NerdWallet's Smart Money Podcast - Setting money goals at milestone birthdays, and scoring big bucks with bank bonuses

Episode Date: June 29, 2020

As you approach your 30s, 40s or beyond, let the milestone birthday be an excuse to set some new money goals. Also, some banks will pay you to open a new bank account, but you need to look beyond the bonus to see if you’ll pay more in fees or collect less interest. As always, send us your money questions! Email [e-mail] or call or text the NerdHotline at 901-730-6373. And visit www.nerdwallet.com/podcast for more info on this episode.

Welcome to the NerdWallet Smart Money Podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm your host, Liz Weston. And I'm your other host, Sean Piles. As always, be sure to send us your money questions. You can call or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or you can email us at podcast at nerdwallet.com. And while you're at it, please rate, review, and subscribe wherever you're getting this podcast. This episode, we're talking with one of our banking nerds about how you can get bank signup bonuses. Free money! Yes, love free money. But first in our This Week in Your Money segment,

Liz and I are going to have a little bit of a self-reflective conversation about what it means to set financial goals as you age. This is a somewhat self-indulgent topic that was inspired by my birthday the other week. I'm officially 29, which means that I'm on the cusp of a new decade. Thank you. Thank you. And I've been thinking about what my goals were in my 20s and what I want them to be in my 30s and what changes from one year or one decade to the next. Okay. First of all, happy birthday. That is so cool. And you are a twin, right? So there were two of you. I did want to say shout out to my fellow Gemini's, especially my literal twin sister. I couldn't see her due to COVID, but I did get to take a week off of work. And I mostly just sat around in my garden and read books and avoided the internet. And so I had that time to

sit and think about what my goals are and what I want to do in the next decade. Yeah. I think at this point in your life, you're starting to see that time is accelerating and you know that you don't have an infinite amount of it. So you want to achieve those goals. I think when a big birthday is coming up, you look back, you know, for the past decade or even more and see, have you been achieving your goals? Have you been setting goals that now are important to you? The really interesting chunk of all this is that there's something called the end of history illusion, which is we can look back on the past decade on our, on our whole lives and see how much we've changed. But we think we've

stopped. We think we basically hit the pinnacle of what we're going to be. And we're basically going to be the same going forward. And the reality is no, everything is always changing. And that's just the reality. And you're going to change so much in your 30s, your goals, what you want, what you do with your time, all of that changes. Right. I want to put in a plug here for one of my favorite science fiction books, Parable of the Sower by Octavia E. Butler. The whole premise is that God has changed, change is constant, everything is always changing. And when you touch something, it changes you and vice versa. And I think about that a lot. And thinking back on my 20s, I mean, my 20s were really about setting a foundation.

And my goal was just to have a goal or to have any finances to make a goal with. And I've come pretty far. And now I'm trying to think about how I can keep up with my good habits, like adding to my savings, whether I want to buy a house, you know, there's really big lofty goals. And then on a day to day basis, getting better at curbing like stupid impulse shopping online, which is an ongoing dialogue I'm having with myself. But Liz, I'd love to hear about how your money goals have changed over time. Yeah, because they really have. I mean, some of the basics are the same. I knew starting when I was 26, and started contributing to a 401k,

I knew that saving for retirement was important, basically because all the money experts around me told me that. Conceiving of actual retirement, it was so far off in the future. It just seemed like this hazy thing, but okay, I was getting there. And I want to put in a pitch for leaving your future self options. One guy I was talking to was in his twenties. He absolutely loved his job. He said, why do I have to plan for retirement? I'm never going to want to retire. It's like, you have no idea what you are going to want in 40 years. Yes. I mean, really it's like you're, you are going to change so much. So give yourself some flexibility, do save for retirement so that if you want to retire early or take some time off or

whatever, you have that flexibility. That's super important. And I will also say one of my big mistakes in my life was buying retirement property in my twenties. Oh, wow. That's very ambitious of you. Well, it's, it's just, it's kind of weird when I think back on it. I was living in Alaska and had the opportunity to buy some raw land 80 miles from the nearest road. It was near a fly-in cabin that my boyfriend at the time had. That sounds very romantic. The entire pastoral premise of that. I get it. It sounds amazing.

And it's also insane. I mean, you don't want to be little old people, 80 miles from the nearest road. We'll have drones by then, Liz. Don't worry about it. They'll deliver everything. Yeah, yeah. Man, I am counting on self-driving cars. Drones would be great. But I want a road to drive on. Anyway, so yeah, it's really, you can't make definite decisions, I don't think, for your future, but you can leave yourself options. I think that's what's important. Yeah. Another thing I was thinking about with this is there can be strong push to think that you have to have certain things accomplished by a certain period of time. And yeah, it's good to start saving for retirement as early as you can. And maybe your 30s are a good time to buy a house.

But I think that it can be a bit of a dangerous trap to compare yourself to what other people are doing. And I want to just tell people to work with what they have and where they are right now and work to improve their financial picture from there. And maybe not think, okay, now that I'm turning 30, I need to have X, Y, and Z done. Make sure that you have a plan, but don't think that you have to accomplish it tomorrow. Yeah, absolutely. And your life is going to look different from other people's lives. I mean, I married in my early thirties, had a kid in my late thirties, and that didn't look like the folks that I graduated high school with at all. In fact, I went to my, one of my high school reunions when my daughter was a

toddler and some of my peers had grandchildren. It was really weird. Yeah. So your life is not going to look like others. So what do you think you're going to want? I mean, what do you think is going to be important in your thirties? Well, I do want to buy a house and what kind of house that is, I'm not sure about because my partner, he's technically on the paperwork for where we live now. And we have this big idea of, okay, we'll live in this house for a few years, break even, and then we'll rent it out and then I'll get a place. And now that the world seems so uncertain, I'm not really sure that's what I want to do. I just want to have enough savings right now so that I can live pretty comfortably if, I don't know, the whole world turns upside down yet again, and I need to live

off of that for a few months. So that's my most immediate goal. But long term is home ownership. It's making sure that I can buy a house and still be financially secure. I really don't want to be house poor. And also, I've been getting into cars. So I want to have a fun car. I know that there's always the advice of buying the cheapest, most reliable thing. But I also want to live for today and plan for tomorrow. So maybe that means getting a fun, zippy little car when I can afford it.

I just want to enjoy what I'm spending my money on and not have something that feels like a cardboard box that's safe. I don't know. Yes, absolutely. I have the problem of being too much in that cardboard box. And my husband knows much more about living his life today. So we're a nice balance that way. By the way, he loved his Mustang convertible and he enjoys it every time he gets behind the wheel.

So having that kind of daily enjoyment of something, that's really important too. Yeah. So that's what I'm thinking about as well. I think a lot about in my life how the things I'm doing on a really daily basis add up over time, whether it's trying to do stretches after I go on a walk or drinking enough water. It's these things that seem really small that are cumulative and can help you over time. I'm wearing some SPF 50 on my face every day to keep my youthful looks. So that also applies for what my money goals are. And so yeah, putting a bunch of my money into

savings every time I get a paycheck through direct deposit, having that good hygiene that I know is going to pay off down the road. That's what I try to focus on. Excellent. Yeah. You kind of move from the teenager's point of view of you can't make me do anything. And they realize, oh, you know, some of these little things really are important for the future. I love that you took a week off and thought about this step because it takes getting away

from the tumult and pressures and deadlines of daily life to kind of really reflect on what you want going forward. I take a little mini sabbatical, a little retreat just about once a year and take a day or two to do exactly that. I can't right now get away for a whole week to do it, but I think that's a really, really good idea. Yeah. There's something so soothing about just walking around without shoes on in my yard that I find so calming and meditative and it helped me put everything into perspective. And I think it's important to find a time and a place, whatever that may be, even if

you don't have a yard, maybe go out to a park in your area and sit there and do some breathing exercises and just focus on what you want to do. And that's why I like doing this on my birthday is having that moment of thinking, okay, I'm kind of turning the calendar year. What does it mean for what I want to accomplish now? And how can I build on what I did in the past year? And what do I want to change? What do I want to keep working on? And it's a good moment to do that. Absolutely. All right. Well, I think that about covers it for now. Let's get to this episode's money question, which comes from Austin. He says, I keep seeing advertisements for signup bonuses when you join a new bank, and I'm wondering if they're actually

legit. Can I really get a couple hundred bucks for quote unquote free by making a new bank account? Yeah, I see these offers all the time. And I'm really kind of curious about this. Yeah. And I totally share your skepticism, Austin. I see these things all around town. They're often right next to a sign for a pawn shop. So it seems really sketchy. So I am looking forward to getting the answer as well. And fortunately, on this episode of the NerdWallet Smart Money Podcast, we're going to be talking with Alice Holbrook, a nerd with a ton of experience helping folks understand the ins and outs of banking. So let's get to it. All right. Sounds good. Hey, Alice, welcome on the show. Hey, thanks for having me, guys. It's nice to be here.

Yeah, we are super happy to have you on. Our listener, Austin, has a question about bank signup bonuses. He keeps seeing all these advertisements for them, and he's not really sure if they're legitimate or not, which I totally get. So first, right off the bat, I'm wondering, are these signup bonuses legitimate? And if so, how much can someone really expect to get? It is true that signup bonuses will let you get some money for opening an account and just following a few requirements. It really is that easy. And you can typically expect to get around $200. We do see some that are less and we do see some that pay more, especially for savings accounts.

But overall about $200 is what you're gonna expect. I'm wondering what those requirements might be because that's where I think the devil may be in the details. When it comes to a checking account, typically you're going to have to set up direct deposit and then have a certain amount in direct deposits within a certain time period. So say you would want to get $500 in direct deposits each month for the first two months after you set up an account. And when they say direct deposit,

they want it to be from your job or from government benefits. They don't want you to just transfer money to yourself from another account, for example. And then when it comes to savings accounts, you would want to typically deposit a certain amount of money and leave it there for a certain amount of time. How much money do you need to deposit to get one of these bonuses? That really varies. But when you have a savings bonus, it's typically going to be a lot more money that you'll have to put down. So $10,000 is kind of a minimum that we often see. It could be more than that, depending on how much money you're trying to get. And for checking accounts, it's really across the board. So it might be that you have to have a couple of direct deposits of maybe $500 each,

but we've seen it go up to multiple thousands of dollars per month that you're going to have to have deposited. Checking bonuses are usually a little bit more flexible though. Okay, great. Now, most people open a bank account and they just stick with it because it's such a hassle to change. So how do you decide if the bonus is worth the hassle of changing banks? So I think it really depends on how happy you are with the account you have now and the account that you'd be switching to. So if you have a savings account that pays more than 1%, which nowadays is pretty good, and you'd be switching to an account that doesn't pay very much interest, you'd probably want to rethink that because the amount that you're getting

an interest now is going to overtake the bonus value over time. And when it comes to checking accounts, I think you want to look at whether you're being charged a monthly fee. If you're not being charged one and you're looking at an account that would charge you one, that's going to eat up your bonus really quickly. But if you're not happy with your account right now, and you are being charged a monthly fee, or you're not getting much interest, and then the bonus is enticing you to switch to an account that would fit you better, then yeah, that's a win-win. Okay. So you can get some decent money if this is a good fit and you don't mind jumping through some hoop to sign up for a new account. But one thing I'm wondering about is if there's any sort of churning that people can do,

like with credit cards, people will sign up for one credit card to the next to get the best bonuses across all of the options they have open to them. Is that something that people can do for these signup bonuses? At NerdWallet, we generally recommend against it just because you're going to have to have a pretty robust spreadsheet with a lot of columns for how much money you have in various places and what your due dates are and things like that. So for most people, we say it's more trouble than it's worth, but it is totally possible to do. Some banks have rules that would make it more difficult. For example, some banks will say you can only have one bonus from that bank in your life as an individual. Or others will say that if you close your account within six months of signing up, then they'll take the bonus back.

But most banks still don't have those rules. So if that is something you want to do and having a really, really intense spreadsheet sounds fun to you and sounds worth it, then yeah, this is something that people do. And that's something that's right up my alley. I love spreadsheets. I love keeping track of these different things. Let me ask you a maximizer question, which is, can my husband and I both sign up for the same bonus? Can the same household have more than one account? Generally, yes. So I don't see a lot of bonuses. Yes. I don't see a lot of bonuses that place restrictions on how many you can get by household. It's usually by individual, but I don't want to make a comment about every bonus. It's not unheard of. So definitely check the fine print if that's

something you're planning to do. Okay, cool. But one caveat I would add is that that only applies if you haven't previously or don't currently have a joint account at the same bank. So typically, banks determine eligibility based on whether you've either been the primary owner of an account or if you've co-signed on the account. So if your name is on it at all, that's going to kind of mess with your eligibility when it comes to a bonus. So if I open a joint account at the new bank, and then my husband tries to go in and open an account, that could be a problem. Exactly. But if you and your spouse are both just looking at opening individual accounts at a bank that you've never had a relationship with, then that shouldn't be an issue.

Oh, okay. Good to know. One thing that I want to ask you about, Alice, is any sort of potential locality to these offers. For example, I saw a sign for a signup bonus. There's a billboard next to a pawn shop in my area, and it seemed kind of sketchy. It was offering $500 to open a certain account. And then weirdly, that same bank sent me a promotion in the mail that seemed like the same bank account that you would open, but the signup bonus was for less, actually. So what's the discrepancy there? Yeah. So a lot of bank bonuses actually are targeted, which is to say that they're only available to people on certain zip codes or who receive a mailer like you got. I'm not really sure what to say about your particular

situation, but what I can say is that targeted bonuses are usually a little bit better than bonuses that are nationally available. So if you do get a mailer, or if you do see a billboard in your neighborhood and an offer sounds really tempting, and you look at the account, and it looks like it would be a good fit, I would definitely say that's something worth looking into. Okay. And would it be worth maybe mentioning that I saw a certain sign? Because otherwise, to me, it seemed a bit like bait and switch, which makes me skeptical of these things. Yeah. I mean, I think it's definitely worth mentioning where you saw the information. A lot of times when you sign up for a bank account and you're expecting to get a bonus, there's a specific

code you have to mention, or when you go on a website, there's a code you have to enter or something like that. So yeah, I think the more information you can provide when you sign up, usually the better. I'm wondering if online banks tend to offer better bonuses. They tend to have higher APYs for their savings accounts. Do they have any sort of differentiating features when it comes to bonuses as well? I would actually say that traditional brick and mortar banks are a little bit better when it comes to bonuses. However, a lot of online bank accounts offer better value over time in our experience in NerdWallet. So it really depends. You will find some occasionally and on really good accounts.

And I just wanted to say that you don't necessarily need to settle for one bank. I mean, we have our brick and mortar bank where our checking and savings accounts are and my daughter's savings account is. And that's where our business accounts are as well. But we also have online savings accounts for longer term savings. And I do the savings bucket thing, which is I label each of these sub-accounts with its goal. So vacation has one pot of money and clothes has another and Christmas and all these other things, they each have their own label. And I found it works pretty well moving the money back and forth. It's not that hard. And

I like being able to take advantage of the higher interest rates on the online banks while having a bank I can walk into if I ever need to. Although I haven't needed to in a very long time. Yeah. Haven't wanted to for a very long time either. But that actually raises a really interesting idea to me where if you are looking to make a new account for a specific goal, whether it be a Christmas fund, a vacation fund, whatever, it might be a good opportunity to take advantage of a signup bonus because you know you're going to have some money sitting in an account. You might as well get a little bit extra and then you know, okay, my account at this bank is only for a certain purpose. And then you don't touch it and you can meet your savings goal while also getting a little bit of extra cash in the process. I think that makes a lot of sense. And I have to also confess that I'm a split traditional and online bank customer

for similar reasons that you discussed, Liz. But yeah, I think that's totally a good option. And similar to a tax refund or something, it can just be a little amount of money that is a little extra boost if there's something you're saving for. But it's money you wouldn't have received otherwise. Exactly. And it's a little bit distant from your regular checking account, so you're a little bit less prone to spend it. I think at least that's

the way my mentality works. If I don't see it every day, I'm much less likely to think, oh, free money. I'm going to grab that. Okay. Well, I have one final question for you, Alice, which is I'm always skeptical of promises of free money because, you know, nothing is ever really free. I'm wondering what catches there might be to these bonuses or if there's anything you think people should be on the lookout for overall. Typically, if you follow the requirements for the bonus, you will get the bonus and there aren't really a lot of catches. However, there are always like fine print, you know, and you want to make sure that you're reading that so that you don't end up not getting what you signed up for. So for example, with savings bonuses, they often require you to put

in a fair amount of money and maintain that for a while. So if you find out that you're in a situation where, oh, you know, I put a bunch of money in that actually kind of really need during that time, you take that out, you're probably not going to get the bonus. So you don't want to kind of do these bonuses with money that you kind of need on your day-to-day or that you might need for an emergency. So it's really about just knowing what you're getting into. You know, it's the same thing we always say with emergency funds. You don't want to invest your emergency fund. You don't want to do anything with your emergency fund where it wouldn't be accessible or where you wouldn't be able to use it if you needed to.

We should also talk about the hygiene of shutting down your old account if you decide to do that. So, Alice, what do you need to think about when you're shutting down your old account if you decide to do that. So Alice, what do you need to think about when you're shutting down your old account? You want to make sure that your direct deposit and all of your regular bills are being redirected into your new account before you shut down your old account. So the new account opening is going to come first. And you want to probably give yourself a few billing cycles to kind of make sure that everything is moved over. Because sometimes with direct deposit, you know, it takes a little bit for those changes to take place. And same with electricity bills and things like that. But once you've moved all that over, yeah, just give it a few months and you should be

good to go. Thanks so much, Alice. Now let's get to our takeaway tips. Takeaway tip number one, balance the bonus with other factors. The new bank may pay less interest or charge higher fees. Make sure the whole deal works for you before you commit. Next up, read the fine print. Getting the bonus usually requires depositing a certain amount and leaving the money there for a certain length of time. Finally, focus your bonus. If you're

looking to open a new account for a specific savings goal, look for one with a good sign-up bonus. And that is all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your question at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com and visit nerdwallet.com slash podcast for more info on this episode. And remember to subscribe, rate, and review us wherever you're getting this podcast. Here's our brief disclaimer thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said,

until next time, turn to the nerds.