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In addition to spoiling them with toys and ice cream, many grandparents also want to help secure a solid financial future for their grandkids. That can mean setting up a custodial account, considering tax-advantaged savings options, and exploring other ways to start building a child’s wealth.

Below, you’ll learn about the different ways to save money for your grandkids, plus the pros and cons of each.

Why Open an Account for Grandchildren?

Sure, your grandkids might prefer a new video game or Lego set, but you’ll do them a favor, today and tomorrow, by opening a savings account for them. Here are a couple of good reasons to open a savings account for your grandchildren.

Teaching Financial Literacy Early

Money management skills are crucial, but personal finance education can be virtually nonexistent during school. It’s not typical for schools to teach kids how to balance a checkbook, how to invest in stocks, how to save for a down payment on a house, and how to file taxes.

Thus, it’s up to parents — and grandparents — to equip the next generation with financial literacy. Opening an account for your grandchildren can help teach them concepts such as interest, budgeting, and investing.

Getting a Head Start for College and Life

While teaching children how to manage money can give them a head start on the path to financial wellness, so too can providing them with a nest egg that can grow over time through various savings and investing accounts. Consider these options:

•   When you open a savings account for grandchildren early on, they could wind up having a sizable chunk of cash in young adulthood to put toward their first car or even a house down payment.

•   A 529 college savings plan could help them avoid taking on too much debt from student loans.

•   Retirement accounts, such as a Roth IRA, can help them achieve their retirement goals, even if those are more than half a century away. Remember, the earlier someone starts investing, the more they stand to earn in the long run.

Types of Accounts to Consider

Grandparents have many options when it comes to opening an account for their grandchildren, including:

Savings, CDs, and Bonds

Many banks and credit unions offer savings accounts designed for kids. Do a quick search for “best savings accounts for grandchildren” or you could start by seeing if your own bank offers such an account.

Having money in savings at an early age will let your grandkids benefit from compounding interest, especially if you find a high-yield savings account for kids.

You can also consider opening a certificate of deposit (CD) or purchasing savings bonds for your grandchildren. CDs are savings accounts that typically provide a higher interest rate than a standard savings account in exchange for keeping your money in the account for a fixed period of time. Savings bonds, issued by the U.S. Department of Treasury, are a very low risk, longer-term investment that provides interest in return for lending the government money.

With both of these options, the money is less liquid, but if the CD or bond matures when your grandchild is older, they stand to have a reliable source of funds they can use in future years.

Custodial Accounts (UGMA/UTMA)

Beyond savings accounts for grandchildren, you can consider helping your grandkids actually start investing with a custodial account, through the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). Once your grandchild is between 18 and 25 (the exact age varies by state), they’ll take control of the account.

These accounts are taxable (meaning you will owe taxes on interest earned) and have no contribution limits. They’re an easy way to purchase stocks, mutual funds, and other securities for your grandchild — and you can even transfer your own securities into the custodial account.

529 College Savings Plans

The cost of college tuition continues to skyrocket, meaning it’s never too early to start saving. There are several benefits of a 529 college savings plan: While the contributions to this qualified tuition plan aren’t tax-deductible, your grandchild’s distributions from the account tax-free at the federal level, as long as the money is used for qualifying expenses.

A 529 college savings may have “college” in the name, but your grandchild can also use it for other higher education programs, such as a trade or vocational school. You can also roll over 529 funds into a Roth IRA if your grandkids don’t use all (or any) of the funds.

Contributions to a grandchild’s 529 account are not deductible on your federal income tax return. However, many states offer either a deduction or credit for this kind of contribution.

Another consideration: Contributions to 529s are subject to annual gift tax exclusion limits, which are $19,000 for individuals and $38,000 for married couples in 2025 and 2026. If you were to put more than that into a 529 for a grandchild, you would need to file a gift tax return (though this does not mean you’ll owe any gift tax).

IRAs for Minors

Similar to custodial investment accounts, you can open custodial retirement accounts for your grandchildren, including a traditional IRA and a Roth IRA. While your grandkid won’t benefit from this account for decades, starting them early on the path to retirement savings means they could have considerably more money to work with when they reach retirement age.

However, it’s important to note that opening an IRA requires the child to have earned income in a given year. For teens, this can make sense. For a newborn, it is unlikely to be a viable option.

When making contributions to an IRA for a grandchild, note that the amount you deposit is subject to the annual federal gift tax exclusion limit.

Choosing the Right Account

Not sure how to choose the right savings account for your grandchildren? Here are some things to consider:

Comparing Interest Rates and Fees

If you’re opening a savings account, compare interest rates — you want an account with a high yield so that the money compounds more quickly over time. For example, currently the average interest rate for standard savings accounts is 0.45%, while the figure for high-yield savings accounts (often from online-only banks) can be several times that number.

For custodial accounts, you’ll want options with low or no fees. It can be wise to shop around and see what options you have from different banks and brokerage firms.

Recommended: How Old Do You Have to Be to Open a Bank Account?

Accessibility and Withdrawal Rules

Certain accounts allow your grandchildren to access funds sooner, while others (like IRAs) have strict rules about when they can withdraw funds and what the funds can be used for (as is the case with 529 plans). Think about the specific timeline and use case you envision for your grandchildren. Sometimes, opening more than one type of account makes sense, depending on how many goals you want to enable for your children’s kids.

Tax Implications and Benefits

Some accounts have tax-deductible contributions; others have tax-free withdrawals. For example, withdrawals from a 529 account are not usually taxable, provided they are used for qualified educational expenses. With a Roth IRA, withdrawals made after your child is older than 59 ½ (as hard as that may be to imagine) are not taxable. With a traditional IRA, taxes are paid when the money is withdrawn, usually in retirement, and are taxable.

Speaking with a financial advisor can help you understand the tax implications of each type of account you’re considering to better understand what you might pay — and what your grandchild might pay.

Setting up and Contributing to the Account

Ready to open a savings account for your grandchildren? Here’s how it works:

Opening and Funding the Account

Follow the bank’s or investment firm’s guidelines for opening the account. You will likely need some specific information from the grandchild’s parents to open the account. You’ll also need to deposit money into the account to start the nest egg. Custodial accounts may even let you transfer your own assets into the account.

Automatic Transfers and Recurring Contributions

If you’d like, you may be able to set up recurring transfers into the account. Perhaps you want a recurring transfer every holiday season or on your grandchild’s birthday. Work with the financial institution to set up these contributions — and perhaps find out how other loved ones might be able to contribute as well.

Monitoring and Managing the Account

After opening an account, it’s important to monitor it and see how the funds grow over time. Just as importantly, once your grandchild is a little older, it’s a good idea to sit down and review the account with them:

•   If it’s a savings account, walk them through how compound interest works.

•   If it’s a 529 plan, talk to them about college costs and how student loans work.

•   If it’s a custodial account, talk to them about the basics of investing and the importance of saving for retirement.

The Takeaway

It’s never too early to start thinking about your grandchild’s future. Savings accounts, 529 plans, and custodial accounts offer several ways for you to give them money that will help them with college, general expenses, and even retirement.

While saving for grandkids is important, it’s also crucial that you take care of your own finances.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What are the contribution limits for custodial accounts?

There are no contribution limits for UGMA/UTMA custodial accounts, but you can only contribute up to a certain amount to avoid gift-tax implications (this changes each year). Contribution limits apply for custodial IRAs just as they would for regular IRAs.

Can grandparents open a 529 plan for grandchildren?

Yes, grandparents can open a 529 plan for grandchildren. If the grandchild’s parents have already set up a 529 plan, grandparents can also contribute to that plan directly. This will simplify account management and withdrawals for the recipient of the funds.

What happens to the account if the grandchild doesn’t need the funds?

If a grandchild doesn’t need funds from a 529 plan for college, they can still use them for trade or vocational schools or roll them into an IRA. Grandparents can also reassign the 529 plan to another grandchild.

Photo credit: iStock/gorodenkoff

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOBNK-Q324-008
CN-Q425-3236452-103

It’s that time of year again: Typically, by midnight on April 15, taxpayers must e-file or mail their federal and, if applicable, state tax returns for the previous calendar tax year to avoid penalty. Well before the deadline, though, it’s wise to do your prep work, hunting down the necessary documents, finding a tax pro or software to help you through the process, and learning about any new tax deductions or credits you might be eligible for.

It can definitely be a challenge to get organized, but by following certain steps, you can be ready to file properly and on time. Here, we’ll help you along with important tips, including:

•   When is tax filing season?

•   How do you prepare for tax season?

•   Should you hire a tax pro?

•   Which tax documents do you need?

•   By when do you need to file taxes?

When Is Tax Filing Season?

Tax season typically begins at the end of January. If you are filing your 2025 tax return, the IRS will start accepting and processing your tax returns at the end of January 2026.

You should receive a Form W-2 by January 31st or, with any mail delay, soon thereafter. The same deadline applies to 1099-NEC forms for independent contractors. Each financial institution that paid you at least $10 of interest during the year must send you a copy of the 1099-INT by January 31st as well.

The due date for individuals to file their taxes is usually April 15th of a given year or, if that falls on a weekend, the next following weekday.

It’s generally not a good idea to wait until the last minute to prepare for tax filing. If you work for one employer, your taxes may not be complicated, but if you have side gigs or you’re self-employed, your tax returns can take a while to fill out.

13 Tax Prep Tips for 2025

Before filing, here’s how to prepare for the upcoming tax season.

1. Decide on Hiring a Pro or DIY

You can either prepare and file your taxes on your own or hire a professional. If you choose the latter, you can go to a tax preparation service like H&R Block or contact a local accountant or other tax pro. Some people feel more secure with a professional who can guide them through the process, know the latest deductions, and perhaps help them avoid IRS audit triggers.

The costs for a professional vary, and the more complicated a return is, generally the higher the costs will be.

The IRS has a tool where taxpayers can find a tax preparer near them with credentials or select qualifications. Doing so will mean paying a fee. How much? Tax preparation could run anywhere from $300 to $600 (or more), depending on where you live, how complicated your tax situation is, and how your tax professional charges for services.

Or, you could use software which is likely to cost less but require a greater investment of your time. For instance, TurboTax prices range from $89 and up, depending on whether you need additional features, like online assistance.

Recommended: How to File Taxes for Beginners

2. Consider Other Tax-Filing Options

You might also want to try this alternative: IRS Free File lets you prepare and file your federal income tax online for free. There are two options, based on income.

•   You can file on an IRS partner site if your adjusted gross income was approximately $89,000 or less. This is a guided preparation, and the online service does all the math.

•   Those whose income is higher and who know how to prepare their own taxes can choose the fillable forms option. The forms-based product can do basic calculations but will not provide step-by-step guidance. Also there is no state tax filing with this option.

Recommended: How to Pay Less in Taxes: 9 Simple Steps

3. Collect Tax Documents

Gathering the right papers is an important part of preparing for tax season. By the end of January, you should have received tax documents from employers, brokerage firms, and others you did business with. They include a W-2 for a salaried worker and Form 1099-NEC if you were self-employed (gig worker or freelancer) or did independent contractor work amounting to over $600 last year.

Employers will send the documents in the mail or electronically.

Investors might receive these forms:

•   1099-B, which reports capital gains and losses

•   1099-DIV, which reports dividend income and capital gains distributions

•   1099-INT, which reports interest income

•   1099-R, which reports retirement account distributions

Other 1099 forms include:

•   1099-MISC, which reports miscellaneous income (such as prize money or payments received for renting space or equipment)

•   1099-Q, which reports distributions from education savings accounts and 529 accounts

If you won anything while gambling, you’ll need to fill out Form W-2G. If you paid at least $600 in mortgage interest during the year, you’ll receive Form 1098, which you’ll need to claim a mortgage interest tax deduction.

A list of income-related forms can be found on the IRS website.

Last year’s federal return, and, if applicable, state return could be good reminders of what was filed last year and the documents used. That can help you pinpoint any missing tax documents.

4. Look Into Deductions and Credits

Wondering whether to take the standard deduction or itemize deductions? The higher figure is the winner.

The vast majority of Americans claim the standard deduction, the number subtracted from your income before you calculate the amount of tax you owe.

For tax year 2025, the standard deductions are:

•   $15,750 for single filers and those married filing separately

•   $31,500 for those married filing jointly

•   $23,625 for heads of household

Individuals aged 65 or older or who are blind can claim an additional standard deduction of $1,550 (for married filers) or $1,950 (for single or head of household filers).

For tax year 2026, the standard deductions are:

•   $16,100 for single filers and those married filing separately

•   $32,200 for those married filing jointly

•   $24,150 for heads of household

Individuals aged 65 or older or who are blind can claim an additional standard deduction of $1,600 (for married filers) or $2,000 for single or head of household filers).

Individuals interested in itemizing tax deductions can look into whether they’re eligible for a long list of deductions like a home office (and, if eligible, whether to use the simplified option for computing the deduction), education deductions, healthcare deductions, and investment-related deductions.

•   You own a home and the total of your mortgage interest, points, mortgage insurance premiums, and real estate taxes are greater than the standard deduction.

•   Your state and local taxes (including real estate, property, income, and sales taxes) plus your mortgage interest exceed the standard deduction.

•   You spent more than 7.5% of your adjusted gross income for out-of-pocket medical expenses.

Then there are tax credits, a dollar-for-dollar reduction of the income tax you owe. So if you owe, say, $1,500 in federal taxes but are eligible for $1,500 in tax credits, your tax liability is zero.

There are family and dependent credits, healthcare credits, education credits, homeowner credits, and income and savings credits. Taxpayers can see the entire tax credits and deductions list on the IRS website.

Recommended: What Tax Bracket Am I In?

5. Be Sure to Include Dependents’ IDs

Details count (a lot) when filing your return, and one important point to include is the Social Security numbers for any children and other dependents. If you omit this, you may lose any dependent credits, like the Child Tax Credit, that you qualify for.

Also know that if you are divorced, only one parent can claim children as dependents.

6. Update Beneficiary Designations

On the subject of children, tax time is a good time to review and update beneficiary designations. While it won’t change your tax-filing calculations, it will potentially reduce the tax burden your beneficiaries may pay on what they inherit after you die.

7. Add to Your Retirement Contributions

As you get ready for tax filing, it’s wise to check your progress towards your retirement fund (hopefully you have one). Money that you put into a 401(k), 403(b), or other tax-deferred account reduces your taxable income. In other words, it helps minimize your tax bill. The contributions you make generally aren’t taxed until you decide to withdraw funds.

If you feel you can afford to contribute more, know that for 2025, the 401(k) contribution limit for employees is $23,500, with an additional $7,500 for catch-up contributions for taxpayers who are age 50 or older. For 2026, the 401(k) contribution limit is $24,500, with an additional $8,000 for those age 50 or older. In both 2025 and 2026, those aged 60 to 63 may contribute up to an additional $11,250 instead of $7,500 and $8,000 respectively, thanks to SECURE 2.0.

8. Take Any Required Minimum Distributions

Another tax-filing tip: If you’ve reached retirement age, make sure you take any distributions that are necessary. You generally must begin taking annual withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts starting with the year you turn 73. When you reach the minimum age, you can delay your first mandatory withdrawal until April 1 of the following year. From then on, however, you must take your annual required minimum distribution (RMD) by December 31. If you miss the RMD deadline, you may get hit with a penalty of 25% of the RMD total.

9. Make a Final Estimated Tax Payment

Taxpayers who do not have taxes withheld from their paychecks can pay estimated taxes every quarter to avoid owing a big chunk of change come Tax Day.

Quarterly estimated taxes are typically due on April 15th, June 15th, and September 15th, with the fourth due on January 15th of the following year.

10. Apply for a Payment Plan If Needed

What happens if you discover, at tax filing time, that you can’t pay the full amount you owe? One option is to pay as much as you can and then set up a payment plan with the IRS for the rest. This is a method that gives you a longer time frame in which to pay what you owe. Depending on whether you have a short-term or long-term IRS payment plan , there may be setup fees.

11. File Electronically

Here’s an important tip: Prioritize filing electronically, especially if you anticipate receiving a refund. Electronic returns can typically be processed more quickly than paper ones, which means you’ll get your infusion of cash that much sooner.

Another benefit of filing this way is that your return is much less likely to have errors. Electronic returns tend to have just 0.5% with errors. But for “hard copy” paper returns, that number ratchets up to about 21% with mistakes.

12. Decide Whether to File for an Extension

What if you don’t quite have your act together and your tax filing materials ready to roll on time? It happens. If you need more time to prepare your federal tax return, you can electronically request an extension by filing Form 4868 by the April tax filing due date. This gives you until October 15 to file a completed return. Just keep in mind: Even if you file an extension, you are required to pay any taxes you may owe by the April deadline.

13. Avoid Tax Season Scams

Filing a tax return can be enough to keep you busy without worrying about getting scammed. But unfortunately, there are fraudsters out there, trying to take advantage of the season. For instance, you might get an email, phone call, or even a text message that says it’s from the IRS. They may say there’s an issue with a return of yours and that they need to speak with you ASAP. Don’t fall for it: The only way the IRS will ever communicate with you is via U.S. mail, unless you are involved in some kind of litigation with them.

The Benefits of Getting Prepared Early

Now that you’ve learned more about tax filing, here are some reasons to get started sooner rather than later on your return.

•   Avoid deadline anxiety. For some people, procrastination can lead to a lot of stress as the filing date approaches. They risk having to pull the proverbial all-nighter to get their return done on time or wind up blowing the deadline. By starting sooner, you can chip away at the process of pulling materials together and completing forms and breathe a little easier.

•   Dodge processing delays. If you file earlier, you are likely to slip in before the deluge of returns hits the IRS’s offices. You might even get your refund (if you’re due one) sooner.

•   Take the time to plan. Perhaps you know you’re going to owe money. Or, maybe you’re not sure if that’s the case. In either scenario, starting the tax-filing process earlier will give you time to see what you may owe and then figure out how to pay any funds that are due.

Recommended: Tax Preparation Checklist 2025: Documents You Need to Gather

The Takeaway

“Tax prep” isn’t a phrase signaling that big fun is on the way, but putting off the inevitable probably isn’t the best choice. To save yourself stress, you’ll want to prepare for tax season as early as possible by gathering documents and information, choosing a preparer or getting ready to DIY, and learning about tax credits and deductions.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

When can I start filing my taxes?

Tax filing season typically begins at the end of January. For example, the Internal Revenue Service (IRS) will begin accepting 2025 tax returns on or about January 26, 2026.

Should I use a tax preparer?

It’s a personal choice whether to hire a tax preparer or file your taxes yourself. A tax preparer will likely reduce the time you have to spend doing your taxes and can apply their professional knowledge to help you know what credits and deductions you qualify for. However, you will have to pay a fee for this service, which could run anywhere from $300 to $600 (or more), depending on where you live and how complicated your tax situation is.

What documents do I need to prepare for tax season?

You’ll need to gather a variety of documents for tax season, including income received (W-2s and/or 1099s to show earnings, and 1099s that reflect interest and dividends earned), records of deductions (relating to home ownership, charitable donations, medical expenses, educational costs, and the like). And, of course, you’ll need personal information like your Social Security number and that of any dependents.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOBNK-Q424-105
CN-Q425-3236452-118

These days, college is a pricey proposition. The average annual cost of attendance for a student living on campus at a public four-year college is $30,990 (in state) and $50,920 (out of state). The average cost of attending a private, nonprofit university is $65,470 per year.

If you’re worried about how you’ll cover the cost of sending your child to college, know that you’re not alone. Also know that you (and your student) have a number of funding options, including grants, scholarships, work-study, and student loans. Read on for tips on how to pay for college when your savings isn’t enough.

Steps to Take if You Can’t Afford College

Here’s a look at five things you can do to make sending your child to college more affordable.

Complete the FAFSA

The first thing every college-bound student is encouraged to do is fill out the Free Application for Federal Student Aid (FAFSA®). This automatically gives your student access to several types of financial aid, including grants, work-study, and federal student loans.

Even if you don’t think you’ll be eligible for federal student financial aid, it’s still a good idea to complete the FAFSA. Colleges often use the information from the form to determine eligibility for their own student financial aid, including merit aid.

Federal student financial aid can come in several forms:

•   Grants A grant is a form of financial aid that typically does not have to be repaid. Many grants, such as the Pell Grant, are awarded based on financial need. However, some are based on the student’s field of study, such as the Teacher Education Assistance for College and Higher Education (TEACH) Grant.

•   Work-Study Eligibility for Federal Work-Study is determined by information provided on the student’s FAFSA. Not all schools participate in the program, so check with a school’s financial aid office to see if it does. Work-study jobs can be on or off campus, and an emphasis is placed on the student’s course of study when possible.

•   Loans Eligibility for federal student loans is also determined by the FAFSA. There are three basic types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, and Parent PLUS Loans. Direct Subsidized Loans are for eligible undergraduate students who have financial need. Direct Unsubsidized Loans are for eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need. Parent PLUS Loans are for parents of dependent undergraduate students, and eligibility is not based on need.

💡 Quick Tip: You can fund your education with a competitive-rate, no-fees-required private student loan that covers up to 100% of school-certified costs.

Speak With the Financial Aid Office

Getting comfortable with the school’s financial aid office staff is a good thing. The office staff can be a font of knowledge for parents and students navigating the complex world of student financial aid. Not only can they help you understand what federal student financial aid you might be eligible for, they can also let you know what student aid is available through that particular school.

Financial aid office staff may also be able to point you toward other offices or departments on campus that may have job opportunities for students, or that offer emergency services for current students in the form of food or housing assistance.

Recommended: What Kind of Emergency Funding Is Available for College Students?

Let Your Student Take on a Part-time Job

Asking your child to work part-time while they are in school can help offset expenses. If Federal Work-Study isn’t a part of their financial aid package, they can still look for a job on or off campus to earn some money to put toward books and living expenses. Learning how to manage responsibilities is also an excellent out-of-the-classroom lesson.

Some ideas for jobs that may offer part-time, flexible hours for students include:

•   Babysitter or nanny

•   Coffee shop barista

•   Retail sales

•   Restaurant server or cook

•   Gym/fitness associate

Some part-time jobs might offer perks in addition to pay. Food service jobs might come with a discount on food during a shift, retail sales associates might get a discount on the store’s products, and working in a gym might come with a free gym membership. A visit to the campus career services office is often a good place to start looking for a part-time job.

Encourage a Gap Year

It’s not at all uncommon for a student to take a gap year between high school and college. Some students might not feel ready for college right out of high school. Others might want to have a specific experience, like travel or working in a specific field. Gap years can also allow students to earn money to pay for their future college expenses.

AmeriCorps is a federal program that pairs individuals with organizations that have a need. Volunteers can work in a variety of places and situations, from teaching to disaster relief to environmental stewardship, and more. Some AmeriCorps programs offer stipends, housing, or educational benefits like federal student loan deferment and forbearance, or a monetary award that can be used to pay for certain educational expenses.

Taking a gap year can give both you and your student time to build savings. It can also give your child an opportunity to gain work experience, or explore different professions. Of course, there can be drawbacks to taking a break from academics. It might be difficult to get back into the flow of studying after a year without that type of structure. Taking a year off without any structure or purpose might leave your child without a sense of accomplishment, so it’s generally a good idea to have a plan for how a gap year will be spent.

Consider a Less-Expensive College

Going to an in-state school vs. an out-of-state or private college is one obvious way to cut costs. Here are some other options to consider.

•   Community college Community colleges often charge much less tuition than their four-year counterparts. Choosing a community college close to home can also save on room and board. Your student might be able to start at a community college, then transfer to the college of their choice to complete their bachelor’s degree.

•   Tuition-free colleges There are some colleges that don’t charge tuition at all. Students at no-tuition schools may be required to maintain a certain grade point average, live in a certain region, or participate in a student work program. For example, service academies associated with branches of the U.S. military offer free tuition in exchange for a certain number of years of military enlistment.

•   Professional school Another option might be to bypass a traditional college degree for training in a specific career field instead. Training for non-degreed positions might last anywhere from a few months to a few years, depending on the job. For example, commercial airline pilots aren’t always required to have a bachelor’s degree, but they are required to have a pilot’s license and pass exams specific to the airline they work for. Jobs in the construction industry generally don’t require a bachelor’s degree, either, but might have apprenticeship programs or on-the-job training lasting several years.

Private Student Loans

If those options aren’t enough, you can also look into private student loans. These are available through banks, credit unions, and online lenders. Loan amounts vary but you can typically borrow up the full cost of attendance at your child’s school. Interest rates are set by individual lenders. Generally, students (or their parent cosigners) with excellent credit qualify for the lowest rates.

Just keep in mind that private loans don’t come with the same protections, like income-based repayment and forgiveness programs, that are offered by federal student loans.

💡 Quick Tip: Parents and sponsors with strong credit and income may find more-competitive rates on no-fees-required private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

The Takeaway

Financial challenges shouldn’t close the door on a college education. By taking proactive steps like completing the FAFSA to access grants and federal loans, communicating with the college’s financial aid office, exploring less-expensive educational paths, and considering options like a part-time job or a gap year for saving, you can significantly reduce the financial burden.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What if I can’t pay for my kid’s college?

If you can’t pay for your kid’s college, prioritize filling out the Free Application for Federal Student Aid (FAFSA®) to determine eligibility for federal grants, loans, and work-study programs. Encourage your child to apply for numerous scholarships (merit- or need-based), as this “free money” doesn’t need to be repaid.

Other options include attending a community college first to save money on general education courses, working part-time (potentially for an employer with tuition assistance), or choosing an in-state public university which has lower tuition costs. The college’s financial aid office is a key resource for guidance on these options.

What is the highest income to qualify for FAFSA®?

There is no maximum income limit to qualify for FAFSA® (Free Application for Federal Student Aid). The U.S. Department of Education recommends all students apply, regardless of income, because eligibility for federal aid (including grants, work-study, and loans) is determined by a complex formula that considers factors beyond just income, such as family size, assets, and the school’s cost of attendance. Even high-income families may qualify for some types of aid, such as unsubsidized federal loans or institutional merit-based aid.

What do families do when they cannot afford to send their children to college?

Families unable to afford college rely on several strategies. The crucial first step is completing the FAFSA® to access federal grants and loans. Students can also apply for numerous scholarships from private organizations and local community groups, which generally doesn’t need to be repaid. Many attend a community college for two years to save money on core courses before transferring to a four-year institution. Students often work part-time while studying or take a gap year to save money. Attending an in-state public university is another cost-saving measure. The college’s financial aid office can be a key resource for exploring these options and appealing for more aid if needed.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q425-015

The average net worth of Americans is about $1.06 million, according to the Federal Reserve’s most recent Survey of Consumer Finances, released in October 2023. Meanwhile, the median net worth of American households is $192,900, according to the same Federal Reserve Survey.

Net worth measures the difference between assets (what you own) and liabilities (what you owe). Understanding the average American net worth by age can be useful for comparing your own progress in building wealth.

What the Average American Net Worth Includes

The Federal Reserve collects data on net worth in the U.S. using the Survey of Consumer Finances. This survey is conducted every three years; the most recent undertaking began in March 2022. Findings are typically published in the year following the year the survey was completed.

To understand wealth and economic well-being in the U.S., the Federal Reserve looks at several specific factors:

•  Income

•  Homeownership status and home value

•  Debt (including mortgage debt, credit card debt, vehicle loan debt, and student debt)

•  Assets (including investment accounts, deposit accounts held at banks, vehicles, and business equity)

The Federal Reserve uses net worth as a gauge to measure increases or decreases in overall wealth levels. The survey also takes into account demographic factors, such as age, race, ethnicity, and level of education.

If you’re interested in calculating your net worth, you’d use similar metrics. For example, you could use an online net worth calculator to enter in your total debts and assets to determine your net worth. When calculating net worth home equity may or may not be included, depending on your preferences. It’s possible to get a positive or negative number, depending on how your liabilities compare to your assets.

You can also use a budget planner app to track net worth as well as your spending, credit scores, and savings. This type of money management tool can deliver a snapshot of your finances to your mobile device.

Recommended: Does Net Worth Include Home Equity?

How the Average American Net Worth Varies By Age

Using the Survey of Consumer Finances as a guide, net worth typically rises over the average American’s lifetime before gradually beginning to decline. Average net worth is lowest for Americans under age 35; between the ages of 35 and 44, the average net worth makes a sizable leap.

There’s another significant bump that happens between the ages of 45 and 54, then the pace at which net worth increases begin to slow. Once Americans turn 75, their average net worth begins to decline.

This pattern makes sense, however, if you consider what the typical person’s working career and retirement might look like. Someone in their 20s likely isn’t making much money yet. They probably don’t own a home and a lot of what they do make might go to repaying student loans, car loans, or credit cards.

In their 30s and 40s, they may move into higher-paying jobs. Their debts may be mostly paid down or paid off so they can afford to buy a home. By the time they reach their mid-40s, they may be in their peak earning years and their home might have appreciated in value since they purchased it.

Net worth growth begins to gradually slow down once they’re in their 50s and 60s. That could be chalked up to moving some of their portfolio into safer investments or beginning to draw down their savings if they’re retired. Once they reach their 70s, they may be spending more of their assets on health care, including long-term care. Or they might have downsized into a home with a lower value.

How the Average American Net Worth Varies Over Time

The Survey of Consumer Finances provides a snapshot of how the average American net worth has changed over time. From 1998 to 2007, for instance, there’s a steady increase in net worth among American households. But between 2007 and 2013, the average American net worth declined. This makes sense, given that the 2008 financial crisis had an impact on millions of American households. Between 2013 and 2019, net worth rebounded sharply, and it continued to rise between 2019 and 2022.

This begs the question of how much net worth might change again if the economy were to experience another downturn. If home values were to drop or a bear market caused stock prices to dip, it stands to reason that Americans’ might see their net worth fall. There is a silver lining, as economies do recover over time and the impacts may be less for younger investors. But a drop in net worth might not be as welcome for someone who’s close to retirement.

How the Average American Net Worth Varies by State

The Survey of Consumer Finances does not track net worth data by state. But the Census Bureau does compile information on household wealth and debt at the state level.

In terms of what influences the average net worth by state, there are a number of factors that come into play. Some of the things that can influence net worth include:

•  Homeownership rates

•  Property values

•  Employment opportunities

•  Average incomes

•  Access to education and job training

According to the most recent data available from the Census Bureau, the median net worth across all states was $191,100 as of 2023. “Median” represents households in the middle of the pack, so to speak, for net worth calculations. Here’s what the median net worth looks like in each state.

*Note: Where a (B) is entered, that means the base was less than 200,000 households or a sample size of less than 50 so the Census Bureau did not record net worth information for those states.

Recommended: What Is The Difference Between Transunion and Equifax?

The Takeaway

As discussed, net worth captures the difference between an individual’s assets and their debts. In the U.S. the average net worth varies by location and age. Tracking net worth is something you may want to do monthly if you’re paying off debt. You can use a money tracker app to figure out how long it will take you to become debt-free based on what you can afford to pay. As your income increases you may be able to pay down debt in larger amounts to increase your net worth faster.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What is the average net worth by age for California?

The median net worth for Californians is $273,800, according to the Census Bureau. This figure represents the middle ground between California residents of all ages from the highest net worth to the lowest.

What is the average net worth by age for New York?

The median net worth for New Yorkers of all ages is $132,800, according to the Census Bureau. This figure represents the middle ground between New York residents whose net worth is at the highest and lowest end of the spectrum.

What is the average net worth by age for Florida?

The median net worth for Florida residents of all ages is $255,100, according to the Census Bureau. This amount represents the middle ground between Floridians with the highest and lowest net worth.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q425-060

According to the IRS, most tax refunds are issued in under 21 days. However, some tax returns require more attention, which can lengthen the process and push back your tax refund date.

The deadline for filing 2025 taxes is Wednesday, April 15, 2026. If you request an extension, the deadline is Thursday, October 15, 2026. The deadline to file 2026 taxes is Thursday, April 15, 2027; the deadline to file an extension is Friday, October 15, 2027.

Keep reading to learn more about deadlines for 2025 and 2026 tax returns, and how to track the progress of your tax refund.

Tax Refund Process, Explained

The process begins when you submit your return to the IRS. The IRS then breaks down the process into three steps: return received, refund approved, and refund sent.

If you file electronically, you should receive an email confirming that your return was received within 24 hours. Paper return filers will have to wait longer.

After the IRS processes your return and confirms the information, your refund will be approved and a tax refund date will be issued. This takes about 3 weeks for electronic filers. Taxpayers who file a paper return by mail will wait at least four weeks.

The last step is when your tax refund is sent out. For filers who provide direct deposit information, your refund should appear in your account almost immediately. Taxpayers who do not include their bank information will have to wait for a paper check to arrive by mail.

Factors Impacting How Long a Tax Refund Takes

Several factors can affect the timing of your tax refund — including your financial organization skills and the accuracy of the information you provide. If you don’t receive your tax refund within 21 days, your return is likely being manually reviewed due to a mistake or complication.

The following factors can also affect your 2025 and 2026 tax refund dates.

How Early You File

Filing early is essential if you want to get your tax refund early. Ideally, you should be able to compile all your tax documents by the end of January. Forms such as W-2s, 1099-Rs, 1098-Es, and 1098s will provide the income information you need to file.

Filing early means submitting your tax return before the official deadline of Wednesday, April 15, 2026, for your 2025 tax return, or Thursday, April 15, 2027, for your 2026 tax return. Since many taxpayers file their returns on the official deadline, filing early allows you to beat the rush.

Similarly, if you requested an extension, filing “early” means before the October deadline. The deadline for 2025 returns is Thursday, October 15, 2026 (and Friday, October 15, 2027 for 2026 returns). However, taxpayers can file anytime before October. This way, you’ll avoid the bottleneck that inevitably occurs on the deadline itself.

If You Are Claiming Certain Credits

Claiming certain credits on your tax return can push back your 2024 tax refund date. These include:

•   Earned Income Tax Credit

•   Additional Child Tax Credit

•   Injured Spouse Allocation

•   Child Tax Credit, if you claim the wrong amount

E-filed or Sent By Mail

Whether you do your own taxes by hand, use software to assist you, or hire an accountant or tax preparer, it’s best to opt for electronic filing. E-filed taxes are accepted by the IRS within a day or two, while mailed paper returns can take weeks to arrive.

Existing Government Debt

Some taxpayers owe the federal or state government due to unpaid child support, taxes from years past, or student loan payments. Taxpayers facing these issues will receive a reduced refund or none at all, and any refund can take longer than the standard 21-day timeframe after e-filing.

How to Track the Progress of Your Refund

If you’re like most taxpayers, it won’t take long until you start wondering where their tax refund is. Getting hold of a live IRS representative by phone is possible but challenging during tax season.

Fortunately, the IRS’s Refund Status tool provides updates on your tax refund date just 24 hours after you submit your taxes electronically.

The tool shows taxpayers one of three statuses: return received, refund approved, or refund sent. After the refund is approved, the IRS will give you a tax refund date. If you mailed your return, you’ll have to wait about four weeks for the tool to provide information on your refund.

What to Do Once Your Refund Arrives

How should I spend my tax refund? It’s a perennial question for taxpayers. Top choices include paying down debt, saving for a vacation, and investing. The important thing is to plan ahead so you don’t spend it all on frivolous or impulsive purchases.

One popular option is to treat your refund like regular income. You can budget the majority of the money for “needs” by setting up an emergency fund or paying down your mortgage. The rest can be set aside for “wants,” such as a year’s worth of dining out.

An online budget planner can help you decide the appropriate percentages for needs and wants. Likewise, a debt pay off planner can show you how much sooner you’ll be debt-free after depositing some or all of your refund.

What Happens If You Can’t File Income Taxes by the Deadline

Each year, taxpayers unable to file their return on time (usually mid-April) can ask the IRS for an extension. The IRS’s Free File tool allows you to electronically submit a request to change your filing deadline to October.

Be aware that taxpayers who want an extension must make an educated guess about the taxes they owe and pay the IRS that amount.

How to File Form 4868 for a Tax Return Extension

Another way to file for an extension is to complete form 4868. You can submit the form electronically or by mail.

The Takeaway

While you cannot predict your exact tax refund date, filing electronically early in the tax season can help you get your refund faster. The IRS sends out most refunds within 21 days of receiving the return. The deadline for filing 2025 taxes is Wednesday, April 15, 2026. If you request an extension, the deadline for filing a 2025 tax return is Thursday, October 15, 2026.

The deadline for filing 2026 taxes is Thursday, April 15, 2027, or if you need an extension, Friday, October 15, 2027.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

When should I expect my 2026 tax refund?

Typically, you can expect to receive your refund within 21 days of filing your return. However, mistakes and special tax credits can slow down the process.

What days does the IRS deposit refunds in 2026?

The IRS deposits refunds Monday through Friday, except for holidays.

How long does it take the IRS to approve a refund in 2026?

Most refunds are issued in 21 days or less from when the IRS accepts your return. However, if there are issues with the return, it may take longer.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

SORL-Q425-062