MONEY stocks

October Can Be Frightful for Stocks. But It Can Also Be Fruitful.

THE DARK KNIGHT RISES, Tom Hardy, 2012.
Ron Phillips—Warner Bros/Courtesy Everett Collection

By reputation, October is the scariest month on Wall Street. In reality, this month tends to be either very good or bad for the market. Which one will it be this time around?

This story was updated on Oct. 15, 2014

Is the Ghost of October Past haunting Wall Street again?

By reputation, October is the market’s scariest month. Six years ago, October witnessed several knee-buckling plunges during the financial crisis — an 8% drop on the 9th, an even-bigger 9% fall on the 15th, followed by a 6% slide on the 22nd.

Go back further, to the Asian currency crisis, and the Dow plunged 554 points on Oct. 27, 1997. Go back further still, and there was Black Monday, when the S&P 500 fell 20% on Oct. 19, 1987. And don’t forget that the stock market crash that set off the Great Depression will commemorate its 85th birthday at the end of this month.

At first blush, this October seems to be trying to join this list.

On the last day of September, the Dow Jones industrial average had climbed as high as 17,145. Two weeks later, the benchmark index was more than than 800 points lower, thanks in part to fears over the slowing global economy, escalating Mideast violence, continuing Russian conflict, and quite possibly the spreading Ebola virus.

Yet October gets a bad rep, and some market observers think this could be a buying opportunity.

While October may be pockmarked with a minefield of securities devastation, history is also filled with examples of strong Octobers for the S&P 500, according to the Stock Trader’s Almanac. Among them: 1966 (up 5%), 1974 (16%), 1998 (8%), 2002 (9%), and 2011 (11%).

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Ycharts

Plus, when you average out historical performance, this autumnal month isn’t so shabby.

In fact, if you look at each month’s returns from 1988 to last September, October turns out to the third best-performer on average, behind December and April. The S&P 500 has gained at least 3.8% in three of the last four Octobers, according to data from Morningstar.

Liz Ann Sonders, chief investment strategist for Charles Schwab, noted that while some investors might be taking profits after a sustained run up for stocks, “we don’t see anything that indicates a more sustained downturn is in store.”

In a note published online, she added:

“We are entering a traditionally positive period seasonally for stocks. According to ISI Research, since 1950, December and November have been the highest returning months of the year, on average. Additionally, according to Strategas Research Group — also since 1950, in midterm election years — October has been the best performing month, followed by November and December. The recent selling we’ve seen could just be setting up for a nice year-end run.”

So is Sonders right? Will this October turn out to be a treat for Wall Street? Or will it just be one big trick?

MONEY Jobs

Why Low Job and Wage Growth is Worse Than Rising Inflation

Hot air balloons floating higher and higher
Jon Larson—Getty Images

As the economy picks up steam, and employers add more workers, investors say that inflation is their biggest impediment to saving. Here’s why they’re wrong.

As the economy added another 248,000 jobs in September, pushing the unemployment rate to a post-recession low of 5.9%, investors are feeling more confident.

In fact, investors are more optimistic than they’ve been since the recession, per a recent Wells Fargo/Gallup survey which measured the mood of those with more than $10,000 in investable assets. Of course the so-called Investor and Retirement Optimism Index is still only at around half the levels of the 12-year average before the 2008 recession. Investors may be more sanguine than three months ago, but that doesn’t mean they think the economy is going gangbusters.

Nevertheless, there was one particularly interesting data point in the survey: “Half of investors (51%) think the pressure on American families’ ability to save is due to rising prices caused by inflation.” Meanwhile only 37% said the pressure was inflicted by stagnant wage growth.

Which is strange.

What inflation?

If you look at the Federal Reserve’s preferred measure of core inflation (which strips out volatile energy and food prices), prices have risen around or below the Fed’s stated 2%-target since the recession.

The Consumer Price Index, a gauge of inflation released by the Labor Department, actually fell on a monthly basis in August for the first time in more than a year, and only grew at an annual rate of 1.7% since this time last year.

Proclamations of rising inflation ever since the Federal Reserve started buying bonds and lowering interest rates in response to the recession have yet to materialize. And those advanced economies that did raise interest rates a few years ago (like Sweden), have come close to deflation.

Meanwhile wages aren’t growing at all. Average hourly earnings in August rose 2.1% versus the same period last year, and the growth rate has been stuck at around 2% since the recovery. The same is true for the employment cost index, which measures fringe benefits in addition to salaries. Ten years ago the index increased by 3.8%.

REALERw
St. Louis Federal Reserve

 

While the unemployment rate has fallen considerably this year, other gauges of jobs are still troubling. Long-term unemployment has tumbled since its post-recession peak in 2010, but there are still almost 3 million people who’ve been unemployed for 27 weeks or longer. If you include workers who’ve recently stopped looking for a job and those working part-time when they’d rather be full time, the unemployment rate is 12%, more than four percentage points above the pre-recession level.

The Fed has implemented an easy monetary policy in order to attack this problem. “The Fed is keeping interest rates low as long as they can and maintaining very loose policy in support of jobs,” says USAA Investments’s chief investment officer Bernie Williams. “They will only tighten up with great reluctance.”

Pick your poison: stronger wages or rising inflation?

In a battle between pushing wages higher and the risk of inflation, the Fed is willing to err on the side of rising wages, says Williams.

BMO senior investment strategist Brent Schutte agrees. “As a society, you decide what is good. Economics is a choice between two things. We’ve clearly decided that higher inflation and rising wages is a good thing.”

Despite years of effort, though, the Fed hasn’t been able to bring back rising wages.

If you’re still unconvinced that a lack of salary increase and slack in the labor market should be more of a concern to your finances than the threat of inflation, check out new research by former Bank of England member David Blanchflower.

Along with three other co-writers, Blanchflower recently published a study titled, “The Happiness Trade-Off between Unemployment and Inflation.”

The researchers found that unemployment actually has a more pernicious effect on happiness than inflation. “Our estimates with European data imply that a 1 percentage point increase in the unemployment rate lowers well-being by more than five times as much as a 1 percentage point increase in the inflation rate.”

In an interview with the Wall Street Journal, Blanchflower said, “Unemployment hurts more than inflation does.”

As the economy gently improves, and people start going back to work, the hope is that wages will start to rise. Inflation might then rise above the Fed’s 2% target, and Yellen and Co. may raise rates in effort to cool off the economy. But we’re not there yet. And investors, for the sake of their wallets and psychology, would do well to remember that.

MONEY credit cards

The Easy Way to Get 5% Cash Back on Everything You Buy

Handing cash back
Jamie Grill—Getty Images

Maximizing credit card rewards requires you to be tactical, but the payoff is well worth the effort.

More than half of cash back credit cards return just 1%, according to CreditCards.com. But you can do better—a lot better, in fact.

Being strategic about which credit cards you choose and how you use them can have significant payoff, we discovered while making picks for Money’s 2014 Best Credit Cards.

No one card will give you back 5% on everything you buy, but you can earn about that much on average if you, ahem… play your cards right.

1. Start with the right base

Groceries are one of American consumers’ biggest expenses, and they’re the only category where you can get 6% cash back—with the right card. That card is the American Express Blue Cash Preferred, which comes with a $75 fee and a $150 sign-up bonus. The Preferred also offers 3% on gas, so it should be used at the pump unless you can do better with any of the cards in the next section.

2. Add some flair

The Discover It, Chase Freedom, and U.S. Bank Cash Plus all have two things in common: They pay 5% on select rotating categories and they have no an­nual fees. So collect all three, and deploy them on which­ ever categories are highlighted at any given time. You can see below the benefit of adding them to your rotation.

The categories that pay 5% are predetermined on the It and the Freedom. But the Cash Plus lets you choose your own from a list of 12; so just make sure on that card to select your biggest expenses after groceries that aren’t covered by the other two cards’ rotating categories.

3. Have a “plan B” card

The cards above pay 1% on most other purchases. So don’t use them for your et cetera shopping. For those purchases, use the Citi Double Cash or Fidelity Investment Rewards American Express, which earn 2% on everything.

4. Use online malls

To get you to use your cards for online shopping, many card companies have created portals that give you access to your favorite stores for additional rewards. For instance, ShopDiscover was recently offering 5% cash back at Enterprise Rent-A-Car, while you could receive 5% back from Bloomingdale’s on Chase Freedom’s Cash Back Boost. That’s in addition to whatever you’d earn for those purchases normally.

5. Hire an assistant

The It and Freedom’s 5% categories rotate every three months, and you have to opt in to enjoy the discounts. Signing up involves only a click, but you have to remember to do so. Plus, with the U.S. Bank Cash Plus, the 5% cash-back category options can change. All this requires you to stay vigilant. Download the Wallaby mobile app to help you remember which cards to use when, and set up a Google calendar alert every quarter so you remember to sign up for the rewards in the first place.

MONEY

3 Stupidly Simple Ways to Make Sure You Never Ever Pay ATM Fees

Bankrate ATM fees
Image Source—Getty Images

A new Bankrate report shows that the cost of using an out-of-network ATM is growing. Here's how to avoid those charges completely.

Using an ATM that’s not run by your bank will now cost you about as much as a latte at Starbucks.

Consumers now fork over, on average, $4.35 per transaction on out-of-network ATMs, according to Bankrate.com’s just-released 17th annual checking survey. That’s a 5% jump over last year and a 23% increase over the past five years.

“ATM fees have been going up for a long time,” says Bankrate’s chief financial analyst Greg McBride. “It’s low hanging fruit for the banks.”

The fee you pay for these types of transactions comes from two sources: The ATM owner charges you a surcharge for using the machine, and your bank charges you for going out of network. The former fee advanced 7% to $2.77, while the latter climbed 3% to $1.58.

Together these costs add up to a decent chunk of change: One trip to a non-sanctioned ATM a month costs more than $50 a year.

For consumers, this is a completely unnecessary outlay, however.

“There are steps people can take to avoid ATM fees, regardless of how long they keep rising,” says McBride. “Plenty of people out there not paying fees at all.”

1. Have a Treasure Map in Hand

Download your bank’s mobile app, if you haven’t already. Chances are it contains a feature that lets you see nearby branch or ATMs that won’t charge a fee.

Make a habit of checking before you stick your card into somebody else’s ATM—there may be a cheaper option closer than you think.

2. Get Cash Where You Buy Your Groceries

Many stores—including pharmacies and supermarkets—allow you get cash back at the point of sale. If you’re getting something, why not also make a habit of getting cash on these trips, since this basically functions as a free ATM withdrawal.

3. Go with a Bank that Won’t Punish You

Not the type to remember to use your bank’s ATM? You might want to trade in your brick-and-mortar bank for an online one. Ally and Schwab do not charge you to use another bank’s ATM (since these institutions don’t have their own) and they will reimburse you for any ATM fees.

And since digital financial institutions don’t service branches, fees tend to be lower and you can even receive interest on your checking account. Ally currently offers 0.10% on balances under $15,000. In a way, you could say they’re paying you to use another bank’s ATM.

MONEY portfolio strategy

Why Rats, Cats, and Monkeys are Smarter than Investors

Ms. Kleinworth goes short in the Treasury Bond market.
Ms. Kleinworth goes short in the Treasury Bond market. Nora Friedel—RatTraders.com

A performance artist in Austria piles on to the case against "active management" by finding yet another animal that seems to invest better than humans.

An Austrian performance artist claims to be breeding and training rats to be able to beat the investment returns of highly educated and paid professional investors.

The artist, Michael Marcovici, says he trained the rodents to trade in foreign exchange and commodities. He did so by converting market information into sounds and rewarded the rats with food when they predicted price movements correctly and inflicted a small electric shock when they didn’t. (If only hedge fund managers could be compensated in similar fashion.) The rats are placed in a Skinner Box with a speaker, red and green lights, a food dispenser and an electrical floor to deliver the shock.

Marcovici says rats can be trained in three months, are able to learn any segment of the market and “outperform most human traders.” This may seem like an outlandish claim, but this kind of thing isn’t altogether new.

UK’s The Observer held a challenge in 2012 between a “a ginger feline called Orlando,” a pack of schoolchildren and a few wealth and fund managers to see which could produce the biggest returns over the course of the year.

The cat won.

Long before Orlando’s victory, Princeton economist Burton Malkiel wrote that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts,” in his book “A Random Walk Down Wall Street.”

Add this to the overwhelming evidence that largely unmanaged index funds — that simply buy and hold all the securities in a market — often outperform professional stock pickers.

Just this month S&P Dow Jones Indices Versus Active funds scorecard for the first six months of the year, which showed that 60% of actively managed domestic large cap funds underperformed their benchmarks.

That’s in addition to 58% of domestic mid-cap and 73% of small cap funds losing out. If you extend the record out five years, more than “70% of domestic equity managers across all capitalization and style categories failed to deliver higher returns than their respective benchmarks.”

What does this mean for your portfolio? As Morningstar.com’s John Rekenthaler noted in a recent article, active funds may not have much of a future.

Passively managed mutual funds and exchange-traded funds, Rekenthaler points out, enjoyed 68% of the net sales for U.S. ETFs and mutual funds over the past year. That leaves 32% for active funds. Meanwhile, target-date funds account for $30 billion of the $134 billion in inflows for active funds over the past 12 months. Even on this front, passive target date funds sales are growing.

In fact, the only real growth area for actively managed funds are in so-called alternatives that invest in things like currencies and that charge annual fees of close to 2% of assets. That’s a lot of cheese.

You’re generally better off staying clear of professional security pickers.

No, this doesn’t mean you should find a rat, cat, or monkey to manage your 401(k). Instead, go the passive index route and select three basic building block funds from our MONEY 50 selection (like say Vanguard Total Bond Market Index, Schwab Total Stock Market Index and Vanguard Total International Stock Index) and you can achieve basic diversification at a price that won’t make you as poor as a church mouse.

MONEY First-Time Dad

Why I’m a Millennial Parenting Cliché

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Luke Tepper

More proof that I’m just like everyone else my age — and you probably are too.

Mrs. Tepper and I like to play a game from time to time that I imagine captivates most new parents. It’s called, “What Will My Child Be Like?”

Our clairvoyant visions alter slightly whenever we play, but recent examples include: a painter, a guitarist, and an astrophysicist (in the Neil deGrasse Tyson mold.)

In short: a creative type. That seven-month-old Luke currently has an imagination consumed by putting any and all things (especially wires and stroller wheels) as far into his mouth as possible doesn’t really matter. Right now, in these glorious months when he can’t tell us what he wants, we are free to speculate on what kind of person he might become. Of course our projections say more about ourselves than him.

Parents everywhere — no matter race, religion, education or age — place greater importance on teaching responsibility and hard work to their children than any other values, per a recent Pew Research Center survey. But when you peer into the data and look at less obviously appealing characteristics, you see just how similar your values are to other people like you.

Take creativity. As shown above, my wife and I care about creativity. Well so do most millennials, per Pew. In fact 78% of parents aged 18-to-29 believe creativity is an important characteristic to instill, six percentage points higher than parents aged 30-to-64. More than one-in-six of people in my age bracket view creativity as one of the most important traits to teach their child.

Religious faith also highlights how similar the Teppers are to other millennials. We spend our Fridays, Saturdays, and Sundays immersed in all sorts of activities – from laundry to playtime at the park to consuming Korean barbeque. Of all the locales in Brooklyn that you might find us on a weekend, a church, synagogue, or mosque doesn’t make the list. Only four-in-10 millennials believe religious faith is a value especially important to teach children, 15 percentage points lower than parents between 30-to-64, and 25 points below parents older than 65.

The survey also distinguishes respondents by education – from college graduates to those who have some college education to people who have a high school diploma or less. Everyone values responsibility, independence, hard work, and good manners. College graduates, though, de-emphasize obedience and prioritize curiosity, persistence, and empathy. (Although all three groups rate helping others as important.)

I don’t know why parents of a certain race, age, educational achievement, or religion view one character trait as more important than another. Everyone, it seems, values good ol’ fashioned American hard work and responsibility. Why a secular, college-educated millennial, though, weighs persistence more heavily than obedience is better answered by social scientists.

What I do know is that the value I assign to these traits illuminates some parental wish fulfillment. Often I yearn for the ability to play Chopin or explain black holes with dexterity and wit. I think I’d be a better person if I were only a bit more curious or empathetic for my neighbors. I can, sort-of, right that wrong with Luke.

But this is a fool’s errand. I know I haven’t been in charge for long, but how do you teach your kid creativity? What does that even mean? What would that look like?

Parents simply have less control over the people our children become than we like to think as Judith Harris argued in her book, The Nurture Assumption.

As Malcolm Gladwell wrote in a New Yorker review of Harris in 1998:

If adolescents didn’t want to be like adults, it was because they wanted to be like other adolescents. Children were identifying with and learning from other children, and Harris realized that once you granted that fact all the conventional wisdom about parents and family and child-rearing started to unravel.

I think parents often fail to remember how little influence their parents actually had on their development. And so as soon as we become parents we imagine all the great things our child will become with only a slight nudge or word of encouragement from mom and dad. If we “teach” creativity, then he will become creative.

There’s a reason that I chose to believe the fantasy. This indulgence in harmless fan fiction shields me from the terrifying reality that before long my seven-month-old infant will be 17 and too big for my arms.

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

MONEY The Economy

China is Slowing. What If Its Housing Bubble Bursts?

Even if the real estate market in the world's second-biggest economy were to collapse, the repercussions may not be bad as you think.

While global investors covet China’s growth — as evidenced by the buzz surrounding Alibaba’s IPO — the Chinese economy is actually slowing down.

In 2013, the world’s second largest economy grew at an annual rate of 7.7%. By 2015, according to a recent report by the Organization for Economic Co-Operation and Development, that will drop to 7.3%. Meanwhile, the U.S. economy’s growth rate is projected to increase by almost one percentage point.

What’s going on? Well, China’s industrial production gains in August slowed to their lowest level since 2008 and retail sales growth declined by a few percentage points year-over-year.

Perhaps most important, the nation’s newly built home prices only grew by 2.5% in July, after surging by 10% at the beginning of the year.

The notion of a housing crisis in an economy more than three times the size of France brings back flashbacks of 2008 and probably a few chills down every investor’s spine.

“A property price crash in the world’s second largest economy would have global implications,” says Wells Fargo Securities economist Jay Bryson.

But those global implications wouldn’t be as worrisome as the U.S. housing collapse six years ago, per Bryson. Here’s why.

The Worst Case

To play out this thought experiment you have to assume that at some point in the near future China’s home prices will experience a decline on the order of what the U.S. experienced over the past decade. (Bryson played out this scenario in a recent report.)

Currently, residential investment makes up a pretty decent portion of the Chinese economy – about 10% of nominal GDP. To put that in context, that ratio was closer to 6% for the U.S. in 2006.

So housing is a big deal in China. If they experienced a value decline like we did, Bryson estimates that would lop off about one percentage point of growth. But the pain wouldn’t stop there.

A collapse in housing prices would result in fewer construction jobs – estimated at around 60 million people in urban China. Jobless workers would spend less, which means that those goods and services the now-unemployed construction workers would normally purchase would not get bought.

If out-of-work construction workers reduce their spending on food and entertainment, the businesses that produce that food and entertainment will make less money and then some of their workers may face unemployment too. Since my spending is your income, lower spending means people have less money in their paychecks, and the nation’s GDP suffers.

Moreover, if housing goes in the tank, banks will see losses, which means they’ll tighten credit, resulting in fewer loans for people to start businesses.

Let’s not forget the actual homeowners. If home prices fall, homeowners’ equity declines as well. (See: Sell, Short). And when people’s chief asset is suddenly worth a lot less, they’re not going to spend as much on other, discretionary items. “Although the lack of data makes it impossible to quantify the wealth effect in China, researchers have found that there is a statistically significant direct relationship in the United States between changes in wealth and changes in consumer spending,” per Bryson’s report.

Lower demand from China means that countries which sell goods to China (think Chile and Australia) will sell less stuff. As corporate profits are squeezed, a global bear market may result.

“Although China may not be as important to global economic growth as the United States, the global economy clearly would not be immune to a major property market downturn in China,” says Bryson.

The Not-So-Bad Case

Freaked out? Breathe deep and take solace in the fact that despite this potentially harrowing dénouement, the world probably wouldn’t endure another global financial crisis. And that’s thanks to responsible Chinese borrowers.

Chinese households usually have to put a lot more money down – 30% on their first home, up to 60% for an individual’s second – than Americans. So if prices were to decline substantially, Chinese homeowners would be in a much better position than Americans back in 2007 to deal with the crisis. For example, household debt-to-disposable income has grown substantially in China since 2007, but it’s still about one-third the size of U.S. households back in 2007.

The world will also feel less of a pinch. When mortgages started going bad in the U.S., foreign financial institutions lost close to $750 billion of the more than $2 trillion in write-downs resulting from the crash. That was because foreign banks owned a lot of U.S. mortgage-backed securities. Not so here. “Chinese mortgages are generally held by Chinese financial institutions in the form of whole mortgages.” So if prices were to drop, Chinese banks would suffer while U.S. one’s most likely wouldn’t.

Lastly, the Chinese government wouldn’t sit on its hands while its economy came crashing down. Beijing’s debt-to-GDP ratio is around 15%, so it has a lot of room to recapitalize its banks if needed.

So what’s an investor to do?

“I don’t lose sleep at night worrying about China, nor should other people,” says Bryson. “But they may want to keep an eye on it.”

MONEY First-Time Dad

Why Millennials Should Have Kids—and Soon

Luke Tepper
Yes, he costs a ton, but he's worth it.

There are plenty of financial and lifestyle reasons to not have a child, but there are also costs to delaying or forgoing, notes MONEY reporter and first-time dad Taylor Tepper.

I finally realized that I’m no longer in charge of my own life a few of weeks ago.

It was a Tuesday at 9:45 p.m. I had arrived home from work at 7:30, just as my wife was putting our son to sleep.

I cooked dinner for the two of us. We ate together on our small dining room table and then spent the rest of the night preparing for tomorrow. Mrs. Tepper collected Luke’s toys and straightened up around the house while I programmed the coffee maker and started to load the dishwasher… only to discover that we were out of soap. Sigh.

I jabbed my feet into my slippers. The dishes needed to be washed, so I found myself headed outside in my pajamas.

As I plodded to my neighborhood grocery store, it dawned on me that I wasn’t running this chore because I wanted to, but because our delicate family ecosystem demanded that the dishes get washed at night. Otherwise, the milk bottles and containers wouldn’t be ready by the morning, meaning my wife wouldn’t be able to pump at work and my son wouldn’t be able to eat.

This two-hour spell of cleaning, organizing, and readying felt like the actualization of a Millennial nightmare.

I had handed over the keys to my liberty to an infant. Before Luke was born, I could sleep all morning, grab a pint whenever I wanted or fly around the country to visit friends. I could quit my job, write a novel, start an artisanal pickled beet company or simply toss a Frisbee in the park all day.

Those days are over. Full stop. But the real question is: Would I ever want them back?

The opportunity cost of having kids

Most people of my generation aren’t like me. In fact, just over one-in-four Millennials tied the knot between the ages of 18 to 32, according to Pew Research Center. That’s 10 percentage points lower than Gen Xers at a similar point in their lives in 1997 and more than 20 points below Baby Boomers in 1980.

Further, research by Wharton School of University of Pennsylvania’s Stewart Friedman seems to indicate that the majority of my peers aren’t interested in kids. Friedman’s study looked at the views Generation Xers had toward bearing children as they graduated college in 1992 and Millennials in 2012. Almost eight in 10 Gen Xers said they planned to reproduce, Friedman found, compared to only 42% of Millennials.

Parenthood comes with a price that Millennials may not be eager to pay. According to the most recent numbers from the U.S. Department of Agriculture, it will cost middle-income moms and dads an average $245,340 to raise one child up to age 18—a stunningly large figure for those who are already burdened by student debt and who graduated into a nasty Recession.

It doesn’t help that America is one of two countries without any kind of paid maternity leave and childcare is very expensive.

Another factor that might dissuade Y women: Mothers who alter their career paths to care for their children can lose out on a lot of potential income. Economist Bryan Caplan pegs the opportunity cost as high as $1 million.

And, of course, there are the non-financial opportunity costs of bearing children: less freedom, less time, and less sanity.

The payoff of having kids early

I understand all of this. I’m living it. My wife and I spend the vast amount of our weekends doing the laundry, sweeping, mopping, shopping and organizing. We schlep and push and haul all day long. Not to mention the $1,600 a month we’re giving to someone else to care for our child. We could have put that money toward a dream vacation, a starter home… or alcohol.

But conceiving a family in your 20s comes with certain advantages. For instance when Luke leaves the nest, my wife and I will be in our mid-40’s and just entering our peak earning years. That means while he’s off at college, we can power save to boost our retirement portfolio.

Plus, you’re more likely to have flexibility at work in your 20s, since you probably have a more junior position with less responsibility. The higher up you get on the food chain, the tougher it is to leave early to go to a parent-teacher conference or soccer game (or so my older colleagues tell me).

There’s also the fact that your ability to actually conceive children decreases as you age, per the Mayo Clinic, while the risks of complication—from C-sections to pregnancy loss—increase in your mid-to-late 30’s. And complications typically mean more money for health expenses.

Look, there are many reasons not to have a child. You may simply not want one—and that’s fine.

But to dismiss the idea of raising a child, or raising him now as opposed to ten years in the future, because you haven’t yet traveled the world or written that magnum opus slightly misses the point of it all. When you raise a child, especially with someone you’ve committed your life to, your self-interest becomes tied up in theirs.

To put it another way, what a lot of people don’t think about is that there’s an opportunity cost to deciding not to have a child: You don’t get to experience the sublime joy of yielding your wants and desires for the happiness of the people you love.

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

MONEY Jobs report

How the Fed Will React to Today’s Surprising Jobs News

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altrendo images—Getty Images

The fact that employers created fewer jobs than expected in August only emboldens the Federal Reserve to keep rates low for the time being.

The Fed is unlikely to raise interest rates this year — and not just because of Friday’s disappointing jobs report.

Though the economy fell short of adding 200,000 jobs in August — as it had in the six prior months — the unemployment rate remains at a better-than-expected 6.1%. Consumer confidence, meanwhile, rose in August and the economy grew by a robust 4.2% last quarter.

Many have long-waited for the time when the economy picks up and the Federal Reserve raises interest rates along with it. Even the presidents of the St. Louis and Philadelphia Federal Banks recently said the nation’s central bank should raise interest rates sooner than expected thanks to job gains and slightly rising inflation.

But given muted inflation and the growing concerns in Europe — where the economy threatens to slip back into recession and central bankers are still slashing rates in a desperate attempt to jumpstart business activity in the region — Fed chair Janet Yellen was unlikely to act soon. And today’s Labor Department report, showing that only a modest 142,000 jobs were created in August, only reinforces this.

Jobs

The unemployment rate has already dropped more than half a percentage point this year.

US Unemployment Rate Chart

US Unemployment Rate data by YCharts

But that’s just one way to look at the labor market. Another is the labor force participation rate. Since younger Americans tend to go school, and Baby Boomers are beginning to retire en masse, you can look at the participation rate for workers between the ages of 25 to 54. Before the recession almost 80% of those Americans were working or looking for a job. Now, 77% are. To put that into perspective, 81% of prime aged workers in France participate in the labor force.

Another, more inclusive, employment metric is the so-called U-6 rate of unemployment — which includes unemployed workers, Americans who want to work but have stopped looking for a job, and part-time workers who’d rather put in full-time hours. The U-6 rate has dropped from about 17% after the recession to 12% now, but that’s still close to four percentage points higher than before 2008.

u-6

Here’s Yellen from her Jackson Hole speech a couple of weeks ago:

At nearly 5% of the labor force, the number of such workers is notably larger, relative to the unemployment rate, than has been typical historically, providing another reason why the current level of the unemployment rate may understate the amount of remaining slack in the labor market.

Inflation

Despite predictions of increased inflation thanks to unorthodox monetary policy, deflation has been a bigger concern since the recession than inflation. Nevertheless, some central bank officials are still worried about an unexpected rise in prices thanks to an improving jobs situation and want to head off that potential rise with higher interest rates.

As Philadelphia Fed President Charles Plosser said on a Bloomberg Radio interview, “I would rather us get started raising rates sooner and raise them more gradually than put them off and have to raise them very quickly.”

The Congressional Budget Office disagrees. The non-partisan agency predicted that over the next 10 years inflation will only rise around 2% a year, in a recent report. “CBO anticipates that prices will rise at a modest pace over the next several years reflecting slack in the economy and widely held expectations for low and stable inflation.”

Right now core inflation, according to the Federal Reserve’s preferred measurement, grew by 1.5% in July over the previous 12 months. That’s well below the Fed’s target rate of 2%.

Europe

Depressed Americans need only look across the pond to see how badly our recovery could be going. The Euro zone area experienced no growth in the second three months of 2014. Combine that with ultra-low inflation and you have the recipe for economic stagnation. Even the vaunted German economy stalled.

This three-year experience of little economic traction follows the European Central Bank’s decision to raise interest rates in 2011 during the sovereign debt crisis in order to fight inflation. Quash it they did. Prices recently rose by an annual rate of only 0.3% in August in the 18-country Euro zone, prompting ECB President Mario Draghi (who wasn’t in charge back then) to drop interest rates to an all-time low of 0.05%.

Eventually American consumers will see raises and go off and spend that extra cash. Demand will not stay depressed forever, and the Fed will one day raise interest rates. That decision, though, is more likely to be later than sooner.

MONEY

24 Things to Do With $10,000 Now

$10,000 bundle
Grafissimo—Getty Images

Got 10Gs burning a hole in your bank account or withering away in your 401(k)? Here's how to deploy that money wisely.

1. Stash your cash in a CD. Really.
Believe it or not, putting a portion of your emergency fund into a CD looks like a decent idea. Synchrony (née GE Capital Retail) Bank offers 1.05% for a 12-month CD of $10,000. Meanwhile, a one-year Treasury yields 0.11%. And Vanguard’s Short-Term Investment Grade bond fund returned 2.6% over the past year, which is not a lot of compensation for the greater risk.

2. Write the book that will launch your career
Julia Child’s first cookbook helped turn her into a star. Follow her recipe, but get to the table faster by self-publishing. You can hire an editor, designer, and formatting expert for some $6,000 via BiblioCrunch.com; use the rest of the $10K to pay a publicist.

3. Create a D.I.Y. home theater
The average home theater costs $26,000. But Dave Pedigo of the Custom Electronic Design & Installation Association helped MONEY put together this one for under 10 grand, with wiggle room for extras like 3-D glasses, movies, and a gaming console.

Seats: Novo Home Viewpoint (around $1,400)
Screen: LG’s 55-inch LED TV ($3,300) or Stewart Filmscreen ($1,200 to $1,500) plus Epson 5030UB projector ($2,499).
Sound system: Sonos Playbar ($699) plus Sub subwoofer ($699) and a pair of Play:1 speakers ($199 each)
Concessions: Nostalgia Electrics vintage popcorn maker ($370) and Avanti’s 3.1-cubic-foot stainless- steel beverage cooler (around $230).

4. Go to the jungle
Traveling with four or more gets expensive fast. But a trip to Ecuador can help you stretch your budget. Since the opening of a new international airport in Quito, airlines have instated new routes to the city and are offering roundtrip flights from the East Coast for as low as $400, says Smartertravel.com’s Anne ­Banas. G Adventures was recently advertis­ing a nine-day tour of the country, including a visit to the Amazon jungle and hot springs, for $1,599 a person, down from the usual $1,999.

5. Give like Gates
Create your own mini version of the Bill & Melinda Gates Foundation—without administrative hassles or billions of bucks—by opening a donor-advised fund. Fidelity lets you start one with as little as $5,000. You don’t have to decide which charity gets the money right away, “so you can be more intentioned about the giving,” says Burlingame, Calif., wealth adviser Sean Stannard-Stockton. But you get to write off up to 50% of your income this year—which is especially valuable when you’re at your peak earnings.

6-8. Snap up an income property
In some locales, a $10,000 down payment gets you a three-bedroom home that will rent for twice your mortgage payment. “For a strong pool of renters, jump into a market with a big student population,” says Daren Blomquist of RealtyTrac. Here are three:

Income property

 

9-10. Put Paul Bunyan in your portfolio
A tighter labor market may ramp up wages and lead to higher prices. Stocks can help you hedge, but for an unexpected support, try trees. Timber is a commodity, so it rises with inflation. Also, it’s used to make houses, and housing prices rise when investors seek shelter in hard assets. Global investment firm GMO predicts that timber will be the best-performing asset class over the next seven years, with gains of 5.4% annually after inflation, vs. 2.1% for high-quality stocks and 0.5% for U.S. bonds. Get your lumber through the Guggenheim Timber ETF CLAYMORE ETF TST 2 GUGGENHEIM TIMBER ETF CUT 0.6877% and ­iShares Global Timber and Forestry ISHARES TRUST S&P GLOBAL TIMBER & FORESTR WOOD 0.7673% .

11. Lock in a great deal on a ski vacation
Ski resorts are eager to get people to book early, before there’s a sense of what kind of winter it will be, says Leigh Crandall, managing editor of Jetsetter.com. For example, Ski Holidays Canada recently offered a 10-day 2015 hotel and ski package in Banff, Alberta, for $4,000 for a family of four, about 40% off the regular rate. Flights to the Calgary airport from the East Coast start at $500 a person in January.

12-14. Get your house ready to sell
If you want to sell next spring, focus on amping up curb appeal, starting now. For $10,000, you could revamp the plantings. Replace what’s along the foundation with a mix of evergreen shrubs of different textures ($2,000 to $4,000), add beds of colorful perennials with different bloom times ($500 and up) and put ornamental trees at the house’s corners ($500 to $1,500 each). Or paint the exterior, which can help your house sell faster, which usually means a better price, says Pasadena architect and realtor Curt Schultz. Or add, upgrade, or replace a deck or patio—since buyers “like to be able to step right outside onto an outdoor room that feels like part of the house,” says Schultz. You might be able to get a 20-by-40 deck, a 20-by-20 deck with a barbecue or a fire pit built in, or a 10-by-10 patio with a roof for 10Gs.

15. Give your investments a boost
Research has demonstrated that certain stocks—those that regularly grow divi­dends, have stable prices, are undervalued compared with fundamentals, or have re­cent­ly appreciated—tend to outperform. Split your $10,000 among these characteristics as follows:

16. See Europe by boat
The market for travelers who want to explore the continent by boat is growing exponentially, says Colleen McDaniel of CruiseCritic.com, but the launch of two dozen new ships last year has created competition to fill cabins. Recently you could get a seven-night late-fall cruise on the Danube for about $1,500 a ­person (a savings of $1,360). Nonstop flights from the eastern U.S. start at around $1,200. So a little over $10,000 would have a family of four out on the river in style.

17-19. Buy a great used car
Check out these three picks for $10,000 from Patrick Olsen of Cars.com:

  • 2008 Ford Fusion: The roomy Fusion— which is “great for a small ­family running errands around town,” according to ­Olsen—has a V-6 engine and gets about 23 miles per gallon.
  • 2008 Kia Sportage: While no-frills, the Sportage is one of the few quality SUVs at this price point. “It’s good for small-business owners and parents whose kids play sports,” Olsen says.
  • 2007 Toyota Prius: This second-genera­tion Prius “is good for those who have a long commute,” says Olsen. “You’ll save a lot of money on gas.” It gets 46 mpg.

20. Practice living in your retirement town
To determine whether a place is really a good fit for you, you need to visit different times of the year and stay for longer periods, suggests Miami financial planner Ellen Siegel. Allocate $10,000 to travel and costs to stay for, say, a month in the summer and a week in the winter. Rent a condo or house in a neighborhood where you want to live and get to know area residents to make the simulation more real.

21. Make yours a chef’s kitchen

Many homebuyers love the industrial looks of pro-style appliances, but a Wolf range can ring in at $10,000 and a Sub-Zero fridge might cost $16,000. And if you invest in one or two high end appliances, but stick with economy versions for the rest, buyers will likely penalize you for that old dishwasher more than they reward you for the gleaming “prosumer” cooktop, real estate agents say. “Still, you don’t need to invest that much to get the professional look in the kitchen,” says Mechanicsburg, Pa., kitchen designer John Petrie, who’s president of the National Kitchen and Bath Association. “Moderately priced brands like Jenn-Air, Kitchen Aid, and Whirlpool have jumped on the commercial trend.” So, you can now outfit the entire kitchen—and cook like a semi-pro—for under $10,000.

22. Chase a market sector before it’s over

Since we’re late in the sixth year of the bull market, many analysts think it’s nearing the end. Certain sectors perform well in the last year of a bull run, including energy (34% average returns in last year of bull), health care (27%) and tech (23%), according to research by Ned Davis. Both energy and technology companies have a lower forward p/e than the S&P 500, and are expected to outgrow the market over the next five years. Meanwhile, “the outlook for the health care sector is promising,” says Eddie Yoon, a portfolio manager and research analyst for Fidelity Investments, “based on factors including an aging global population, an expanding middle class in many emerging markets, and a strong product innovation style.” Look to Money 50 funds Sound Shore SOUND SHORE FUND I COM USD0.01 SSHFX 0.6525% , which allocates almost half of its holdings to energy, technology and health care, and Primecap Odyssey Growth PRIMECAP ODYSSEY F TRUST UNIT POGRX -0.4558% , which has two-thirds of its holdings in health care and technology companies.

23. Invest in the frontier
BRICS is so 2012. With emerging markets countries (recent case in point: Russia) struggling to sustain economic growth, it may be time to look toward faster growing smaller countries (like Ghana and Vietnam). These “frontier” nations have been expanding fast: iShares Frontier 100 ISHARES INC MSCI FRONTIER 100 ETF FM 0.3804% is up 15% this year, but is still less expensive than the S&P 500. (The MSCI Frontier Index forward p/e is 13.6). Moreover, an index of frontier funds has actually been less volatile over the past 15 years than its emerging markets counterpart, says Morninstar’s Patricia Oey.

24. Sprechen Deutsche
If you work for a firm that does business internationally, becoming fluent in another language may pay off. A second language is correlated to an average 2% to 3% increase in annual income, according to research from Wharton and LECG Europe. Chinese provides the highest return. But if you don’t have it in you to learn an entirely new alphabet—and your company is trying to land clients in Deutschland—try learning German, which is correlated to 4% higher pay. One way to get up to speed: A language vacation. LanguagesAbroad.com offers language immersion programs for travelers in 35 countries. An intensive two-week course with 20 group lessons and 10 private lessons in Berlin is $2200, not including airfare or accommodations. On a $100,000 current salary, it would only take you three years to recoup a $10,000 investment.

Related: 35 Smart Things to Do with $1,000 Now
Tell Us: What Would You Do With $1,000?

 

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