles of debt. Before choosing one of these options, consider loan alternatives with lower costs and less risk.

A Simplified Gift Registry, With More Products on the Way

Reviewed by Khadija Khartit

Zola is a wedding registry, planning, and retail e-commerce company designed to facilitate the full spectrum of activities weddings require, from using a wedding planning checklist to honeymoon experiences to filling your home with the necessities of married life.

Zola makes money by charging vendors to connect with couples and collecting a share of sales made using its website.

Key Takeaways

• Zola is a wedding registry, planning, and retail e-commerce company.
• Zola makes money by providing wedding services and a platform for vendors to connect with couples.
• Zola is in the wedding planning and services industry.

Zola’s Industry

Zola operates in the wedding services industry. It’s competing for market space with Amazon, Walmart, Macy’s, Pottery Barn, Bloomingdale’s, and many others, large and small. The global wedding services industry was estimated to be $182.6 billion in 2023 and is expected to grow 12.7% by 2030.

Business Model

The company appeals to millennials with its enormous online product catalog and easy-to-use app. Zola makes it easy to add or remove products and services to a registry with a swipe to the left or right, and provides a convenient alternative to the hours of wandering stores and scanning everything in sight. By providing one centralized online location for a couple’s registry, it cuts shopping time for wedding guests.

In addition, Zola offers features that set it apart from traditional gift registries. Gift buyers can pool their money to collectively purchase the most expensive items on a couple’s list. Couples can also request cash they might apply toward a honeymoon, a dream home, or whatever they choose. The ability to pool money together is a dream come true for couples. Couples can also choose when gifts are delivered, so they do not need to worry about their new dishes being left on the porch while they are on their honeymoon. Finally, Zola also has tools to help couples think outside the box when creating their registry lists, with features that can suggest interesting products they might never have thought of.

Zola’s website provides access to wedding planning solutions such as calendars, registries, reminders, vendor locations, and guest lists. The company recruits vendors who list their products and services on the e-commerce site, some of which offer various tailored experiences, discounts, wedding website building, and much more.

Zola’s Fundraising and Financials

Zola’s latest fundraising round was in 2020. Over eight rounds, it has raised about $240.8M. Seventeen investors have participated in the round, including Comcast Ventures, Lightspeed Ventures, Thrive Capital, Forerunner, and BAM Ventures. The company is rumored to have been valued at $650 million in 2019.

Where the Revenue Comes From

Similar to other online stores, Zola earns money by taking a cut of the purchases made through its site. When a customer buys an experience through Zola, like a guided trip or a wine tour, the company keeps some of the sale. When a customer buys a product, Zola keeps an amount comparable to other retailers.

Because the vast majority of the items Zola sells are shipped directly from the manufacturer or vendor, the company itself has practically no inventory. This means Zola has a much smaller overhead than competing services. While other sites such as Amazon (AMZN) offer registry services with wide ranges of products, Zola differentiates itself with a large selection of activity packages, cash options, and numerous ways to personalize the experience.

History and Leadership

Zola was co-founded in 2013 by Australian entrepreneur Shan-Lyn Ma, former Chief Product Officer at Chloe+Isabel and Gilt Group’s product lead. Ma founded the company with Nobu Nakaguchi, the former director of user experience and product management at Gilt Group. They were joined by Gilt Group founder Kevin Ryan and other colleagues at Gilt.

Recent Developments

Zola continues to add new wedding tools and services, in addition to offering wedding industry reports annually that cover wedding planning trends.

In April 2024, Zola announced an artificial intelligence tool designed to help couples split wedding planning chores fairly. The company found in client surveys that couples’ most significant concern when planning a wedding is that one person usually takes on more planning work (or decision-making) than the other. This leads to strain between the couple—the AI tool was created to help couples share wedding decision-making.

In its 2024 Wedding Trends report, Zola found that the average wedding costs more than $30,000. It’s survey also found that 89% of couples begin planning their wedding before one party asks the other to marry them.

In November 2024, Zola launched a card game called Imagine the Day. In it, couples draw cards to playfully discuss their future plans, values, money, and many of the issues they will face on their journey together.

What Does Zola Do?

Zola is a wedding services provider that assists couples in everything from planning their wedding to purchasing travel packages.

What Does Zola Charge For?

Zola doesn’t charge couples, but it charges vendors for connecting them to couples by taking a percentage of sales and charging connection fees.

Is It Safe to Buy From Zola?

Zola is a legitimate business and states it takes customer and vendor safety and security very seriously. According to the company, it employs an external security company, uses a third party payment processor, and aggressively acts on any suspicious activity.

The Bottom Line

Zola is a wedding planning services business that connects vendors and couples. Couples can create wedding and baby registries, collect funds from family and friends, and spend the funds on the website. Friends and family can purchase items from the registry while the couple is assisted with planning their big day.

Zola makes money by collecting sales percentages from vendors and manufacturers, but doesn’t take any money from couples planning their events.

A 529 plan can be a great way to save money for college, as earnings are generally exempt from federal and state income taxes if used for qualified education expenses. However, withdrawals from these accounts for non-qualified education expenses can be subject to taxes plus an additional 10% penalty. Fortunately, this penalty doesn’t apply under certain circumstances, such as when the beneficiary receives some form of tax-free educational assistance.

Key Takeaways

• A 529 plan is a tax-advantaged account used to save for qualified education expenses, lessening the need to rely on student loans. 
• If the account’s beneficiary receives any form of tax-free educational assistance, then a distribution of up to the amount awarded won’t be subject to the 10% penalty on non-qualified expenses.
• As it isn’t entirely clear when this exception can be made, the safest bet is to make a withdrawal prior to the end of the calendar year that the educational assistance was granted.

529 Plans: The Basics

A 529 plan, formally known as a qualified tuition program (QTP), is a type of tax-advantaged account that offers a way to save for educational expenses. Although the basic framework for these plans was devised at the federal level, the states determine the specifics of their respective plans, such as what the investment options are and whether there are any tax benefits.

Because a 529 withdrawal usually isn’t subject to income taxes, parents often open these accounts on behalf of their children to grow their college funds tax free. One type of 529 plan, called a prepaid tuition plan, can even be used to essentially prepay for future attendance at select institutions based on today’s tuition rates.

Anybody can set up a 529 account, so you could open one and name yourself as the beneficiary if you so choose. This can be a good option if you want to save money to attend grad school.

While 529 plans are primarily used to pay for college, changes in legislation over the years have expanded how these funds can be used, such as the Tax Cuts and Jobs Act (TCJA) allowing withdrawals of up to $10,000 per year to pay for K–12 tuition. Another example is the Setting Every Community Up for Retirement Enhancement (SECURE) Act permitting distributions to repay qualified student loans, up to a lifetime maximum of $10,000.

Consequences of Non-Qualified Withdrawals

Since they’ve already been taxed, 529 plan contributions can always be taken out tax free. However, when 529 funds are used to pay for non-qualified education expenses, the earnings portion of that withdrawal may be subject to income taxes and an additional 10% federal tax penalty.

Unfortunately, because distributions are allocated pro rata between a plan’s contributions and its earnings, you cannot make a contribution-only withdrawal.

You may also have to pay income taxes and the 10% penalty if you exceed any distribution limits, even if the money was technically used for a qualified education expense. For example, if you withdraw a total of $12,000 in a single year to pay for your child’s high school tuition, that’s $2,000 over the $10,000. You would then owe taxes and a 10% penalty on the earnings portion of that excess amount.

Options for Penalty-Free Non-Qualified Withdrawals

If you make a 529 withdrawal for a non-qualified education expense, there are certain circumstances where the 10% penalty won’t apply (though taxes still will). These include:

• The beneficiary dies or becomes disabled
• The beneficiary attends a United States military academy (not exceeding the costs of advanced education)
• The qualified education expenses were only taxed because the student or parent(s) claimed the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit (LLC)
• The beneficiary received any kind of nontaxable educational assistance (other than gifts or inheritances), including scholarships, fellowship grants, veterans’ educational assistance, and employer-provided educational assistance

Beneficiaries can avoid paying income taxes as well as the 10% penalty by rolling over a lifetime maximum of $35,000 from a 529 plan into a Roth individual retirement account (IRA), subject to annual contribution limits, so long as the 529 plan has been open for over 15 years.

Another possibility would be transfering the funds to an Achieving a Better Life Experience (ABLE) account, also subject to annual contribution limits. This is only an option for those who’ve been diagnosed with significant disabilities prior to their 26th birthday.

The Educational Assistance Exception

If you open a 529 account for your child and they’re later granted some form of nontaxable educational assistance, that may mean having more funds saved than are needed to cover their qualified education expenses. Fortunately, you can withdraw an amount up to the awarded value from the 529 plan and use the money for any purpose, without paying the 10% penalty.

The major downside of this exception is that it would result in the student having a lower adjusted qualified education expenses (AQEE), or their total qualified education expenses during an academic period minus any tax-free educational assistance they received. Making a 529 withdrawal in excess of the AQEE results in the earnings portion of that distribution becoming taxable. You still wouldn’t owe the 10% penalty, just income taxes.

The Internal Revenue Service (IRS) also doesn’t clearly spell out when 529 funds have to be withdrawn in order to count toward this exception. However, to be on the safe side, consider making the 529 distribution before the end of the same calendar year that the scholarship funds were awarded, suggests Larry Sprung, CFP, founder of Mitlin Financial.

“Although there is some ambiguity regarding the timing, I think taking a more conservative approach is better,” says Sprung. “I would also recommend that you maintain clear records of what amount was distributed, when, and for what calendar and school year. It would also make sense to confirm your strategy with your tax professional, so you are both on the same page as well.”

The Bottom Line

A 529 plan can be a great way to save for college while minimizing taxes, and there are options for accessing these funds even if you end up needing less money for school than anticipated.

In particular, not only does securing tax-free educational assistance reduce your college costs, it also gives you an opportunity to withdraw an equivalent amount from your 529 plan—without paying the 10% penalty on non-qualified distributions. You may still end up owing income taxes in this situation, but you’ll still be able to retain more of your 529 earnings than you might’ve otherwise.

Reviewed by Lea D. Uradu
Fact checked by Betsy Petrick

Buying a home comes with many additional expenses beyond the price of the house and the mortgage. Among these is a home inspection, which is a thorough check of a house’s condition and systems. This includes the structural condition of the house and the functionality of systems such as electrical, plumbing, heating and cooling, and more. A purchase agreement might even be contingent on specific outcomes of the home inspection. Even if you feel confident the home is in good condition, there are 10 good reasons why you should get a home inspection and why it is worth the $300 to $600 it likely will cost.

1. It Provides an “Out”

A quality home inspection can reveal critical information about the condition of a home and its systems. This makes the buyer aware of what costs, repairs and maintenance the home may require immediately, and over time. If a buyer isn’t comfortable with the findings of the home inspection, it usually presents one last opportunity to back out of the offer to buy.

2. Safety

A home inspection can detect safety issues like radon, carbon monoxide, and mold, which all homes should be tested for. Make sure that your home-buying contract states that should such hazards be detected, you have the option to cancel the offer to buy.

3. Reveal Illegal Additions or Installations

A home inspection can reveal whether rooms, altered garages or basements were completed without a proper permit, or did not follow code, according to Chantay Bridges of Clear Choice Realty & Associates. “If a house has illegal room additions that are un-permitted, it affects the insurance, taxes, usability and most of all the overall value. In essence, a buyer is purchasing something that legally does not exist,” she explains. Even new homes with systems that were not installed to code will become the new homeowners’ financial “problem” to fix (and finance).

4. Protection

Home inspections are even more critical if you are buying an “as-is” foreclosed property or short sale. Dwellings that have been boarded often develop hazardous mold problems, which are costly to remedy and pose health concerns. Greg Haskett, Director of Operations at TrueBlue Total House Care says it’s common for home inspectors to find that copper plumbing lines and outdoor compressors have been removed from foreclosed properties by people trying to sell copper to recyclers for money.

5. Negotiating Tool

Realtor Jennifer De Vivo, owner of Orlando-based Lotus Door Realty says the home inspection report presents an opportunity to ask for repairs and/or request a price reduction or credit from the seller. Work with your realtor to understand what requests can and should be made to negotiate a better deal.

6. Forecast Future Costs

A home inspector can approximate the installation age of major systems in the home like plumbing, heating and cooling, and critical equipment like water heaters. They can diagnose the current condition of the structure itself, and tell you how long finishes have been in the home. All components in the home have a “shelf-life.”

Understanding what may require replacement can help you make important budgeting decisions, and it will determine what type of home insurance coverage or warranties you should consider.

7. Determine “Deal-Breakers”

De Vivo suggests that home inspections can help buyers identify how much additional money or effort they are willing and able to spend to take the home to a condition that is personally acceptable. If you are unwilling to repair issues like faulty gutters, cracked walls, or ceilings, perhaps you are not ready to end your home buying search.

8. Learn to Protect Your Investment

The home inspector is a valuable educational resource. They can suggest specific tips on how to maintain the home, and ultimately save you thousands of dollars in the long term, according to De Vivo.

9. Reveal the Big Picture

Haskett advises that people use home inspection to understand the nuances of what may be the biggest purchase they ever make. “People fall in love with a piece of property based on the color of the walls, the location of the home, or something else; they are completely blind to the issues that can make that dream home a nightmare,” he says.

10. Insurance

Some insurance companies will not insure a home if certain conditions are found, or without the presence of certifications like Wind Mitigation and four-point inspections, according to Haskett. “Qualified home inspectors can do these things at the same time as their other services and save the home buyer time and money in the long run.”

How Much Does a Home Inspection Cost?

The cost will depend on location and the size of the house, among other factors. A home inspection service in Michigan lists prices starting at less than $300 for homes up to 1,500 square feet and more than $500 for homes up to 4,000 square feet. There are additional costs for things like detached buildings or testing water.

Is a Home Inspection Required?

Home inspections usually are not required, unlike home appraisals, which assess a property’s market value and impact how much can be borrowed from the lender.

What Is Included in a Home Inspection?

Standard elements of a home inspection usually include a check of the home’s electrical systems, plumbing, heating and cooling, the roof and other structural elements, and more. The full details of the inspection will depend on the specifics of the building and the needs or requests of the person paying for the inspection.

The Bottom Line

It is your responsibility to understand as many details as you can about the property you may soon call home. Home inspections reveal the inner workings of the property, allowing you to be informed of all the perks and pitfalls the home has to offer.

Reviewed by David Kindness

Theranos Inc. was a consumer healthcare technology startup that closed down in 2018, after the company, its CEO Elizabeth Holmes, and former president Ramesh Balwani were indicted by the SEC for scheming to defraud investors, doctors, and patients. At one time, the company, whose leadership claimed it would revolutionize the blood-testing industry, had been not just a unicorn—a term applied to start-ups valued at $1 billion—but a decacorn, thanks to having been valued at $10 billion.

The technological breakthrough that Holmes and Balwani touted was never demonstrated, and Holmes was accused of purposefully lying to investors and patients, as well as lying about the company’s profitability. Holmes’ and Balwani’s separate fraud trials resulted in their being convicted and sentenced to prison.

Key Takeaways

• Theranos Inc. was a consumer healthcare technology startup that claimed to revolutionize the blood-testing industry.
• Theranos reportedly raised roughly $724 million of capital from venture capitalists and private investors, ultimately attaining a valuation of $10 billion.
• Theranos CEO Elizabeth Holmes claimed that the company had developed a new technology to test blood, but these claims were later discovered to be fraudulent.
• In 2018, the SEC charged Theranos, Holmes, and former President Ramesh “Sunny” Balwani with fraud. Both Holmes and Balwani were eventually imprisoned for fraud.
• By June 2016, Elizabeth Holmes’ net worth reportedly dropped from $4.5 billion to nothing.

Theranos

Theranos was a privately held healthcare technology company founded by then 19-year-old Elizabeth Holmes in 2003.

Using a “nanotainer” (a small device designed to draw, retain, and analyze a droplet of blood from a patient’s fingertip) and its proprietary “Edison” testing technology, Theranos claimed the device could run a multitude of tests on a patient’s physiology within minutes and at a fraction of the cost of current technology.

After more than 10 years of fundraising and reaching a peak valuation of roughly $10 billion, the tide started to turn in 2015 thanks to skepticism from the press.

Doubt on Viability

A New Yorker profile termed Holmes’ explanations of Theranos’ technology “comically vague,” citing as one example Holmes’ statement that “a chemistry is performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel.”

Important

On Jan. 3, 2022, Theranos founder Elizabeth Holmes was found guilty of four out of 11 fraud charges.

The Wall Street Journal then followed with a highly critical report on Theranos. Based on interviews with ex-employees, the newspaper alleged rampant management incompetence and claimed that Theranos had grossly exaggerated the capabilities of its proprietary technology.

One former senior employee stated that only a small fraction of all the tests were conducted on the “Edison machines,” and the majority of tests were handled on competitors’ equipment despite Theranos’s claims to the contrary. If true, this would have been a violation of the U.S. Food and Drug Administration (FDA) rules.

Investigations

The FDA then released two reports from its ongoing investigation into Theranos. They were less than favorable and claimed that Theranos had “uncleared medical device(s),” poor records, was mishandling complaints, and had failed to conduct audits and produce supplier qualifications. In regard to an unspecified medical device, an investigator noted: “The design was not validated under actual or simulated use conditions.” Further, Theranos failed to “ensure the device conforms to defined user needs and intended uses.”

At the beginning of 2016, a letter released by the Centers for Medicare & Medicaid Services (CMS) stated that a California-based lab used by Theranos posed “immediate jeopardy” to patient health and safety. CMS gave the company 10 days to correct the deficiencies or face daily fines and/or loss of CMS approval for Medicare payments.

Charges of Fraud

After a couple of years of settled lawsuits, dissolved relationships with big partners such as Walgreens, and broken deals with the likes of Safeway, the U.S. Securities and Exchange Commission (SEC) formally charged Theranos, Holmes, and former company president Ramesh “Sunny” Balwani with “massive fraud.”

The complaint alleged that the company raised more than $700 million by deceiving investors for years about the company’s performance.

Both Theranos and Holmes agreed to settle the fraud charges pending court approval. Holmes lost control of the company, returned millions of shares, and was barred from serving as an officer or director of a public company for 10 years.

Balwani and Holmes were both sued for multiple counts of fraud. In January 2022, Holmes was convicted of three charges to commit wire fraud, and one charge of conspiracy to commit wire fraud. Later that year, Balwani was convicted of six counts of defrauding investors, four counts of defrauding patients, and two counts of conspiring to commit fraud. Balwani was sentenced to 12 years and 11 months in federal prison, while Holmes received 11 years and three months.

Note

Several works are based on Theranos and Elizabeth Holmes including: John Carrreyrou’s 2018 nonfiction book titled “Bad Blood: Secrets and Lies in a Silicon Valley Startup,” Alex Gibney’s 2019 documentary “The Inventor: Out for Blood in Silicon Valley,” and the Emmy-award winning 2022 mini-series “The Dropout,” starring Amanda Seyfried and Naveen Andrews.

A Timeline of Theranos’s Rise and Fall

2003: Nineteen-year-old Stanford chemical and electrical engineering drop-out Elizabeth Holmes founds Theranos with the aim of revolutionizing blood testing.

2004: Theranos raises $6.9 million in early funding gaining a $30 million valuation.

2007: The company’s valuation hits $197 million after it raises another $43.2 million in early-round funding.

2010: After further rounds of funding, Theranos is valued at $1 billion.

2013: After a decade of working “in the dark,” Holmes introduces Theranos to the world via press appearances and unveils a website.

2014: With over $400 million in funding, Theranos is valued at nearly $9 billion. Holmes effectively becomes a multi-billionaire thanks to her 50% stake.

December 2014: Despite her company’s hefty valuation, Holmes remains tight-lipped on how exactly Theranos’s technology works. It turns out that the technology has never been submitted for peer review in medical journals.

July 8, 2015: Capital BlueCross, a Pennsylvania insurer with 725,000 customers, chooses Theranos as its preferred lab work provider. Theranos is valued at $10 billion. 

Oct. 15, 2015: The Wall Street Journal runs a scathing article criticizing Theranos.

Holmes appears on “Mad Money” and other media outlets to do damage control. She is “shocked” by the Wall Street Journal article and claims that Theranos supplied over 1,000 pages of documentation to refute the allegations. The Wall Street Journal stands by its reporting.

Oct. 16, 2015: A follow-up article in the Wall Street Journal states that Theranos was forced to suspend the use of its unapproved nanotainer for all but one type of blood test.

Oct. 27, 2015: The FDA releases two partially redacted Form 483 reports from an ongoing investigation into Theranos.

Oct. 28, 2015: Fortune reports that Theranos sought to raise an additional $200 million in Series C-3 funding just days before the initial Wall Street Journal article was published.

Nov. 10, 2015: A $350 million deal with Safeway fizzles out after Theranos failed to meet key deadlines for rollouts and Safeway executives questioned the validity of the test results.

Dec. 27, 2015: The Wall Street Journal ran another article alleging management ineptitude at Theranos and test rigging to produce better results for its Edison machines.

Jan. 27, 2016: The Centers for Medicare & Medicaid Services releases its damming report on Theranos’ California-based lab.

Jan. 28, 2016: Following the CMS report, Walgreens Boots Alliance Inc. (WBA) decides to temporarily close the Theranos Wellness Center in its Palo Alto store and suspend its use of Theranos’s Newark, California lab.

May 1, 2017: Theranos settles a lawsuit with Partner Fund Management, one of its largest investors, after the hedge fund accused the company of securities fraud. Theranos had previously settled proceedings with the Centers for Medicare & Medicaid Services and the Arizona Attorney General.

March 14, 2018: The SEC charges Theranos, its founder and CEO Elizabeth Holmes, and its former President Ramesh “Sunny” Balwani with massive fraud.

$10 billion

Theranos’s valuation at its height in 2015. 

June 15, 2018: A federal grand jury indicts both Holmes and Balwani on nine counts of wire fraud and two counts of conspiracy to commit wire fraud.

The press release from the U.S. Attorney’s Office states that in order to promote Theranos, both Holmes and Balwani “engaged in a multi-million dollar scheme to defraud investors and a separate scheme to defraud doctors and patients.”

Holmes stepped down as Theranos CEO earlier in the day although she continues to be the chair of the company’s board.

September 2018: Theranos begins the process of dissolving as a company.

Jan. 3, 2022: Elizabeth Holmes is convicted on four out of 11 federal charges for conspiring to defraud investors. She is ultimately sentenced to 11 years and three months in prison.

July 7, 2022: Balwani is found guilty of all charges and ultimately sentenced to nearly 13 years in prison.

May 30, 2023: After several efforts to delay her sentence through appeals, Holmes finally reports to federal prison camp Bryan in southern Texas.

Feb. 24, 2025: Elizabeth Holmes loses her appeal in federal court to have her fraud conviction overturned.

Was Theranos Publicly Traded?

No. Theranos was a privately held corporation until it was shut down and liquidated in September 2018.

Is Theranos Still Open?

Theranos started shutting down its clinical labs and wellness centers in late 2016, finally ceasing operations in September 2018.

What Did Theranos Do Wrong?

Theranos claimed to have developed blood tests that required only small amounts of blood and devices that could quickly perform the tests. Based largely on those claims, Theranos reportedly raised roughly $724 million of capital from venture capitalists and private investors.

How Much Did Walgreens Invest in Theranos?

Walgreens reportedly invested $140 million in its partnership with Theranos.

Is Elizabeth Holmes Still Wealthy?

According to Forbes, by June 2016, Elizabeth Holmes’ net worth dropped from $4.5 billion to “nothing.” However, Holmes later married the millionaire hospitality heir Billy Evans, who went on to father her two children. Although Evans’ net worth is estimated at around $10 million, it is not clear if the couple shares their finances.

The Bottom Line

Theranos was a healthcare startup that claimed to revolutionize the blood-testing industry. However, CEO Elizabeth Holmes’ aggressive claims were later found to be fraudulent, and the company was actually fabricating results to deceive both investors and patients.

Holmes and her co-conspirator, Ramesh Balwani, were each convicted and sentenced to over a decade in federal prison. Their names, along with that of their company, have now become synonymous with fraud.

Reviewed by Somer Anderson
Fact checked by Suzanne Kvilhaug

Think you can beat the Street? Have you spotted a company you just know is going to go through the roof? Got a gut feeling about a hot initial public offering?

Or maybe, you’re new to investing and trading and need an introduction to how buying and selling securities works—an exploratory deep dive that doesn’t involve real money.

Before you bet the farm, or any amount, for that matter, you can build your investing skills and test trade theories without risking any hard-earned funds.

Welcome to the world of stock market simulators.

Key Takeaways

• For beginning investors, stock market simulators are a great way to develop investing skills.
• You can see what happens to a stock purchase in different market environments.
• Users can become familiar with price movements, trends, indicators, and technical analysis.
• Experienced investors use simulators to evaluate trading strategies before trying them in the real world.
• A stock market simulation competition can test your skills against real opponents with fake money.

What Are Stock Market Simulators?

Stock market, or trading, simulators are online systems that allow investors to practice their stock-picking skills without investing real money.

Investors log on, set up an account, and get mock money with which to make simulated investments.

Some brokers require investors to open and fund an account to get a full-featured simulator. Others provide limited features without opening an account.

Review all your options to find a trading simulator that meets your needs and expectations.

The best simulators can support trading in equities, ETFs, options, and futures, with limit and stop orders, and short selling. They can also adjust for most corporate actions such as stock splits, dividends, and mergers.

They’re available at many online brokers and offer investors tools used by experienced traders, such as stock screens, charts, live data feeds, and technical analysis tools. They can also provide educational resources.

Investopedia offers a free stock market simulator that lets you paper trade without a deposit or other obligation.

Benefits of Stock Market Simulators

For Beginning Investors

For novice investors, a simulator can be a gateway to investing and the mechanics of trading. They can learn about basic investment concepts, reading stock tables, the impact of market volatility, and much more.

News features can provide insight into real-world events, such as corporate scandals, earnings forecasts, and the effects that upgrades or downgrades issued by Wall Street analysts have on stock prices.

They’re also a great introduction to investor research. Simulators generally offer a host of research tools, including historical prices, performance charts, price-earnings ratios for specific securities, and historical trading data for various industries and indexes.

For Experienced Investors

Trading simulators can be valuable tools for experienced investors, as well. They can use them to test-drive complex trading strategies in a safe environment.

Investors can analyze the results of a simulated trading strategy over time to see its advantages and pitfalls. They can refine investment concepts and skills before launching them in the real world.

Simulators offer experienced investors the tools to monitor IPOs, track trading volumes, and build customized screens based on technical and fundamental criteria.

Learn From Others

Some online sites run stock market simulation competitions that give players an opportunity to win real money. These competitions can be a great way to pit your strategies and skills against those of other investors.

Perhaps even more valuable, you can learn what works and what doesn’t in a more intense environment.

So, even if you don’t find your name at the top of the leader board at the end of the competition, you’ll still be able to observe and learn from the winning strategy.

Whether trading on your own or in a competition, simulators also can teach you about the importance of leaving your emotions out of trading and investing.

Your reactions to your simulated portfolio’s changing value can inform how you’ll deal with similar price movements when trading in a live market with real money.

Test What You Learn Elsewhere

With simulators, you can test your interpretation of investing information provided by others. If you already have a brokerage account, read the daily updates and the monthly or quarterly newsletters in which your broker offers outlooks on the markets, the economic environment, and government activities.

It may even recommend specific trades that you could simulate.

Stream the financial news to enhance your knowledge and to learn what stock-picking gurus recommend. Then, test out that information by placing trades for your simulated investment portfolio.

Simulators can even teach you about the importance of leaving emotions out of trading and investing. How you respond to positive and negative positions might give you a sense of how you will react to price movements in a real-life trades.

Important

As a beginning investor, you can easily recover from a bad decision in simulated trading. An actual financial loss in real trading may have a more serious effect. Whether with a simulator or by the careful study of stocks, markets, and the steps of trading, or both, solid preparation can make a big difference to your trading success.

The Limits of Simulation

There is no doubt that simulators are good tools, but even the best of them can’t fully replicate the the real thing. Generally, they offer fewer securities and more restricted trading parameters than the actual global financial markets.

A simulator may not allow trading in foreign stocks or penny stocks. There may be a time delay in the data feeds, which means your trade won’t be executed instantly, as in real life. For example, Investopedia’s free simulator has a 15-minute time delay.

Mistakes made in simulated trading might be easily forgotten. Try not to let that happen. You want to keep such mistakes in mind when you start trading live. They should be part of the learning experience that you’ll put to work throughout your investing years.

Are Trading Simulators Free?

Yes, trading simulators can be free, but they may require that you open an account at a brokerage, and even fund the account. In general, though, the idea behind the simulator is that an investor can practice trades without risking actual money. 

Who Uses Trading Simulators?

Trading simulators can be used by all kinds of traders and investors, but may be most useful for new, inexperienced, or younger investors. 

Can You Use a Simulator to Practice Day Trading?

Yes, an investor can practice day trading using a simulator. A simulator can be used by any investor.

The Bottom Line

Stock trading simulators are online systems offered by many brokers and some financial websites that give investors the opportunity to buy and sell securities without putting real money at risk.

Simulators can help users to learn the mechanics of trading, sharpen their trading skills, and test out investment strategies in a financially worry-free market environment.

Reviewed by Michael J Boyle

For all of the expensive subscriptions and analytics programs, a huge amount of the work that Wall Street analysts and managers do is done on the Excel software that you have on your own computer. With just a little bit of effort, you too can create a variety of financial and analytical models, and investing the additional time and energy to learn about macros can give you even more options.

Key Takeaways

• Financial models help make predictions about future company performance by organizing information but can only be as accurate as the data and assumptions inputted into the models.
• Investment analysts commonly use Microsoft Excel for financial modeling, which can also be used at home for personal stock selection.
• Valuation models are used for many purposes, such as determining a company’s worth, with discounted cash flow (DCF) being one of the most popular methods.
• DCF estimates future cash flows, applies a discount rate, and calculates present value, allowing investors to see if a stock is fairly priced.

Company Financial Models

The core of what every sell-side analyst (and many buy-side analysts) does is the creation of a company’s financial models. These are simply spreadsheets that hold (and help form) the analyst’s views on the likely financial results for the company in question.

They can be incredibly detailed and complex, or relatively simplistic, but the model will never be any better than the quality of the work that goes into forming the estimates. In other words, elaborate guesswork is still just guesswork.

Financial models are usually built with the x-axis serving as the time (quarters and full years) and the y-axis breaking down the results by line item (i.e., revenue, cost of goods sold, etc.)

It is not at all uncommon to have a separate sheet generating the revenue estimate; whether that is a per-segment basis for a large conglomerate like United Technologies or General Electric or a more simple units-sold-and-estimated selling price for a smaller, simpler company.

For these models, the model-builder needs to input estimates for certain items (i.e., revenue, COGS/gross margin, SG&A/sales) and then make sure that the mathematical formulas are correct.

From this base, it is also possible to build sophisticated and interconnected models for the income statement, balance sheet, and cash flow statement, as well as macros that allow investors to create “bull/bear/base” scenarios that can be changed with a click or two.

Although most would deny it, surprisingly few buy-side analysts actually build their own company models from scratch. Instead, they will essentially copy the models built by sell-side analysts and “stress test” them to see how the numbers respond to a variety of circumstances.

Valuation Models

Even if you don’t build your own company models, you should seriously consider building your own valuation models. Some investors are content with using simple metrics like price-earnings, price-earnings-growth, or EV/EBITDA, and if that works for you then there’s no reason to change. Investors who want a more rigorous approach, though, ought to consider a discounted cash flow model.

Note

Common financial models include the dividend discount model (DDM), residual income model, Monte Carlo simulation, and earnings power value (EPV).

Discounted Cash Flow (DCF)

DCF modeling is pretty much the gold standard for valuation and plenty of books have been written on how free cash flow (operating cash flow minus capital expenditures at its simplest level) is the best proxy for corporate financial performance. One row will serve to hold the year-by-year cash flow estimates, while rows/columns beneath can hold the growth estimates, discount rate, shares outstanding, and cash/debt balance.

There needs to be a starting estimate for “Year 1” and that can come from your own company financial model or sell-side analyst models. You can next estimate the growth rates by creating individual year-by-year estimates or using “bulk estimates” that apply the same growth rate for years two to five, six to 10, 10 to 15, and so on.

You then need to input a discount rate (a number that you can calculate with the CAPM model or another method) in a separate cell, as well as the shares outstanding and net cash/debt balance (all in separate cells).

Once this is done, use your spreadsheet’s NPV (net present value) function to process your cash flow estimates and discount rate into an estimated NPV, to which you can add/subtract the net cash/debt, and then divide by the shares outstanding. As part of this process, do not forget to calculate and include a terminal value (most analysts calculate explicit cash flows for 10 or 15 years and then apply a terminal value).

What Is Financial Modeling?

Financial modeling is a method of using math to predict a company’s future financial performance. It works on analyzing past data and incorporating assumptions to forecast potential future outcomes. It is often done by using spreadsheets, such as Excel, to project revenue, expenses, cash flow, and earnings. Financial modeling is widely used by businesses, investors, and analysts to make decisions, determine risks, and discover opportunities.

What Is the Difference Between LBO and DCF Models?

Leveraged buyout (LBO) and discounted cash flow (DCF) models are both used in valuing a company but are used for different purposes. LBO is commonly used in private equity and focuses on how much debt can be used to buy a company. It encompasses two main points: (1) the return for investors through debt repayment and (2) the exit value. DCF seeks to determine a company’s value based on its projected future cash flows, discounting them to the present value. DCF centers on intrinsic value whereas LBO centers on financial structuring.

What Is the Difference Between Financial Analysis and Financial Modeling?

Financial analysis centers on understanding a company’s financial statements as well as external factors, strengths, and weaknesses, focusing on past and present data to understand a company’s financial health. Financial modeling, on the other hand, is forward-looking, using math to forecast a company’s future financial performance, incorporating historical data and assumptions.

The Bottom Line

Investors must remember that detailed or sophisticated modeling is no substitute for judgment and discretion. All too often, analysts lean too heavily on their models and forget to do the occasional “reality check” regarding their core assumptions.

Nevertheless, building your own models can teach you a lot about what a particular company must do to grow, what that growth is worth, and what the Street already expects from a particular company. Accordingly, the relatively modest amount of time it takes to build these models can often pay for itself many times over by leading you to better investment decisions.

Fact checked by Vikki Velasquez

By the time you hit your 60s, your 401(k) balance is more than a number you check. It will be an actual financial lifeline for your retirement.

Many people stop working completely in their 60s, so the money in their 401(k) accounts may be needed in their 60s and beyond. You might be surprised by the amount of money people in their 60s have tucked away for retirement—more than half a million dollars.

The 60s is also a great time to grow 401(k) balances. It is not too late to boost your contributions even more or to catch up on savings.

Key Takeaways

• In 2025, you can contribute as much as $23,500 to a 401(k) plan.
• If you are age 60 to 63, you can invest a catch-up contribution of $11,250.
• The average 401(k) balance for people in their 60s is $573,624.

The Surprising Average 401(k) Balance for People in Their 60s

According to Empower, the average 401(k) balance for people in their 60s is $573,624, and the median balance is $210,724.

Balances in 401(k) plans vary by age group.

Not surprisingly, the balances in 401(k) plans go down for people in their 70s and 80s. The average 401(k) balance for people in their 70s is $431,962 with a median balance of $106,654. And the average 401(k) balance for people in their 80s is $393,826 with a median balance of $86,301.

If you are in your 60s and your 401(k) balance is lower than you would like, consider making a catch-up contribution.

According to the Internal Revenue Service, the 401(k) contribution limit is $23,500 for 2025. The catch-up contribution for people 50 and older is $7,500. There is a higher catch-up contribution of $11,250 available for people ages 60, 61, 62 and 63.

Wondering how much you need to have saved for retirement by the time you reach your 60s? According to T. Rowe Price, by the age of 60, your retirement savings goal should be six to 11 times your salary. According to Fidelity, you should aim to have retirement savings of eight times your income by the age of 60. Both are good guidelines for saving.

The Bottom Line

Saving as much as six to 11 times your salary by the time you reach age 60 may seem like a daunting goal. But it is worth shooting for. Whatever you can put aside for your retirement savings in your 60s can help you provide for your non-working years, and that time is coming soon.

So contribute all that you can in a 401(k) plan, max out your contributions, utilize catch-up contributions, and with each dollar you invest, you’ll be closer to making your retirement dream a reality.

Fact checked by Vikki Velasquez

The children born from 2025 to 2039 will be known as Generation Beta, the kids of younger millennials and older Gen Zers. Many of these children will live into the 22nd century, navigating technologies and societal changes we can’t predict.

They’ll also grow up in a financial landscape that looks different from ours, with rising costs of housing, healthcare, and education. While it may be hard to plan for all of Gen Beta’s financial needs, there are small steps you can take now to help set your child up for future financial success.

Key Takeaways

• Generation Beta, born from 2025 to 2039, will grow up fully immersed in technology and a world facing environmental challenges.
• Parents can help set their children up with a solid financial foundation by opening up a 529 plan, creating a will, updating beneficiaries, and getting life insurance.
• Teaching kids about money and investing, such as in a custodial IRA, can help secure their financial future.

Who Is Gen Beta?

Generation Beta, born in 2025 and the following 14 years, will grow up in a world shaped by rapid technological advancements and an evolving climate landscape—possibly a deteriorating one.

Like Generation Alpha, Generation Beta will be fully immersed in digital technology from the day they are born, but even more so. Their childhood will include smart devices, automation, artificial intelligence, virtual learning, and perhaps even decentralized finance.

They will also be born in and inherit a planet facing extreme climate challenges, the outcome of which can be hard to predict by the time they are teens and young adults. These environmental challenges are likely to influence their financial decisions.

Given the evolving and unpredictable challenges they face, it’s important to get them started on the right financial foot. Here are some steps you can take today to help your child along their financial journey.

Open a 529 Plan (Even If They Won’t Attend College)

With the extremely high cost of college that is expected to continue rising, college may not be the best choice for everyone, especially given the numerous avenues people can learn from today. Still, opening a 529 is a good idea, as this tax-advantaged plan isn’t just for college anymore.

529 plans can be used for K–12 education, trade schools, and even student loan repayments. The earlier you start contributing, the better, as your contributions have time to grow, providing your child with a larger fund to use toward education.

According to CFP Hazel Secco, president and founder at Align Financial Solutions, whom we spoke to via email, “The tax-free growth and flexibility of a 529 make it a powerful planning strategy, not only for education but also for long-term financial success, as recent changes allow unused funds to be converted into a Roth IRA for the child’s future retirement savings.”

Make a Will and Update Beneficiaries

Making a will is one of the best ways to ensure your child is financially secure should something tragic happen to you. While it’s never easy thinking about worst-case scenarios, being prepared will benefit your loved ones.

Creating a will ensures your wishes are met and that your child is protected. In the will, you can specify who receives your assets upon your death or incapacitation. Stating that your home and other assets go to your child upon your death will ensure they’re financially taken care of.

One benefit of a well-crafted will is that it helps speed up the probate process, ensuring that assets are transferred directly to beneficiaries without court delays.

Secco says, “The probate process can be costly, time-consuming, and emotionally overwhelming for heirs … that’s why I encourage parents to establish a will and other essential estate planning documents, such as a healthcare proxy and power of attorney as soon as possible.”

In addition to setting up a will, check and update your beneficiaries for important financial accounts, such as life insurance and retirement plans. It’s always a good idea to revisit these after big life changes: marriage or the birth of a child.

Increase or Get Life Insurance

If you have dependents, life insurance is a smart way to take care of them financially after your death. Life insurance helps with mortgage or rent payments, funeral costs, future education expenses, and any other financial needs your family may have. This is particularly important if you are the primary earner in your family.

While there are many types of life insurance policies, term life insurance is a good way to get started. Term life is cost-friendly and straightforward, with the goal of replacing your income when you pass. Term life comes in coverage length brackets, such as 10, 20, or 30 years.

Many people choose coverage amounts that span their working years, ensuring their beneficiaries can cover financial expenses if they die suddenly.

Teach Your Child About Money

Financial literacy is imperative to achieving and maintaining a healthy financial profile. Most education systems for children don’t teach financial literacy, so it’s up to the parents to instill this knowledge.

Teaching your kids about saving, budgeting, jobs, and wants vs. needs at an early age can impart lessons they will carry with them throughout their lives. As they get older, you can teach them about investing and even retirement.

Studies show that children start forming money habits at 7 years old, so it’s never too early to teach your kids financial lessons they can use later in life.

Note

There are many engaging ways to teach children about personal finance, such as podcasts (such as “Million Bazillion” and “Money with Mak & G”) and games (such as Bankaroo).

Invest in Their Future

While most of the expenses on your kids will be clothes, toys, and child care, you can also invest in their future at an early age. It’s a way of thinking about what else might benefit them when they’re older.

For example, setting up a custodial IRA when they start earning income will help with their retirement. Doing this as early as possible will allow more time for their money to grow through compounding.

The Bottom Line

Raising a child comes with a lot of responsibilities, including setting them up for a secure financial future. Through a few straightforward and intentional steps taken today, you can lay the financial foundation for your child’s success.

Generation Beta will face a financial landscape we can’t yet fully predict, but by implementing the actions discussed above, you can prepare them early and equip them with the tools to navigate whatever their future may hold.