Saving vs. Investing: What’s the Difference?

Commonly confused, both as words and concepts, saving and investing are not the same. There are similarities between the two, but let’s look closely at saving vs. investing to learn how each approach to putting money aside can help you today and in the future.

What Is Saving?

Saving is a term used for safely putting money away for short-term goals. Typically, you will not want to put your savings at risk of losing any of its value. This is because growth is not what you’re after when trying to save. Instead, you want to keep this money relatively safe, accessible and ready to use in a moment’s notice.

Some examples of savings, include:

  • Bank savings accounts
  • Money Markets
  • Certificates of deposit (CD)
  • Emergency funds
  • Christmas shopping accounts
  • Piggy banks

Having savings on hand is important, but there are questions to ask yourself before you start saving:

1. Do I have outstanding debt?

If you have credit card balances or outstanding medical bills, you should consider paying off this debt before saving money, because consumer debt often carries a rate of interest higher than that of a savings account. It would be counterproductive to save money and earn 1% interest while paying upward of 20% interest on outstanding credit card balances. Pay those off, then make a plan to save. If you can’t pay off your debt, you might consider debt consolidation. With a personal loan, for example, you can often secure a lower rate than a credit card, and you have a clear path to paying off your debt since the loan is for a fixed term — usually 3 or 5 years.

2. Can I afford to save?

Some financial experts would phrase this question as, “Can you afford NOT to save?” but the truth is that your monthly budget, expenses and income may not facilitate savings right now. Thinking critically about your spending and how to budget better could help you find additional dollars to pay down debt and then start saving.

Deciding to focus on saving goals and building an emergency fund during these uncertain times is one of the best financial new year’s resolutions to make and to stick to all year long. 

The Difference Between Saving vs. Investing

Unlike saving, investing is for longer-term goals. As a result, where the money you choose to invest goes will likely be different than where you save. This is because only money that’s not needed for years (maybe even decades) should be invested. Therefore, because it needn’t be liquid or easily accessible, money you are investing can be put into riskier vehicles than money you are saving for short-term needs and goals. 

Some common examples of investing, include:

  • Retirement plans
  • Stock portfolios
  • Real estate
  • Cryptocurrency

Being able to invest for your future is crucial to your long-term financial stability and achieving retirement goals, but there are also questions to ask yourself before you start investing:

1. Do I have adequate savings for emergencies?

Experts suggest couples with two incomes and secure jobs have savings equal to three months of expenses, whereas if one of your jobs is less than secure, it could be wise to accumulate six months of expenses in a savings account. Finally, individuals or families relying on a single income could benefit from having a full year of expenses saved for a rainy day. Whatever your current employment situation, you should consider starting/adding to a savings account before investing.

2. Am I taking full advantage of my retirement savings?

While the word ‘savings’ is commonly used when talking about putting money away for retirement, contributing to a company’s retirement plan or an IRA is actually investing because of the timetable for using these dollars and the relative inaccessibility of the money while still employed and under a certain age. For many people, the first investing they will do is through their company’s 401(k). This is because it may be tax advantageous to do so (you contribute pre-tax dollars from your paycheck, which reduces your taxable income), is a painless process (the money comes out of your paycheck automatically), and often there’s a company match, which can help accelerate your retirement savings. 

3. When will I need the money I will be investing?

Another question to ask yourself to better understand when to save and invest is, “When will I need to use this money?” If you think you may need to use the money you will be investing within the next five years, that cash should be saved and not invested. Because of market volatility, money that’s invested should remain invested for a number of years. Not giving your investments enough time to grow could cause you to realize losses that otherwise would only be “on paper.” 

4. What is my risk tolerance?

Investing usually involves putting money at risk in order to, hopefully, experience exponential growth over many years. If you’re not comfortable with the risks associated with investing, such as the aforementioned paper losses — when your account balance drops below your initial investment, you’re experiencing a loss but it’s not realized unless it is sold, meaning it could recover and turn into a gain — investing may not be for you regardless of how long you have before needing to access the money.

Investing options today are robust and can extend far beyond the stock and bond mutual funds available in your company 401(k) plan, the investment you’ve made in buying your home, and even trading individual stocks in a brokerage account. Learn how you can diversify your investment portfolio with Prosper.

Get Started

Now that you understand the differences between saving vs. investing, get started on building your emergency savings fund and look into your retirement plan options to ensure you have a financially sound future.

Read more: Tips for Saving, Investing and Managing Your Money at any Age

13 Ways to Save Money on a Tight Budget

If you’re one of the many Americans living paycheck to paycheck since COVID-19 struck, you likely haven’t thought much about saving for the future over the past 12 months. And you may be wondering how to live on a budget and save money at the same time. Believe it or not, there are many ways to save money on a tight budget without impacting your ability to pay your bills or put food on the table. 

Every donut lover knows the value of a baker’s dozen, so grab a cup of coffee (brewed at home to save money, of course) and sit down to discover 13 deliciously simple ways to save money on a small income.

1. Save First, Spend Second

As you make, revisit and revise your monthly budget (and yes, you should have a monthly budget — here’s how to budget and save money on a small income), first put down the amount you want to save each month. Do this before listing your rent or mortgage, before the car payment and streaming services, and even before the amount you plan to spend on groceries. This way, instead of saving only if there’s money left at the end of the month, you’re making saving a priority. By adjusting your spending accordingly, you’ll be more likely to actually save money each and every month. 

2. Make Your Coffee and Tea at Home

A box of high-quality green or English breakfast tea costs about $6 for 50 bags. That’s 50 cups of tea for the equivalent of just two from a coffee shop! Making your own coffee and tea at home could easily save you hundreds of dollars each month — that’s money that can be saved! Getting into the habit of making your hot morning beverages at home instead of paying for them through the drive-thru is one of the first ways you can save money on a budget.

3. Take the Pantry Challenge

At least one day each week, go without spending any money on food or beverages by using only what’s already in your pantry (and freezer/fridge) to prepare breakfast, lunch, dinner, snacks and dessert for you and your loved ones. Not only will this challenge free up money to be saved instead of spent, it will help you become resourceful and self-sufficient in the kitchen, and potentially eliminate food waste, all of which could have positive long-term impacts on your budget. 

4. Round-up Savings

One of the clever technological tricks to saving money without realizing it or feeling its impact in your checking account is to take advantage of round-up savings. Often called microsaving, your purchases are rounded-up to the nearest whole dollar and, whether through a third-party savings app (note: beware of monthly fees for these services) or through your own bank, like Bank of America’s Keep the Change Savings Program, watch as that spare change is deposited directly into a savings account. Rounding up is one of the simplest ways to save money on a tight budget. 

5. Lose Your Loyalty

Being brand loyal can cost you extra money at the grocery store. Instead of paying top dollar for your favorite brands each week, only buy them when they’re on sale. During non-sale weeks, buy what is discounted. You’ll save money and may just find new favorites in the process!

6. Adjust the Temperature

Small tweaks to your home’s temperature can dramatically reduce your utility bill. According to the U.S. Department of Energy, you can save as much as 10 percent per year on heating and cooling by simply turning your thermostat back 7 to 10° for eight hours a day from its normal setting. So put on a sweater and your favorite fuzzy socks, and invest in a programmable thermostat, because this is how to live on a budget and save money every month!

7. Make the Movie/Game an At-Home Event

If you have a sizable flatscreen TV at home, it’s likely that watching a new movie, concert or your favorite team’s game from the comfort of home will actually be more enjoyable than lining up to get into a theater, stadium or arena (once we’re able to do so again). One thing’s for sure, it’ll certainly be cheaper! You’ll pay no parking fees, buy no overpriced drinks and food, and of course, no expensive tickets are required. Pop some popcorn, prepare a cheese and cracker board, and put out a hummus and veggies platter, because enjoying movies, concert streams and sporting events at home is one of the easiest ways to save money on a tight budget.

8. Choose Filtered Over Bottled Water

Not only will this decision help save the environment, it’ll also save you money. A simple pitcher with replaceable filters and a reusable bottle will go a long way toward keeping your beverage costs down from month to month. Additionally, consider drinking more water and less soda to become healthier physically and financially!

9. Get Thrifty

Local thrift stores are overflowing with barely used jeans, cute sweaters, comfy shorts, gently worn sneakers, like-new accessories and so much more. Starting to buy some of your own, but especially your still-growing kids’, clothes and shoes secondhand for 25–50% of the cost of purchasing them new is sound advice for budgeting on a low income.

10. Make Saving a Weekly Challenge

PNC Bank suggests that if you’re looking for ways to save money on a tight budget, make saving a challenge by slowly increasing (or decreasing) the amount you put away each week. For example, put $1 in savings during the first week of January. The second week, make it $2, and so on. Doing this for 52 weeks straight will result in a whopping $1,378 saved! Or, if you want to start strong, reverse the challenge by putting $52 into savings the first week of the year, followed by $51, $50, $49 etc. This method will free up money at the end of the year when you’ll likely be doing some holiday shopping.

11. Use Cashback Apps

When you’re trying to figure out how to live on a budget and save money at the same time, you should check to see if stores participate with a cashback app or service, like Rakuten, before buying anything online. It may only be 1% or 2% back on your $25 purchase (although depending on the store and the day, it could be upward of 10–15%) but just like putting nickels, dimes and quarters into a piggy bank, your cashback savings will grow steadily. Every three months, when you get a check (or Paypal), that could be a substantial amount of money to put away into your savings account. 

12. Consider Your Streams

Once upon a time, consumers wished they could pay for an a la carte cable TV package to save money and only have the channels they wanted to watch. That day arrived, sort of, but chances are you’re paying more to watch TV than ever before. This is because most people now pay for four streaming services each month, with 38% of Americans using five or more according to a Los Angeles Times report. And all that could be in addition to a cable package so many wanted to be rid of in the first place! 

The result is likely a personal budget straining to cope with the costs of television in 2021, and a lack of money being saved. One of the ways to learn how to live on a budget and save money is to consider your streams. Really think about what you actually watch and which streaming services can be canceled or at least paused while you build up an emergency savings fund, which could have been one of your financial New Year’s resolutions.

13. Save Your Tax Refund

Finally, if you’re getting a tax refund this year, make a plan to put it directly into savings. Even if you’ll need to use some of it to pay down debt or buy a new car, make sure it goes into savings first. This is because simply seeing that account balance rise, and feeling the emotional satisfaction of having money saved, may just be the impetus for a continued commitment to making saving money a part of your everyday life.

Read more: Simple Tips for Saving Money on Your Energy Bill

How to Save for Retirement at Any Age

When you talk to people about how to save for retirement, you’ll likely hear one of three things… I’m too young to worry about retirement. I’m too old to start. I’m already saving.

Aside from the final reply (well done!), such thoughts are incorrect but sadly all too common. People just starting on their employment journey, with an employee’s 401(k) plan and company match available to them, often don’t consider their financial situation in 30–40 years time. When you’re young, though, your money has more time to grow, making those years the very best to save! Meanwhile, older folks who have not been saving or not saving enough for retirement tend to believe that they’ve missed their opportunity to build a nest egg. 

The truth is that it’s never too early to start saving for your retirement and never too late to catch up and secure your financial future.

Important Facts About Retirement Income

  • Americans are living longer than ever before. While good news, this likely means you’ll need to have more saved to generate enough retirement income, and for a longer period of time, than you may currently imagine in order to maintain your quality of life once you stop working. 
  • While once a reliable source of retirement income, Social Security benefits alone will probably not be enough to ensure a comfortable retirement. For this, you’ll need a supplemental source of income.
  • You shouldn’t count on Medicare to fully cover the costs of assisted living or a nursing home, should you need those services later in life.
  • According to 2020 research by Investopedia, almost half of all Americans have no retirement savings whatsoever. This means that, sadly, half of the population may never be able to stop working. 

These facts make it imperative you know how to save for retirement and start saving as soon as possible, no matter your age, so that you can enjoy your later years.

Types of Retirement Accounts

Before we talk about how to save for retirement, let’s take a look at the two most commons types of accounts with which you can put money aside now to let grow. 

Employer-Sponsored Plans

The two most common employer-sponsored plans are 401(k) and 403(b). The former is offered through for-profit companies while the latter is associated with universities, hospitals and other non-profits. With each, employees have the opportunity to save a percentage of their pre-tax paycheck, which not only grows tax deferred via contributing to a 401(k) or 403(b) pre-tax, but also reduces your taxable income. This means that while you may see a $25 contribution deposited into your 401(k) on payday, for example, less than $25 will be ‘missing’ from your take-home pay because you’ve paid less in taxes. 

Many employers offer a matching contribution (or matching up to a certain percentage) to encourage participation in their retirement plan and help accelerate savings growth. Most people should not only be enrolled in their company’s 401(k) but take full advantage of any available match. And the earlier you start, the more money you’ll have saved for retirement.

In 2021, the maximum amount you can contribute to your 401(k) plan in dollar terms is $19,500. But don’t let this figure scare you away from starting. Any portion of your paycheck that you can direct to your retirement will benefit you later in life. 

According to a 2020 TDAmeritrade Report, company 401(k) plans are the preferred investment vehicle for workers between the ages of 40 and 60. 

*There are also solo 401(k) plans available to self-employed individuals. These plans are designed to help business owners save both as the employee and employer.

Individual Retirement Accounts (IRAs)

IRAs are tax-advantaged accounts that you open on your own, not through an employer. Typically, you’ll save money for retirement in an IRA through investment firms (the money invested in a combination of stocks, bonds and mutual funds of your choosing) or a bank (the money saved in a certificate of deposit or similar interest-bearing bank product).  

There are two main types of IRAs: traditional and Roth. The biggest difference between the two is when you pay taxes.

With traditional IRAs, the amount you contribute is tax deductible. Only when you start withdrawing money during retirement is the original money plus any earnings taxed as ordinary income.

The opposite is true with Roth IRAs. Your money is contributed ‘after tax,’ meaning there’s no tax deduction or tax benefit today. But, qualified withdrawals of the original money you contributed plus any earnings are tax-free when withdrawn after age 59½ and when it’s been at least five years since you first contributed to the Roth. Additionally, you always have access to your original Roth IRA contributions, with withdraws available for any reason, and at any time, with no taxes or penalties.

For the 2021 tax year, you’re able to contribute up to $6,000 to an IRA if age 49 or under — slightly more if you’re over the age of 50. Read on to discover this benefit of saving for retirement later in life.

How to Save for Retirement at Any Age

The best way to learn how to save for retirement is to start now, regardless of your age. Through a company’s 401(k) or 403(b)(7) plan, you can begin with just one or two percent of your pre-tax salary and set an automatic increase every year. Although, if you’re able, you should contribute enough to get the full employer match (if offered) right away.

The Benefits of Starting Young

Compounding interest and earnings — the concept of your earnings generating additional money, and those new earnings generating even more, and so on — make the first dollars saved possibly the most profitable because that money has longer to grow and multiply. These early retirement contributions will likely have the biggest impact on your ability to comfortably retire. 

To put this in real terms, a 25-year-old who invests $75 per month could accumulate upward of $113,000 more in retirement savings by age 65 than if he or she started investing $100 per month at age 35 — despite investing less each period, according to Merrill Edge. That’s the power of starting early and watching those dollars compound over those extra years. And this growth on top of growth can help you hit your retirement savings goals more easily.

Here’s how much Fidelity Investments says you should have saved for retirement at every age, in order to maintain your current quality of life into your retirement years:

  • By age 30: The equivalent of your annual salary (For example, if you make $55,000 a year, you should have $55,000 saved by your 30th birthday.)
  • By age 40: Three times your income
  • By age 50: Six times your income
  • By age 60: Eight times your income
  • By age 67: 10 times your income

Despite this, 28% of people in their 60s have less than $50,000 saved for retirement, meaning over a quarter of older Americans likely won’t get to slow down and enjoy what should be their retirement years. 

The Benefits of Saving Later In Life

Current laws governing employer-sponsored retirement plans allow you to contribute an extra $6,500 each year to your 401(k) or 403(b) plan if you’re age 50 or older. With these catch-up contributions, the individual limit increases to a maximum of $26,000. If you can afford it, taking advantage of these higher limits will allow you to boost your savings.

Those age 50 and older are also permitted to contribute extra money to IRAs each year, with the limit increasing to $7,000 for 2020 and 2021. You’re also able to contribute to an IRA for the previous tax year up until the current year’s tax filing deadline date to get another deduction before filing, if needed. Keep in mind that for specific questions or concerns about filing taxes and available deductions, it’s best to consult a trusted tax professional.

No matter when you begin your retirement savings journey, it’s critical that you do so. Maybe you can consider adding another new year’s resolution to start (or start saving more) for your retirement. Making the accumulation of tax-deferred or tax-advantaged money for retirement a priority throughout your life will help ensure you’re able to enjoy your later years and that you’ll be taken care.

Read more: Retirement Planning During an Uncertain Economy

You Could Save Big with These 7 Benefits of Working From Home

Waking up to start your workday on camera from the kitchen table is an adjustment. But for many of us, there are benefits of working from home, from our finances to our lifestyle and even health.

What Are the Financial Benefits of Working From Home?

There are many benefits to working from home. Some are expected while others may surprise you. Here’s a look at seven ways you’ll spend less while away from the office.

1. You’ll Save Big on Your Commute

Commuting is more than just the price at the pump to fill up your car with gas. One of the financial benefits of working from home is reducing or eliminating your commuting costs.

Gas

If you usually drive to and from work, you’ll be less stressed by the ebb and flow of gas prices while working from home. 

How much can I save on gas?

Actual savings will vary based on your vehicle’s fuel efficiency, length of normal commute, and gas prices in your part of the country but consider that last year the average mpg for a U.S. car was 25 miles per gallon, and currently, the average gas price is $2.14 a gallon. If your daily commute is 50 miles roundtrip, you will save approximately $85 a month in gas expenses.

Tolls

There are no tolls when commuting from the bedroom to the kitchen table! No longer paying to cross bridges, drive through tunnels, and traverse turnpikes is one of the more surprising financial benefits of working from home.

Parking

When your daily commute involves both a vehicle and a big city, it often means parking costs, too. Leaving your car in the driveway doesn’t cost a penny and therefore, saves you money while working from home.

Wear and Tear

Less commuting means less wear and tear, fewer oil changes, and less frequent costly car maintenance appointments.

Non-Driver Commuting Costs

Of course, commuting to and from work costs non-drivers, too. Subway fares, train tickets, and more eat into an employee’s bottom line. That’s why the lack of a commute might just be the biggest of all the benefits of working from home. 

2. You’ll Buy Less Clothing

When working from home, you may find yourself spending less on clothing. You may no longer need business outfits at all, or could cut your clothing expenses in half by opting only to buy nicer tops and jackets since that’s the part of you on camera for Zoom meetings!

3. …and Ditch Dry Cleaning

Similar to the pause on clothes shopping, another benefit of working from home is that you won’t need to drop off those blouses, pants, and dress shirts at the dry cleaners. Removing this recurring bill from the budget could save you considerable money every month you work from home.

How much can I save by cutting dry cleaning costs?

Dry cleaning costs vary, so to get an exact number, you’ll need to factor in how much your dry cleaner charges, as well as how many pieces you tend to drop off. However, for this example, let’s say you typically wear three pairs of slacks and five shirts a week. At approximately $2 a shirt (for men) / $4 a shirt (for women) and $5 per pair of pants, cutting dry cleaning could save you around $100–$140 a month. And that’s not even including more expensive items such as suits, sweaters, and dresses.

4. You’ll Save a Small Fortune on Childcare

Admittedly, it may be more challenging to be productive and stay on task while working from home when kids are around, but not paying childcare costs could be one of the largest financial benefits of working from home. 

How much can I save on childcare?

Typically, the majority of Americans spend 10% or more of their household income on childcare, with that figure being at least $10,000 per year for just about half of U.S. families.

5. Eating at Home vs. Eating Out Will Save You Hundreds 

Maybe you tend to sit in the drive-thru lane each morning for a coffee and an egg sandwich and then, midday, head out for a salad with some colleagues. The food costs of working outside the home can add up quickly and quietly. Conversely, one of the benefits of working from home is the reduction in food expenses because groceries are generally cheaper than individual cups of Starbucks coffee, and eating out for lunch or dinners with clients. 

How much can I save on food costs?

The simple cost-cutting action of making coffee at home could save you as much as $100 a month! Making breakfast and lunch in your own kitchen should see that figure triple or even quadruple (depending on how often you’d usually eat out for lunch at work in the office).

6. You Might Be Eligible to Lower Your Car Insurance Premiums

Conventional wisdom would say that the less you drive, the less risk you’ll be in an accident. This in turn could lead to lower car insurance premiums. Paying less for auto insurance may be one of the surprising financial benefits of working from home. 

How much can I save on car insurance?

Over 80% of the largest U.S. auto insurance companies offer low mileage discounts, and a low mileage discount may result in up to 30% off your car insurance premiums.

7. Less Makeup on Your Face Means More Money in Your Pocket

With masks on in-person, you technically only have half a canvas on which to apply makeup but while working from home, attending meetings on Zoom, chances are you’ll be less interested in using any makeup at all or at least skip the expensive makeup you usually apply for face-to-face contact. It may surprise you, but spending less on makeup/perfume/cologne could be one of the sneaky financial benefits of working from home.

3 Ways to Get the Most Out of Your Work-From-Home Savings

In addition to cutting down on commuting costs, clothes, and dining out, you may see indirect benefits of working from home. Consider what you could do with the money no longer leaving your checking account to work outside the home.

1. Up the Amount You Add to Your Savings Account

If this year has taught us anything, it’s that the future is wildly unpredictable. You could choose to start a new savings account and deposit your usual workday lunch money, parking costs, and other normal work-life expenses. Soon, you’ll have a tidy little rainy day fund to help you through the next rough patch.

2. Increase Your Retirement Savings Contribution

With less money being spent on eating out, commuting, and makeup and clothes, consider increasing your retirement savings contribution percentage. If you’re not maxing out on your employer’s 401(k) matching program already, go at least that high with your own contribution percentage. The ability to save more than ever before could be one of the best long-term financial benefits of working from home.

3. Set Aside Money for Future Education Costs

As you increase your personal savings and retirement contribution percentage, consider how working from home might benefit your children’s future education. In saving hundreds of dollars each month by brewing your coffee at home and not spending $10 to launder a single cashmere sweater this winter, you could jumpstart your kiddo’s 529 college savings plan.

Read more: COVID-19 Financial Health Calculator: Extending Your Quarantine Budget

Have questions about how you might pay off debt or complete a renovation project while you’re stuck at home? Prosper can help. 

What Savvy Borrowers Should Know About Variable Interest Rates

variable interest rates

When it comes to figuring out if a particular loan could be a good fit for your financial situation, interest rates are an important consideration. After all, your interest rate is a key factor in the total cost of borrowing. There are two main types of interest rates: fixed and variable. Here we’ll take a closer look at variable interest rates, including how they differ from fixed rates and how they’re typically determined.

How are fixed and variable interest rates different?

If a loan has a fixed interest rate, the interest rate stays the same over the life of the loan. With a fixed rate, you’ll know in advance what your payment will be each month and the total amount of interest you’ll pay over the life of the loan. Personal loans through Prosper, for example, have fixed interest rates. Many other forms of financing, like auto loans and federal student loans, are commonly offered with fixed interest rates.

If a loan has a variable interest rate, the interest rate can change, meaning it can go up or down over time according to a benchmark rate (more on benchmark rates below). Home equity lines of credit (HELOCs), for example, generally have variable interest rates. Many credit cards and mortgages have variable rates, and it’s also common for private lenders to offer variable-rate student loans. Loans with variable rates are sometimes referred to as floating-rate loans.

It’s also possible to have a “hybrid” loan, which would have a fixed interest rate for a certain period of time then switch to variable interest rate.

How are variable interest rates determined?

The interest on a variable-rate loan changes according to what’s called a “benchmark” or “index” rate. Two common benchmarks for variable-rate loans in the U.S. are:

  • The Wall Street Journal U.S. prime rate – the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks.
  • London Interbank Offered Rate (LIBOR) – the average interest rate banks charge each other to borrow money.

In most cases, the interest rate you’ll pay equals the specified benchmark rate plus a markup determined by the lender, sometimes referred to as a “spread” or “margin.” Your markup often depends on the strength of your credit profile: stronger credit typically means you’ll be charged a lower spread, and therefore a lower interest rate.

As the benchmark rate goes up or down, so does the interest rate on your loan. Let’s say you have a loan with a variable interest rate that equals the Wall Street Journal U.S. prime rate + 3%. If the prime rate is 5%, your interest rate would be 8%. If the prime rate goes up to 6%, your interest rate would also increase, reaching 9%. Alternatively, if the prime rate declines to 4%, your interest rate would also fall, dropping to 7%.

How frequently your variable interest rate changes depends on the terms of your loan. For example, some credit card issuers change their interest rates at the start of the next billing cycle following a change in the prime rate. Other loans make interest rate adjustments on a quarterly basis. Be sure to read your loan agreement to see how your issuer sets and adjust rates.

What are the possible pros and cons?

It’s important to note that rising interest rates can meaningfully increase the cost of borrowing, and, with a variable-rate loan, it can be difficult to predict exactly what your interest rate will be in the future. Some variable-rate loans come with an interest rate cap (maximum) and floor (minimum), which can help when calculating how much you’ll potentially pay in interest over the life of a loan.

Returning to the example above, where your loan’s interest rate equals the prime rate + 3%, let’s say your lender has capped your interest rate at 14%. If the prime rate were to reach 12%, your interest rate would only increase to 14% (not 15%), thanks to the cap.

It’s also worth noting that a loan with a variable rate typically starts out at a lower rate than a similar loan with a fixed rate. If you choose the variable-rate option, it’s true that you’ll be taking on a certain level of risk that your rate could go up—but you’re also (potentially) starting off with a lower rate than you’d get with a fixed-rate loan. For some people, this is an important benefit. Before making a final choice, smart borrowers spend time crunching the numbers on potential interest payments and also thinking carefully about their comfort with possible rate increases.

Prosper recently announced that it will launch a HELOC product in 2019. To learn more when a Prosper HELOC is available in your state, visit: https://www.prosper.com/heloc

Expert Advice on How to Grow Your Savings in 2019

There’s no two ways about it: Savings are foundational to your financial well-being. As 2019 gets into full swing, we asked nine experts to share their best tips for how to grow your savings this year. Whether you’re looking to replenish your emergency fund or save up for a major purchase, here’s some valuable advice from a handful of personal finance experts.

Alissa Todd, The Wealth Consulting Group

  • Get clear on your goals and why you want to save money. Are you saving to build an emergency fund? Save for a house down payment? Summer vacation? You are more likely to stick to your budgeting and savings plan if you relate them to goals instead of simply saying that you want to save.
  • Automate your bills to avoid late payment penalties and interest charges. Automate your savings so that every time you get paid, a portion of your paycheck goes directly into your savings account.

Marc Andre, VitalDollar.com

  • Learn to wait on significant purchases. Whenever you’re buying something that’s not a necessity, wait at least 24-48 hours before buying it. This will help you to avoid impulse buys, and you’ll find that, in many cases, you may decide it’s not really worth the money.
  • Don’t pay for too much insurance. Check the details of your insurance policies (like car, home, renter’s, etc.) to make sure that your coverage is not higher than you need. If it is, adjust the policy and it will reduce your premium, freeing up dollars to deposit in your savings account.

Kristin Stones, LifeOfStones.com

  • Participate in a money-saving challenge. For example, try the five-dollar bill challenge, where you save every five-dollar bill you come across. Psychologically, challenges make saving more fun and give you a more visual representation of how much you’ve saved—which can be very motivating to help you keep going.

Cherie Lowe, Queen of Free

  • Cancel unused subscriptions. Whether it’s wine, clothes, books, streaming services, magazines, or gym memberships, many people have more subscriptions than they can shake a stick at. See which subscription services you can do without for a short or long period. But don’t absorb those extra dollars into your checking account—transfer the exact amount over to a savings account.

WenFang Bruchett, BlissFinance

  • Maintain the strongest credit scores you possibly can. Pull your free credit reports from each of the three major bureaus at com. If you catch any errors, fix them to potentially boost your score. A better score can mean you pay less on expenses like a car loan or apartment rental, allowing you to put more money into savings.
  • Pay off your debt. If you can eliminate paying interest to lenders, you’ll have more money to save for rainy days.

Logan Abbott, Wirefly.com

  • I recommend doing a self-audit of your finances that includes several steps but is actually quick and easy to complete. First, make sure you aren’t carrying any large credit card balances. If you have the ability to pay off the balance, do so. Second, see if you’re paying too much for a monthly service like cell phone, TV or Internet. Third, take a look at your monthly subscriptions and cancel those you’re no longer using. Fourth, consider signing up for a service like Mint or Betterment, which allow you to see a full picture of your finances and track your saving progress over time.

Marcia Layton Turner, Layton & Co.

  • Sign up for an automated service, such as Acorns, and have money from your checking account or spare change transferred and invested. It’s a painless way to save.
  • Generate extra cash to dedicate to savings by bagging up clothes that you and/or your kids have outgrown or no longer wear. Send them to a consignment service, such as thredUP, where you can earn money on items that are sold. It’s easy to do and also helps control closet clutter. You can also try other income-generating ideas, such as selling your cast-offs on eBay or Poshmark.

Patty Briotta, National Veterans Legal Services Program

  • Veterans should make sure they have maximized their awareness of benefits they may be eligible to receive. Through NVLSP’s VA Benefit Identifier App,  they can review specific VA benefits to which they are likely entitled. This could represent a meaningful amount of untapped monetary VA benefits for veterans and their families.

Dustyn Ferguson, Dime Will Tell

  • Cash back and rebate apps can save you a lot of money on things you are already buying. There are apps to save money on groceries, gas, online shopping—virtually everything. You can then deposit the earned cash straight into your savings account.

If you’re considering paying off your high-interest rate debt to generate more savings in 2019, a personal loan could be a good fit for your financial situation. With a fixed-rate, fixed-term loan through Prosper, you could potentially consolidate your credit card debt with a budget-friendly, single monthly payment.