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[ad_1] Your credit score communicates with lenders your level of credit trustworthiness. As a result, those with higher credit scores qualify for higher credit limits and better interest rates. Your credit score will play a major role if you plan to purchase a house or apply for a loan in the future. Understanding credit scores and what they mean can improve your financial literacy. We gathered the following credit score statistics to help you get a better sense of where your credit score stands compared to other Americans. Key findings: The national average FICO® Score is 716 as of April 2022 (FICO) About 10% of the U.S. population doesn’t have a credit record and are “credit invisible.” (Consumer Financial Protection Bureau) Ages 76 and up have the highest average credit score at 760. (American Express) Women’s and men’s average FICO Scores are virtually the same. (Experian) Average U.S. credit score The national average FICO Score is 716 as of April 2022. This is the same as when FICO last reported on it a year ago. Average credit score by state While your location doesn’t affect your credit score, some states have a higher average credit score than others as seen in the statistics listed below. While 31 states (and the District of Columbia) have average FICO scores that are higher than the national average of 716, the upper Midwest and New England continue to have the best average FICO Scores. (FICO) Minnesota, Vermont, New Hampshire and Wisconsin all have scores that are 23 points higher than the national average, with scores of 742, 739 and 737, respectively. (FICO) Mississippi, Louisiana, Alabama and Arkansas have the lowest credit scores at 662, 668, 672 and 673, respectively. (WalletHub) Average credit score by age Since credit history length is a factor that influences your credit score, it makes sense that the average credit score increases with age as seen below. Approximately 58% of consumers with the highest credit score are between the ages of 56 and 74. (Money Geek) The average score for adults aged 18 to 29 increased by 24 points between April 2017 and April 2022; 19 points for those aged 30 to 39; 19 points for those aged 40 to 49; 13 points for individuals in their 50s; and 10 points for those aged 60 and older. (Nerd Wallet) As of 2021, ages 18-24 have the lowest average credit score at 679. (American Express) Ages 76 and up have the highest average credit score at 760. (American Express) Average credit score by race Average credit scores can differ across demographics like race. However, keep in mind that race doesn’t directly influence your credit score. At 745, the Asian population has the highest average FICO score. (Shift Processing) The average credit score among White individuals is 734. (Shift Processing) The average credit score among Hispanic individuals is 701.  (Shift Processing) The Black population has the lowest average score of 677. (Shift Processing) Average credit score by gender Although women couldn’t legally apply for credit until 1974, women’s and men’s average FICO Scores are still very close in range at 705 for men and 704 for women as of 2019, according to Experian. Average credit score by income A common credit score myth is that your income contributes to your credit score. Although this is untrue, the statistics below show a correlation between income and credit score. Approximately 25% of low-income consumers don’t have enough knowledge to raise their credit scores. (Consumer Federation of America) The median credit score of 658 for lower income individuals suggests that many borrowers are unlikely to have access to affordable credit as those with scores above 720. (Federal Reserve Bank of New York) Those considered high income have the highest average credit score at 774. (American Express) Average FICO Score in the U.S. FICO is an analytics firm that developed the credit scoring models used today. The national average FICO Score is 716 as of April 2022, the same as when FICO last reported on it a year ago. Here are some FICO statistics. Average FICO Score by generation The Silent Generation (ages 77 and up) has the highest average credit score at 760. (Experian) The average credit score of baby boomers (ages 58-76) is 742 in 2022, up two points from 2021. (Experian) Generation X (ages 42-57) has an average credit score of 706. (Experian) The average credit score of Millennials (ages 26-41) is 687. (Experian) Generation Z (ages 18-25) has an average credit score of 679 in 2022, the same as 2021.  (Experian) Generation Average credit score (2022) Silent Generation 760 Baby Boomers 742 Generation X 706 Millenials 687 Generation Z 679 Average VantageScore in the U.S. VantageScore is the second most popular credit scoring model in the U.S. As of September 2022, the average VantageScore was 697. Credit card utilization statistics Credit utilization refers to the amount of your available credit you’re currently using. Your credit utilization ratio is calculated by adding up your balances and then dividing by the total of your credit limits. Keeping your credit utilization ratio low can help raise your score. Individuals with credit scores 800 to 850 have an average credit utilization ratio of 5.7%. (Experian) Consumers with credit scores considered “very good” (740-799) have an average utilization ratio of 12.4%. (Experian) Those with credit scores in the “good” range (670-739) have an average credit utilization ratio of 32.6 %. (Experian) 47.6% of the population opened at least one new credit account in the last year. (FICO) Approximately 26 million U.S. adults, or 10%, don’t have a credit record and are “credit invisible.” (Consumer Financial Protection Bureau) 19 million Americans have a credit history but lack a credit score because their report is insufficient or out of date. (Consumer Financial Protection Bureau) The 15% growth in credit card balances from 2021 to 2022 is the highest in more than 20 years. (Federal Reserve Bank of New York) Currently, 83% of American people own at least one

[ad_1] One of the key factors that determine your credit score is your credit utilization ratio. In fact, this ratio accounts for as much as 30% of your credit score. With this much influence on your credit score, it’s important to understand what credit utilization is, how to calculate it, and how it impacts your finances. This article delves deeper into the answers to these questions. It also provides valuable tips for improving your credit utilization ratio. In This Piece What Is Credit Utilization? Why Is Credit Utilization So Important? How Does Credit Utilization Affect Your Credit? How to Improve Your Credit Utilization Does Opening Credit Cards Improve Your Credit Utilization? Does Closing Credit Cards Improve Your Credit Utilization? What Is Credit Utilization? In the most basic terms, your credit utilization is the amount of debt you owe in comparison to your overall credit limit. Only revolving credit is used when determining credit utilization. Things like mortgage loans, car loans, and student loans aren’t included. What Is Revolving Credit? Revolving credit is any type of credit account that continuously renews as you pay off the debt connected to that account. Some prime examples of revolving credit include credit card accounts and home equity lines of credit. How to Calculate Credit Utilization You can easily calculate your credit utilization ratio using a credit utilization calculator or the following formula. Start by adding up all your revolving credit account balances. Next, you need to add together the credit limit amounts for each of these accounts. With this information, you can calculate your credit utilization ratio by dividing your total account balances by the total credit limits and multiplying this total by 100. Credit utilization ratio formula: (Total amount of revolving credit account balances / Total credit account limits)  x 100 How Balance Reporting Affects Credit Utilization While credit card companies are under no obligation to report your credit information to the credit report agencies, almost all of them do. In fact, most credit cards submit your credit information every billing cycle. This means your credit card company will likely update your credit card balance every 25–30 days or so. This frequent reporting affects your credit score because the amount of credit you have available versus your credit balances impacts your credit utilization ratio. Depending on your spending and repayment habits, credit card balance reporting could cause your credit score to change from month to month. Understanding Per-Card vs. Overall Utilization It’s important to understand the difference between overall credit and per-card utilization. Your overall credit card utilization combines all your revolving credit accounts into one ratio. Your per-card utilization only takes into account one card at a time. For per-card utilization, you can use a credit card utilization calculator or the formula listed above, but instead of adding all your account balances together, you calculate each card separately. Most experts recommend keeping your overall credit utilization score under 30%. However, some creditors look at revolving accounts separately. It’s a good idea to spread your revolving credit across multiple accounts rather than just one or two credit accounts. This keeps the credit utilization from getting too high on any one card. There are also two other utilization numbers that could be helpful to know: Line-item utilization measures your individual credit card balances against your individual limits. For example, suppose you have three credit cards, each with a $10,000 limit. Based on your current balances, your line-item utilizations break down like this: Card A: Balance of $4,500 / Credit limit of $10,000 = 0.45 × 100 = 45% utilization Card B: Balance of $2,000 / Credit limit of $10,000 = 0.20 × 100 = 20% utilization Card C: Balance of $3,300 / Credit limit of $10,000 = 0.33 × 100 = 33% utilization Aggregate utilization is the average of your credit card utilizations. Calculate yours by combining your current balances and dividing them by your total credit limit. In the example above, your total balance is $9,800 and your total limit is $30,000; therefore, your aggregate credit utilization is $9,800 / $30,000 = 0.32 × 100 = 32.6% Why Is Credit Utilization So Important? Every factor of credit scoring is crucial, but credit utilization is responsible for 30% of your overall score, second only to your payment history’s weight of 35%. Credit utilization measures your revolving balances against your total credit limit. Lenders and credit card issuers rely on credit utilization to predict risk and future behavior. In general, the higher your utilization ratio, the greater your risk of defaulting on your balances. Risky behavior isn’t rewarded in the world of credit scoring, and you may see a decrease in your scores as your utilization ratio goes up. How Does Credit Utilization Affect Your Credit? Your credit utilization ratio directly impacts your credit score. In fact, five primary factors influence your score for FICO and VantageScore, the two most common credit scoring companies used. The Five Credit Factors Payment history: Your payment history, including both on-time and late payments.FICO: 35% of your credit scoreVantageScore: 41% of your credit score Credit utilization: The amount of debt you have compared the amount of your current available credit balance accounts.FICO: 30% of your credit scoreVantageScore: 34% of your credit score. This includes credit utilization, outstanding balances, and available credit. Age of credit history: The length of time you’ve held each credit account.FICO: 15% of your credit scoreVantageScore: N/A Account mix: The different types of accounts you have. You should have a variety of accounts, including installment loans and revolving credit accounts.FICO: 10% of your credit scoreVantageScore: 20% of your credit score New credit inquiries that impact your credit score. Work at building your credit slowly to reduce the risk of too many hard inquiries to your account over a short period of time.FICO: 10% of your credit scoreVantageScore: 11% of your credit score What Is a Good Credit Utilization Ratio? Experts agree that you should try to keep your credit utilization ratio under 30% if possible. When it

[ad_1] Guest Post by FitMoney As a parent of a teenager or young adult, you want to ensure that your child is financially secure and understands the importance of taxes. Filing taxes can often be confusing and intimidating, but it’s an important part of life when you start earning income. Once you know a few key concepts, filing your taxes doesn’t have to be so intimidating. Teens and young adults need access to resources that explain the tax filing process in easy-to-understand language and walk them through their specific filing situation so they know exactly what needs to be done come tax time. Today, we’ll cover taxes from a young adult perspective and discuss how learning about this important financial component now can help prepare for future success. Explain the basics of filing taxes and why it’s important for young adults Filing taxes can seem daunting for young adults, but it’s an essential part of financial responsibility that shouldn’t be overlooked. Simply put, it’s a way for the government to ensure that they’re collecting the appropriate amount of money from individuals and businesses alike. When you file your taxes, you’re essentially reporting your income for the year and any applicable deductions you may have. It’s important to file because if you don’t, you could end up facing penalties. Additionally, filing can help you receive a refund if you overpaid taxes throughout the year. Even if you’re just beginning work, there could be money for you to claim. Don’t let the tax season stress you out–it’s an opportunity to reflect on your own financial literacy throughout a calendar year. Educate yourself on why and how we pay taxes Sometimes the toughest part of filing taxes can be knowing where to start. Young adults need to learn if they should file, when to file, how to file, and what all those numbers across a paycheck mean. Did you know that more income doesn’t necessarily mean a higher tax rate? It just means that only income over a certain amount will be taxed higher. What forms should you keep an eye out for in January? What can you do throughout the year to make paying your taxes easier? Sometimes, we’re left with more questions than answers, and these are just a few of the questions that are critical for building financial stability and health as your resume grows. Knowing when and how to file Knowing when and how to pay and file taxes is crucial to staying organized and on top of your responsibilities. It’s important to understand how you pay taxes throughout the year and when you need to file. This can depend on many factors including your job, income, or where you live. Secondly, figuring out how to file can seem overwhelming, but there are many resources available to help you navigate the process. Government websites or tax professionals can provide guidance and assist you in filling out necessary paperwork. Remember, filing taxes might seem overwhelming, but with a little research and support, you can successfully manage this responsibility – just don’t miss that Tax Day deadline! Understanding your paycheck A paycheck is an important part of understanding your taxes. Your paycheck outlines your gross pay, taxes deducted from your income, and the final amount of take home pay that you actually receive in cash or check form. The gross pay includes regular wages, any overtime wages. Also included on your paycheck are mandatory and optional deductions which are taken directly from your paycheck before the final amount of take home pay is calculated. The look of your paycheck can often explain what forms to look out for at the start of tax season. Whether you’re receiving pay stubs from an employer or submitting invoices as a freelancer, it’s important to hold on to this important paperwork to keep track of what you owe and what you’ve paid. Once all deductions are included, the net amount of your paycheck is what you will receive as take home pay. Tax season can be stressful, but it doesn’t have to be! All it takes is some time to know what to do and why you’re doing it. In just an hour, anyone can build confidence to not feel intimidated every time tax season comes around. It’s something we’ll do for the rest of our lives – so why not take the stress out of it? Learn More about FitMoney The post What Young Adults Should Know When Filing Taxes appeared first on Credit.com. [ad_2]

[ad_1] Rent payments are not typically reported to the credit bureaus. If you make a rent payment on time every month, you’re fulfilling your commitment to your landlord—but those payments are not contributing to your credit scores. However, if you’re new to credit or trying to recover from past financial problems, you probably want to get … How to Add Rent Payment History to Your Credit Report Read More » If you’re new to credit or trying to recover from past financial problems, you probably want to get credit for every on-time payment you make. That’s why it’s a good idea to consider reporting rent to the credit bureaus. Learn how. The post How to Add Rent Payment History to Your Credit Report appeared first on ScoreSense. [ad_2]

[ad_1] If you know how to use a credit card responsibly, you can boost your financial life. Credit cards help you shop more securely online and book rental cars, and they can create more flexible cash flow opportunities. When used responsibly, credit cards also help you build credit. Flip the coin, however, and you get irresponsible credit card use. That can hurt your cash flow, leave you in debt and lower your credit score.  Many people think responsible credit card use simply means paying their bills on time. But that’s just the minimum. In reality, there are a few bad habits people can fall into that hurt their credit and make for poor credit card use. Learn about some bad credit card habits you can’t afford not to change below. In This Piece Constantly Making Late Payments  Only Making the Minimum Payment Ignoring Your Statements Applying for the Wrong Card Maxing Out Your Credit Cards Applying for Too Many Credit Cards at Once Not Using Your Credit Cards 1. Constantly Making Late Payments  Timely payments are the biggest factor in credit score calculations, so you should strive to pay all your debts on time. Missing credit card payments regularly is a good way to tank your score and make your future debt more expensive. Those late payments can also stay on your credit report for up to seven years. On top of this, many credit card companies charge late fees. They can be $40 or more, so they add up to a lot quickly. You might also face penalty interest rates that make your debt more expensive if you’re late with your payments. 2. Only Making the Minimum Payment You can keep late payments off your credit history by making the minimum payment amount each statement cycle. But that makes your debt more expensive overall and means you’re paying down your balance for much longer. For example, say you have a card with a $1,000 balance and 24% interest. Your minimum payment is $25. Paying only $25 a month, it would take you 82 months to pay off the balance and cost you a total of $2,031 with interest. If you paid $100 a month instead, you’d pay off the balance in 12 months for a total of $1,127 with interest.  As you can see, paying more than the minimum makes a huge difference. Whenever possible, add what you can to any payments. 3. Ignoring Your Statements If you’re struggling to pay your bills or just busy, you may be tempted to toss statements to the side or even hide them in a drawer. However, you should always open and review your statements as soon as possible after you get them.  Reviewing your statements gives you a chance to ensure there aren’t mistakes or charges you didn’t make. Reporting fraudulent charges sooner rather than later can help you reduce any negative outcomes associated with identity theft. You should also create a monthly budget that helps you make your credit card payments without too much stress. That way, you aren’t tempted to ignore those statements. 4. Applying for the Wrong Card You should always research a credit card before you apply for it—first, because you should understand the credit requirements and whether you’re likely to be approved. Applying for a card that you can’t get simply results in an unnecessary hard inquiry on your account. Second, you should research cards to find ones with rewards, benefits and perks that work for you. For example, some luxury rewards cards have annual fees of $400 to $700. Those cards are only a good idea for individuals who can max out rewards to make up for the fees. If that’s not you, you may want to apply for more cost-effective cards. 5. Maxing Out Your Credit Cards Credit utilization is another big factor in your credit score. This refers to how much of your available credit you’re using.  For example, if you have a credit limit of $1,000 and a balance of $600, your credit utilization is 60%. That’s really high and can have a negative impact on your score. Keep your credit utilization rate at 30% or lower for the best result.  6. Applying for Too Many Credit Cards at Once Each time you apply for a credit card, your credit is pulled by the lender. That leads to a hard inquiry, which can reduce your credit score. Other lenders may also see numerous hard inquiries on your credit as an indication that you’re struggling with finances or desperate, which is never good when you want to apply for credit. Opening a bunch of new credit cards at the same time can also impact the average age of your credit accounts. Credit age is a factor in your credit score. 7. Not Using Your Credit Cards If you don’t use your credit cards, your card issuer may decide to close your account. This can impact the age of your open credit accounts, which adversely affects your credit. Instead, ensure you have credit cards that work for you so you can integrate them into your day-to-day financial life. Use them for items you would normally purchase and pay off each statement to avoid interest. How to Use a Credit Card Responsibly Now that you know what not to do with your credit card, here are a few tips for how to responsibly use a credit card: Only use your card for necessary items you’d already be purchasing. Avoid using cards for frivolous purchases, as that can lead to running up your balances. Always make payments on time. Consider setting up automated payment reminders or automated payments so you never forget. Keep your balances under 30% of your credit limits so you don’t take a hit on credit utilization. This doesn’t mean you can’t use your entire credit limit. However, you should pay it down to under 30% before the statement cycle ends. Manage Your Credit and Credit Cards Keep on top of your

[ad_1] Venmo is a financial platform acquired by PayPal when it bought Braintree for $800 million in 2013. Venmo has competitors, but its reach is huge and its rise meteoric—especially with millennials and younger. In the fourth quarter of 2018, it processed 19 billion U.S. dollars—that’s 80% growth year-on-year.1 Today, it has as many as 10 million users by some estimates. The Venmo app is representative of the willingness to embrace a new kind of money system. It represents a willingness to trust gadgets on a whole new level, and a lack of concern for financial privacy. But users—and you whether you’re a user or not—may not thoroughly understand the platform. And while Venmo might look free at first glance, there are many little Venmo charges you could be paying without even realizing it. Anytime you use a financial platform, it’s important to know what the possible charges and risks involved are. This lets you protect yourself and can save you money. Venmo makes it easy to pay a friend back for a meal or send money to your child in college. There are almost unlimited uses to this personal payment network, but are you paying Venmo fees every time you use the app? We’ve got answers below.  In This Piece What Is Venmo? A Guide to Venmo Charges Venmo and Your Financial Safety Is Venmo Right for You? What Is Venmo? Even if you’re not familiar with this platform, you’re likely familiar with platforms like it including Square Cash, Zelle and Google Wallet. Venmo is a type of peer-to-peer payment platform. It’s a mobile app that enables sending money easily among friends. No credit card, no wallet, no fees and no nagging for unpaid drinks required. Just link the app to a debit card and spend away. You can use Venmo to send and accept payments to or from other people online. Instead of finding the exact change to pay your friend back for dinner or stiffing him/her, for example, you can simply Venmo him/her the exact amount. You can also use Venmo to pay for goods and services from some online retailers as well as to make in-app purchases in some online apps. Some businesses even choose to use Venmo to make payments to freelance employees. Venmo is somewhat unique in that it’s also a social platform. Unless you change the settings, your transactions are visible to the public, as well as your friends on the platform. You can see who’s sending or receiving money from who, and the notes they include about what the payments are for. Creating a Venmo account is as easy as entering your email and selecting a username and password or using your Facebook account to create your Venmo account. Easy of account setup aside, Venmo users can probably learn a thing or two by reading the fine print and chatting with more suspicious types. A Guide to Venmo Charges Does Venmo charge a fee for its use? It depends on how you use it. Venmo doesn’t charge a fee to set up an account, hold an account or transfer money to others when you have a balance or are funding with your bank account or debit card. Venmo does have fees for some other activities.  Instant Transfer Fees One time that Venmo charges a fee is when you instantly transfer funds from your Venmo account to your checking or savings account. You don’t pay for standard transfers, which are sent via ACH networks. However, instant transfers are sent via payment card networks and are more expensive. Venmo fees for instant transfers are 1.75% of the transfer value. The minimum fee is 25 cents, and the maximum fee is $25. Credit Card Processing Fees You won’t pay a fee if you send money to other people using your Venmo balance or funds from your bank account or debit card. However, you will pay a fee if you send a payment that’s funded by your credit card. The fee is 3% of the total transaction.  Merchant Fees If you use Venmo as a business or charity, you pay merchant fees. These are seller transaction fees that occur each time you receive money for goods or services. Even if you’re a personal Venmo user, you may pay these fees if someone identifies a payment to you as being related to goods or services. Seller transaction fees are 1.9% of the transaction plus 10 cents. To get an idea of how much these fees might be, consider the table below. Transaction Amount Seller Transaction Fees $25 $0.58 $50 $1.05 $100 $2.00 Cryptocurrency Fees Venmo charges a fee if you use your Venmo balance to buy cryptocurrency. If you sell cryptocurrency and receive the funds from the sale in Venmo, you also pay this fee. The amount of the fee depends on the amount of the cryptocurrency transaction. Transaction Amount Fee $1 to $4.99 $0.49 $5 to $24.99 $0.99 $25 to $74.99 $1.99 $75 to $200 $2.49 $200.01 to $1,000 1.8% of the transaction More than $1,000 1.5% of the transaction Venmo Card Fees If you opt for a Venmo debit card, you won’t pay any fees for the card. You also won’t pay a fee when you use it to pay at the register or in online checkout processes, and you can make withdrawals from in-network ATMs with no Venmo fee. However, withdrawals from out-of-network ATMs cost $2.50 each time you make them. If you make over-the-counter cash withdrawals at a bank, the fee is $3.00 for each transaction. Venmo also offers a credit card with no annual fee. However, the card has other fees: $10 or 5% of the transaction value for cash advances Up to $41 for late fees Up to $30 for returned payment fees You’ll also pay between 19.49% and 28.49% in interest for any balance you carry forward on the Venmo credit card, depending on your creditworthiness and the type of account you have.  However, you can get between 1% and 3% cash back for eligible purchases. Overall

[ad_1] Key takeaways: Investing is a way to increase your wealth based on your risk tolerance and time horizon The best investments for low-risk investors looking for moderate returns are index funds, government bonds, and high-yield savings accounts The best investments for high-risk investors that want high returns are individual stocks, real estate, and cryptocurrencies Investing is one of the best ways to grow your wealth and improve your financial future. One of the keys to finding the best investments is to recognize the power of compound interest. The credit bureau Experian® describes compound interest as “when interest gets added to the principal amount invested or borrowed, and then the interest rate applies to the new (larger) principal.” There are many ways you can invest, and some investments earn more than others, and some investments are riskier than others. Today, you’re going to learn about the nine best investments in 2023 based on average returns as well as your personal risk tolerance. The investing information provided is for educational purposes only. We recommend consulting a financial professional before investing. The best investments The best investments right now to grow your wealth include: High-yield Savings Accounts Short-term Certificates of Deposit (CDs) Government Bonds Corporate Bonds Real Estate and REITs Individual Stocks Index Funds Exchange-traded Funds (ETFs) Cryptocurrency 1. High-yield Savings Accounts High-yield savings accounts are similar to a regular savings account, but you’ll often earn more interest by keeping your money in one of these accounts. You can sign up for a high-yield savings account through many banks and credit unions, and some accounts can earn you anywhere from three to four percent annually. If you have or plan on making an emergency fund, Javier Simon from SmartAsset recommends using one of these accounts. “Anyone looking to open a rainy day or emergency fund that provides a higher-than-average interest rate and high liquidity should consider a high-yield savings account,” writes Simon. You’re saving anyway, so why not make money from storing your funds? Best investment for: People with lower risk tolerance and who are good at saving. This is one of the safest investments with high returns because many banks are FDIC insured, so even if the economy has a downturn, your money is backed by the government. Risk level: Very low How to invest: Banks, credit unions, and online banks Potential returns: Moderate 2. Short-term Certificates of Deposit (CDs) When looking for where to invest money, many people turn to certificates of deposit, which are also known as CDs. Like high-yield savings accounts, CDs are another type of account. CDs work by allowing you to deposit your money with the caveat that you don’t withdraw the money for a certain amount of time. Once that time frame expires, you’ll receive your money back as well as the interest. Best investment for: People willing to store their money for one, three, or five years, which are the average predetermined time frames. Just remember, unlike a savings account, there’s a fee for withdrawing your money early. Risk level: Very low How to invest: Banks and credit unions Potential returns: Moderate returns that sometimes exceed those of high-yield savings accounts 3. Government Bonds Sometimes, the government needs to borrow money, so they offer people the option to loan them money via government bonds. Like CDs, these bonds are for a specified period, but they provide regular payments. Peoples sometimes use bonds as one of the best passive income investments due to these payments. One caveat to note is the return on government bonds varies depending on how the economy is doing. Best investment for: People with a low risk tolerance often buy government bonds. Unless the government fails, there’s not much that will prevent getting your return from this investment. Unlike other investments, government bonds can last for up to 30 years. Risk level: Very low How to invest: The United States Treasury or through a stock broker Potential returns: Low 4. Corporate Bonds Like government bonds, corporate bonds are loans, but you’re providing that loan to a company. This investment helps companies that need money to invest in new products and expand their business. Since these aren’t backed by the government, they can be riskier because the company may go out of business. Although these have a higher risk, they also have a higher return than government bonds.   Best investment for: Individuals with a higher risk tolerance and are looking for higher returns may want to invest in corporate bonds. These bonds pay out regularly, and they’re a safer investment when buying bonds from large, stable companies that have been around for a while. Risk level: Moderate to high How to invest: Stock brokerages Potential returns: High 5. Real Estate and REITs One of the investment ideas many people turn to is real estate because it can provide extremely high returns when the housing market is good. The downside is that when the housing market has a downturn, as we saw in 2008, people experience big losses. Rather than investing in real estate, you can invest in real estate stocks, which are called real estate investment trusts (REITs). These stocks are for companies that own properties like malls, office buildings, and other forms of real estate that generate revenue. These can be slightly less risky but still have some risk due to the nature of real estate. Best investment for: Those who are looking for high returns or have a diversified portfolio already and can weather some higher-risk investments. Risk level: High How to invest: Mortgage broker for real estate and stock brokerages for REITs Potential returns: High 6. Individual Stocks Individual stocks are available to everyone, and when the average person buys these types of stocks, they’re known as “retail investors.” You may have heard of retail investors investing in individual stocks during the GameStop stock hype of 2021, which also showed how risky individual stocks can be. Individual stocks come with a high risk and high reward. Basically, you’re