SoFi

It may sound like a negative thing, but a sinking fund is money that’s saved toward a specific goal. Governments and businesses can use sinking funds to hold reserve cash to fund future expenses, but this kind of account also has a place in personal finance as you build wealth and achieve goals.

What sinking funds are is a way to earmark and stash money so you can, say, buy a new car or take an amazing vacation. Understanding how sinking funds work can help you decide if you need to include them in your budget.

What Is a Sinking Fund?

A sinking fund is money that’s earmarked to pay planned expenses that fall outside of your regular budget. In accounting, a sinking fund is used to save money to pay debt or replace an asset that is declining in value. The name, which can admittedly sound negative, may be derived from the idea of sinking, or paying off, a debt.

As mentioned, individuals, businesses, and even governments can use sinking funds to hold money in reserve for future expenses. For example, the U.S. Treasury Department maintains a sinking fund for unused appropriations.

For an individual, the meaning shifts somewhat. A sinking fund can help you be financially prepared to pay certain expenses that are on the horizon. In this way, it can help you avoid having to turn to high-interest credit cards or loans to cover expenses that don’t fit into your monthly budget. Being able to avoid debt is one of the main reasons why saving is important.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

Examples of a Sinking Fund

A sinking fund can be used to save money for a variety of expenses. Some of the most common sinking funds categories include:

•   Vehicle maintenance and repairs

•   Pet care

•   Home maintenance and repairs

•   Birthdays, holidays, and other special occasions

•   Wedding expenses

•   Baby expenses

Those are just a few of the things you might need a sinking fund for. The number of sinking funds you choose to establish can depend on your financial goals. You might create one for, say, a down payment on a home or a trip to Bali. It’s up to you.

You can set up separate accounts for each goal and, if you like, automate savings into each. You might add $25 per pay period to one, $100 to another. By setting up recurring transfers to occur right after your paycheck hits your checking account, you can help your savings grow with minimal effort.

Benefits of a Sinking Fund

Setting up sinking funds can offer some advantages if you have planned or recurring expenses.

•   You can use them to create a structured plan for saving toward various expenses or financial goals.

•   Depending on where you keep your sinking funds, you may be able to earn a decent rate of interest on your deposits.

•   Sinking funds ensure that when a planned expense comes due, you have the money to pay it. You can avoid dipping into your emergency fund or using a credit card.

Drawbacks of a Sinking Fund

Sinking funds can help you to be consistent with saving, but there are some potential drawbacks.

•   You have to be organized and disciplined when setting up a fund or multiple funds.

•   If you’re also saving or investing in other accounts, you may have trouble keeping track of what is sinking fund money and what isn’t.

•   Saving in multiple sinking funds could leave you spread thin financially if you’re not careful about budgeting.

How to Create a Sinking Fund

Getting started with sinking funds isn’t that difficult. Here are a few simple tips for using sinking funds to save toward planned expenses.

List Your Sinking Fund Categories

The first step in creating a sinking fund is deciding what categories to include. A good way to choose sinking fund categories is to review your spending for the last six months to a year. Look for expenses that may recur periodically, like biannual or annual insurance premiums or annual home maintenance.

From there, consider what savings goals you might be working toward that are one-time expenses. That may include a wedding, a down payment on a home, a vacation, new furniture, or something else you only expect to pay for once. You can then use your recurring expenses and planned expenses to create your sinking fund categories.

Determine Your Savings Target

Next, decide how much you need to save toward each expense or goal on your sinking fund list. Assign an overall dollar amount first, then determine how much you need to save monthly, based on when you plan to spend the money.

Say you want to save $1,000 for a trip you’d like to take in a year. You’d divide the total by 12, and your savings goal would be $83.33 per month.

Decide Where to Keep Sinking Funds

Once you know what you need to save each month, you can choose where to keep your sinking funds. Again, this may be a single savings account or money market account, or a savings account with multiple subaccounts.

Certificate of deposit (CD) accounts are usually not the best place to keep sinking funds. They require you to leave money in them untouched for a set maturity term to avoid a penalty. However, you may be able to find an add-on CD account that is a work-around to this. These accounts may allow you to increase the funds on deposit; check with a financial institution that offers this product for more details.

Set Up Automatic Transfers

If you’ve opened sinking fund accounts, you can take the final step and link them to your checking account. You can then schedule recurring automatic transfers from checking to your sinking fund account each month to grow your savings automatically.

You might want to set up your automatic deductions for payday. It can be helpful to have the money whisked out of your checking account and into savings before you see it and think about spending it.

Sinking Funds vs Emergency Funds

You may be tempted to dip into your emergency fund for some expenses, like, say, buying a new mobile phone. However, a sinking fund may be a better option. While a sinking fund and an emergency fund are both designed for saving, they serve very different purposes.

With a sinking fund, you’re setting aside money regularly that you plan to spend at some point. (In the example of a new phone, maybe your current one is starting to have some glitchiness, and you know a new model will be released in six months with lots of bells and whistles.) Some sinking fund expenses may be one-time; others may be recurring.
An emergency fund, on the other hand, is designed to hold emergency cash in case you have an unexpected expense that you need to cover. Emergency funds are there for those “uh-oh” moments, when your hot water heater conks out or you get hit with a major dental bill.

Starting an emergency fund while also having sinking funds can be a good idea. When you have both, you have money set aside to pay foreseen and unforeseen expenses. And just like sinking funds, one of the benefits of having an emergency fund is that you’re less reliant on high-interest credit cards to pay for things.

Sinking Funds vs Savings Accounts

Sinking funds and savings accounts can refer to the same thing. For example, you might hold your sinking funds in a high-yield savings account at an online bank. But it’s also possible that you have other savings accounts that are not specifically used for sinking funds. Sinking funds usually have a specific goal, which can help you get motivated to save money.

Saving funds can be more general. If you have kids, you might set up savings accounts for them to teach them the value of money. Or you might have a savings account that you treat as a slush fund, where you keep money that you haven’t earmarked toward any specific goal.

If you have both sinking funds and savings accounts, it’s important to track what money goes where. That way, you can ensure that you’re saving enough in your sinking funds and not shortchanging any of your planned expenses.

Recommended: Smart Short-Term Financial Goals to Set for Yourself

Where Can You Keep a Sinking Fund?

When deciding where to keep a sinking fund, accessibility matters. You need to be able to add money to your sinking fund and withdraw it when needed. For that reason, you might open an online bank account to hold your sinking funds.
With an online savings account, you can earn interest on deposits and link your account to checking for easy transfers.

Some banks allow you to open a main savings account with multiple subaccounts. You might choose this option if you’d like to be able to add money to individual sinking funds for specific expenses. Subaccounts can allow you to see all of your sinking fund money in one place while keeping goals separate.

A money market account is another candidate for holding sinking funds. These accounts can earn interest like a savings account, but they may offer check-writing abilities or debit card access, which you typically don’t get with a savings account.

Just be sure to check if your bank limits the number of withdrawals you’re allowed to make from a money market account. For some people, this factor (if it exists) can be a deal breaker.

The Takeaway

A sinking fund can help you stay on track when saving for planned expenses. You can use sinking funds to save for a wide range of expenses, without having to dip into other savings, your emergency fund, or breaking out your plastic. It can be a helpful way to organize your finances and meet your money and lifestyle goals.

Where to keep money in a sinking fund? Someplace that bears interest but is easily accessible can work well.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What is a sinking fund in simple terms?

A sinking fund is a type of account that has a specific goal (such as a down payment on a house or debt repayment). Funds are typically added to it regularly.

How much should you have in a sinking fund?

If your sinking fund is an emergency fund, you should aim to have at least enough money to cover three to six months’ worth of standard living expenses. Otherwise, it’s up to you to set the purpose of a sinking fund (a Peloton bike or a trip to Yellowstone?) and how much you want to save.

What is considered a healthy sinking fund?

A healthy sinking fund has enough money to cover any planned expenses you might have on the horizon. The size of your sinking fund will depend on which expenses you’re planning for, how often you’re saving for those expenses, and how much you’re saving toward them each month.

---

About the author

---

Photo credit: iStock/whitebalance.oatt

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.

SOBK-Q224-1920428-V1

Read more

A certificate of deposit (CD) can be a good savings vehicle, and an add-on CD can be even better if you crave more flexibility. Traditional CDs allow you to save money for a set term while earning interest. Typically, when you open a CD, you make a one-time opening deposit and leave it in the account until the end of the term.

But add-on CDs offer a convenient twist on that basic principle: They are CDs which permit you to deposit additional funds after the account is opened.

Banks and credit unions may offer add-on CD accounts alongside other types of CDs. Whether it makes sense to open an add-on CD can depend on your financial goals.

What Is an Add-On CD?

Certificates of Deposit (CDs) are designed to help you save money that you can afford to “lock up” for a period of time. Generally, when you open a CD account, you make an initial deposit. That deposit earns interest throughout the CD’s term until it matures, or becomes accessible again. The term can be anywhere from a month to 10 years, but many people opt for several months or a few years.

Once the CD matures, you can withdraw your initial deposit and the interest earned, or you can opt to roll the entire amount into a new CD. CDs typically pay a higher interest rate than a traditional savings account but still keep your money safe, since these accounts are federally insured.

Add-on certificates of deposit, sometimes referred to as add-to CDs, give you the option to make additional deposits to your CD after opening the account. So, for example, you might open an add-on CD with an initial deposit of $500. You might then choose to deposit $100 per month into the CD account for the remainder of the maturity term.

The bank or credit union with which you open the add-on certificate of deposit account might require additional deposits to be made via automatic transfer. There may also be a minimum amount that you’re required to deposit monthly or bimonthly.

How an Add-On CD Works

An add-on certificate of deposit account works much the same as any other CD, with one exception: You can make additional deposits to the account. Opening an account for a CD add-on starts with choosing a CD term. This is the length of time you’ll leave the money in your account.

Choosing the right term for an add-on CD matters for two reasons. First, it can determine how much interest you’ll earn on deposits. The longer the term, the more time your money has for compound interest to accrue. Banks and credit unions may also reward you with a higher interest rate and annual percentage yield (APY) for choosing a longer add-on CD term.

Second, you need to be fairly certain that you won’t need to withdraw money from an add-on CD account before it matures. Banks can impose penalties for early CD withdrawals, which can be equivalent to some or all of the interest earned. The penalties might even take a bite out of your principal.

Once you choose an add-on CD to open, you can complete the application and make the initial deposit. The amount required to open an add-on certificate of deposit accounts can vary from bank to bank. It’s typically less than for a traditional CD; perhaps $100. You can also decide how much you’d like to contribute to your add-on CD each month going forward.

As you make new deposits to your add-on CDs, that amount gets added to the principal and earns interest. You’ll then earn interest on the principal and interest as the CD compounds over time.

Recommended: How Long Does it Take to Open a New Bank Account?

Can You Add Money to a CD Before It Matures?

Generally, you cannot add money to a traditional CD beyond the initial deposit you make when you open the account. Once the CD reaches maturity, your bank may allow you a grace period of seven to 10 days in which you can make new deposits to the account. You might choose to add money during the grace period if you plan to roll the funds into a new CD account.

Add-on CDs give you more flexibility since you’re not bound by such strict rules for deposits. You can set up additional deposits to your CD to continue growing your balance, based on an amount that fits your budget and savings goals. You could even take investing in CDs a step further and create a CD ladder.

A CD ladder strategy involves opening multiple CDs, add-on or otherwise, with varying maturity terms and interest rates. Rolling maturity dates mean you may not have to worry about triggering early withdrawal penalties if you need cash. Why? Because with the staggered terms, you can always have a CD getting close to its maturity. This means you’re likely to soon have access to your cash. Laddering also allows you to take advantage of interest rate hikes if they occur.

Recommended: A Beginner’s Guide to Investing in CDs

Add-On CD vs Traditional CD

You might consider add-on CDs and traditional CDs if you’re comparing different types of high-interest accounts. Either type of CD could help you to achieve your savings goals. Before opening an add-on or traditional CD, it helps to know how they compare.

•  Add-on CDs allow you to add money after account opening; traditional CDs do not.

•  Minimum deposit amounts may be lower for add-on certificate of deposits versus traditional CDs.

•  Banks may offer different interest rates for add-on CDs vs. traditional CDs.

•  Different early withdrawal rules and penalties may apply.

When deciding where to open a certificate of deposit account, first consider whether add-on CDs are an option. Then you can look at the interest rates offered and the CD terms available.

Advantages of Add-On CDs

Opening an add-on certificate of deposit account is something you might consider if you’re looking for something other than a traditional CD or a more flexible financial vehicle. Understanding the benefits of add-on CDs can help you decide if this is the right savings option for you.

Low Minimum Deposit

CDs impose a minimum deposit requirement; otherwise, you’d have no money to earn interest on. These minimums are often around $500 or $1000 or more. Banks may offer lower initial deposits for add-on CD accounts to get you to open them and continue depositing money later. You might find ones in the $100 range. That can be an advantage if you want to save with CDs but you don’t have a large amount of money in your bank account to deposit up front.

Guaranteed Return

If you’re looking for safe investments, it doesn’t get much safer than CDs. Add-on CDs can offer a guaranteed return for your money since you’ll know what the interest rate and APY are before opening the account. You can then use a CD calculator to estimate how much of a return you’ll get for your money over the maturity term.

Flexibility

Perhaps the biggest advantage of add-on CDs is the flexibility they offer. With a traditional CD, you make one deposit and that’s it. You can’t add anything else until the CD matures. An add-on CD, however, gives you the option to continue saving at a pace you can afford.

Disadvantages of Add-On CDs

Add-on CDs have some attractive features but they aren’t necessarily right for everyone. There are few potential drawbacks to keep in mind if you’re debating whether an add-on CD account might fit into your savings plan.

Lower Rates

Banks may offer lower interest rates for add-on CDs and reserve higher rates for traditional CDs. When comparing add-on CDs, consider the different rates you might get at traditional banks vs. online banks. An online bank may be the better choice if you’re hoping to get the highest rate possible for add-on CDs. Or, check and see what kinds of interest rates are being offered on high-yield savings accounts. You might find you fare better with one of those.

Early Withdrawal Penalties

Add-on CDs allow you to add money on your own terms but there are restrictions on when you can take money back out. Remember, the bank can charge an early withdrawal penalty if you decide to pull money from your CD before maturity. Penalties could cost you some or all of the interest earned.

Guaranteed Return

An add-on CD can offer a guaranteed return but it might not match the return you could get by investing your money elsewhere. Trading stocks, exchange-traded funds (ETFs), or IPOs, for example, could yield a better return on your money but there’s risk involved — you could also lose your money.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

Example of an Add-On CD

Now that you know the pros and cons of add-on CDs, let’s zoom in on how exactly one might be set up to help you save. Let’s say you open an add-on 12-month CD that earns 5% APY and make an initial deposit of $1,000. At the six-month point, you’ve earned $24.70 in interest and your balance is now $1,024.70. You decide to deposit another $1,000. That extra cash earns the same 5% APY. When the CD matures, you’ll have around $2,075.

The Takeaway

Add-on CD accounts can help you reach your savings goals while offering more flexibility than other CDs. Before opening an add-on CD, it’s helpful to shop around to see which banks or credit unions offer them and how much interest you might be able to earn. You may also want to compare rates to what you could earn in a high-yield savings account (which offers even more flexibility). Also check into the minimum deposit required and different term lengths to find the best match for your needs and financial goals.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What is an add-on CD?

An add-on CD is a certificate of deposit account with more flexibility. It allows you to make additional deposits after the CD has been opened. Banks may impose a minimum deposit requirement, and you may need to automate deposits to add-on CDs.

Can you add additional funds to a CD?

CDs typically do not allow you to make additional deposits once your CD account has been opened. Add-on CDs, however, are designed to allow additional deposits before the CD matures.

---

About the author

---

Photo credit: iStock/Atstock Productions

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.
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.

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.

SOBK0124033

Read more

An Individual Development Account (or IDA) is a special type of matched savings account that’s designed to help lower-income individuals and households achieve their financial goals. IDA accounts were first introduced in the 1990s as part of a federal initiative to encourage wealth-building among financially-challenged populations.

The IDA account program is specifically designed to encourage saving toward one of four goals, including home ownership. There are certain requirements that must be met to qualify for an Individual Development Account.

Here, take a closer look at how these accounts work and their pros and cons.

What Is an Individual Development Account (IDA)?

An Individual Development Account is a bank account that allows lower-income Americans to set aside money to fund specific goals. Generally, money in an IDA account can be used for one of four purposes:

•   Buying a car

•   Purchasing a home

•   Starting a business or supporting an existing business

•   Paying for post-secondary education or training

Some programs may allow you to use the money for other things, like home repairs and improvements or retirement.

IDA accounts are matched savings accounts that are funded partially with grant money. The IDA program can also provide other benefits to participating savers, including financial literacy training and homebuyer education.

How Does an Individual Development Account Work?

Individual Development Accounts work by encouraging participants to save and then matching a percentage of those savings to fund specific financial goals. A sponsoring organization, which may be a non-profit or state government agency, partners with banks and other financial institutions to offer IDA accounts to underserved populations.

In terms of the matching component, IDA accounts are similar to 401(k) plans in that savers can essentially get free money for participating. The match is designed to act as an incentive to encourage account owners to save. The IDA savings match varies by program.

For example, you may be eligible for a 1:1 match, meaning you get $1 for every $1 you save. Other programs may offer a 5:1 match instead, so you get five times the matching contributions for every dollar you save (that means $5 to every dollar you tuck away). IDA programs can also cap the total maximum match allowed to a set dollar amount. In some cases, the cap will be in the $5,000 range, though higher and lower amounts are possible as well. These Individual Development Account programs typically last five years.

Once you reach your target savings amount, you can then use that money to fund your goals. So if you save $25,000, including your contributions and the match, you could then use that money to put a down payment on a home or start a business under the guidelines of the IDA program. Account minimum balance requirements and fees may be waived for IDA savers.

One word of caution: If you stop saving before you reach the goal amount or if you use the funds for a purpose other than described by the IDA, you may risk forfeiting the matching money.

History of Individual Development Accounts (IDAs)

The idea for IDA accounts was first proposed in 1991 by author Michael Sherraden. In his book, “Assets and the Poor: A New American Welfare Policy,” Sherraden proposed IDA accounts as a means of introducing real assets into the lives of poorer populations that might otherwise lack them. Specifically, the Individual Development Account was meant to be a tool for encouraging personal responsibility in building wealth.

In 1996, the Personal Responsibility and Work Opportunity Reconciliation Act reformed welfare programs and included IDAs as an eligible use for federal funds.

How to Open an Individual Development Account

If you’d like to open an Individual Development Account, the first step is locating programs in your area. The Administration for Children and Families offers an online mapping tool to help you locate IDA programs in each state.

Once you find an IDA program provider near you, you can contact them to find out the specific steps you need to take to open an account and which banks they partner with. Keep in mind that you’ll also need to meet the following eligibility requirements to have an Individual Development Account.

Earn Less Than 200% of Federal Poverty Level

Income is a key eligibility requirement for IDA accounts. Your income has to be below 200% of the federal poverty level for your household size. These levels are set by the federal government and are also used to determine eligibility for other benefits, like Medicaid. You can use an online federal poverty calculator to determine whether your income falls within the guidelines.

Have a Paying Job

A paying job is another requirement for opening an Individual Development Account. If you’re planning to buy a home, for instance, the government wants reassurance that you’ll be able to save money now and make your payments later. There are, however, no specifications on what kind of job you need to have.

Asset Restrictions

The IDA program assumes that participants aren’t starting out with significant wealth. So another condition for eligibility may be a $10,000 cap on assets. You can, however, typically exclude the value of one home and one car from this total.

Must Take Free Financial Literacy Courses

Financial literacy and education courses are typically provided and required by IDA programs. These courses are designed to educate participants about financial basics, such as budgeting, saving, and debt. A participant might learn financial hacks, such as how a parent can set up a kids’ savings account for a child, even though the minimum age to open a bank account in one’s own name is 18. This can give a kid a head start on accumulating money. Or perhaps the class would illuminate the value of creating an emergency-fund savings account to achieve greater financial stability.

Programs can also offer additional topic-specific classes on concepts like home buying and business planning. The idea here is that an IDA isn’t just helping you build wealth, it’s also teaching you how to manage it wisely.

Pros and Cons of an Individual Development Account (IDA)

Individual Development Accounts are designed to help people who participate in them to build wealth and get ahead financially. Those are among the upsides of these accounts. There are, however, some disadvantages to weigh against the potential benefits. Here’s a closer look:

Pros	Cons
•   Matched savings can help you fund your goals more quickly •   The money you receive in matching contributions isn’t taxable to you •   Financial literacy courses can help to make you more knowledgeable about money	•   IDA accounts have limited flexibility since they can only be used to fund specific goals •   Not everyone is eligible to open and contribute to an IDA account •   Saving money in an IDA isn’t guaranteed to improve your financial outlook •   You may risk forfeiting the matching money if you can’t meet your goal or if you use the funds for something other than approved expenditures

Alternatives to an Individual Development Account (IDA)

An IDA account isn’t the only way to save money toward your financial goals. Some of the other possibilities for saving money include:

•   Establishing a money market account

•   Opening a brokerage account

•   Setting up one or more high-yield savings accounts

•   Contributing to a 401(k) or IRA

•   Building a CD ladder with multiple certificates of deposit

Each savings option has pros and cons, and you may need to spend a little time learning about each one. If you don’t know how a money market account works, for example, that could make it more difficult to choose the best account for your savings.

And in terms of whether an IRA vs. 401(k) is better for retirement saving, the answer depends on your goals and tax situation. In addition, not everyone has access to a 401(k) account and may need to find other ways (like an IRA) to save for their future.

Another important bit of advice: If you choose to open a savings account, keep in mind that you have options. Your decision may determine the interest rate you earn and the fees you pay. For example, a college student bank account (if you are eligible for one) might charge fewer fees than a traditional savings account.

You may also be debating whether to open a joint vs. separate bank account if you’re married and want to save for a goal like a down payment on a house. Having a joint account for shared savings goals or expenses and separate accounts for individual goals could help you to strike the right balance. But again, do your research to find the option that best suits your financial style and goals.

Recommended: Savings Account vs Money Market Comparison

The Takeaway

An Individual Development Account (IDA) was created to help lower-income individuals secure financial stability. Thanks to matching funds, it can accelerate a person’s saving towards such expenses as buying a home. However, not everyone is eligible for these accounts, and the funds, once saved, can only be used on certain expenses. Still, it’s an opportunity to possibly snag some free money and definitely worth consideration for many people who qualify.

Another way to boost your financial wellness is by partnering with a top-notch financial institution for your bank account.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

How do I get an IDA account?

To open an Individual Development Account, you’ll need to meet the eligibility requirements. Assuming that you’re eligible, you can then contact an IDA program near you to learn what steps are necessary to open an account.

What is a federal IDA?

The federal IDA program is a savings match program that’s designed to help underserved populations build wealth. Money in an IDA account can be used to buy a home, pay for higher education expenses, start a business, or even buy a car.

Can I take money out of my IDA?

Money in an IDA can be withdrawn to fund a specific goal. For example, if you’re ready to buy a home, you can take money from your account to pay for the down payment or closing costs. Or if you’re starting a business, you can withdraw IDA money to cover operating costs. However, if you take out the money for other purposes, you may forfeit the matching funds.

---

About the author

---

Photo credit: iStock/HAKINMHAN

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.

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.
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/.

SOBK-Q224-1918870-V1

Read more

ChexSystems is a nationwide credit reporting system that collects information about bank accounts that are now closed. It compiles data on red flags, such as whether a bank account was closed due to numerous overdrafts or suspicious financial transactions.

Many (but not all) financial institutions rely on ChexSystems data to decide whether or not to approve an application for a new checking or savings account. If you have a bank account or plan to open one, it’s helpful to understand what goes into a ChexSystems report and why it might matter to you.

What Is ChexSystems?

Authorized by provisions in the Fair Credit Reporting Act (FCRA), ChexSystems is a risk-management tool for financial entities that are checking an individual’s banking history.

ChexSystems compiles information that can help financial institutions gauge whether a customer is creditworthy before granting them an account. The information that ChexSystems compiles is based only on closed accounts, not current ones, and can reveal whether past accounts were closed voluntarily or due to negative behavior, such as repeated overdrafts or suspected fraud.

Negative marks typically stay on a ChexSystems report for up to five years. If a financial institution sees any kind of negative activity on a ChexSystems report, the applicant may be denied a bank account.

The information in your ChexSystems report can also be used to generate a ChexSystems consumer credit score. This is separate from consumer credit scores generated using information from the three major credit reporting bureaus to help lenders decide who may qualify for a loan.

What Is In a ChexSystems Report?

Not everyone will have a file with ChexSystems. Those who have a clean banking record may not be listed. However, those who have had bank accounts closed in the past for negative reasons will likely have a report with ChexSystems.

A report will usually include basic identifying information, such as name, address, phone number, and date of birth. It will also include details about your banking history, such as:

•   Suspected fraudulent activity

•   Non-sufficient funds (NSF) or overdraft activity

•   Inquiries (when someone has viewed your ChexSystems report)

•   Check cashing inquiries

•   Returned checks reported by retailers

•   History of checks ordered

•   Checking account closures

ChexSystems only collects information for closed accounts, and negative behaviors typically stay on file for five years, as noted above. Current checking accounts do not show up on a ChexSystems report.

Worth noting: If you’ve ever had a security freeze in place, that will usually show up on your ChexSystems report, as will identity theft alerts.

Recommended: Why Is Having a Good Credit Score Important?

How to Get a Copy of Your ChexSystems Report

You can get a copy of your ChexSystems report for free once every 12 months under the Fair and Accurate Credit Transaction Act (FACTA), similar to the way you can request a free copy of your credit reports once a year from the three main credit bureaus.

You can request your ChexSystems report online, by phone, or by mail:

•   You can complete and submit the Consumer Request for Disclosure Form online.

•   You can call 1-800-428-9623 Monday through Friday, 8:00 am to 7:00 pm CST.

•   You can mail a Consumer Request for Disclosure Form to ChexSystems, Inc., Attn: Consumer Relations, PO Box 583399, Minneapolis, MN 55458.

ChexSystems also offers options for people with visual or hearing impairments. In addition, the ChexSystems website details ways to obtain a report for those under age 18 or for an adult for whom you have power of attorney.

There is an exception to this “once a year” free report rule: If you’ve been denied a bank account, you can request a copy of your ChexSystems report to understand the factors behind the bank’s decision, even if less than a year has passed since the last time you pulled a report. The bank is required to specify the reason for the denial, too.

How to Clean Up Your ChexSystems Report

To clean up your ChexSystems report, you’ll first need to get a copy of it, if you haven’t done so already. You can then dispute any negative information you may find. This can help improve your ChexSystems profile if you can get the information removed.

You can reach out to the bank that shared any negative information about your past account and offer to make good on any outstanding obligations. The bank could agree to remove the negative information.

Going forward, you can prevent any further negative information from being reported by practicing good banking habits, such as:

•   Maintaining positive balances across accounts so you don’t land in overdraft

•   Keeping of checks and deposits to avoid bounced checks

•   Protecting your banking information to prevent fraud

•   Reporting any suspected fraud to your bank right away

Those actions won’t erase a negative ChexSystems file. But they can help you to stay on your bank’s good side.

Does a ChexSystems Report Affect Your Credit Score?

Your ChexSystems report doesn’t affect your consumer credit scores directly. FICO® credit scores, for example, are based on how responsibly you manage credit and debt. For example, it can reveal how often you pay bills late, how much of your available credit you’re using, and how often a hard credit inquiry shows up on your report.

Those are some of the main factors that affect credit scores.

But there could be a ripple effect. If your ChexSystems report makes it difficult or impossible to open a bank account, you might have a hard time paying bills when they are due. If, as a result, you send payments late, that could lower your credit score.

Options if You’ve Been Denied a Bank Account Due to ChexSystems

If you’ve been denied a checking account because of a negative ChexSystems report, it helps to know what to do next. You have a few options:

•   Clean up your ChexSystems file. Request a copy of your ChexSystems report to understand why you were denied. Review your report for any errors or inaccuracies, and dispute any errors you find. Or, if you owe a debt to your previous bank, you could pay it off and request that the bank remove the mark against you.

If successful in cleaning up your report, you can ask the financial institution you recently applied to if they would reconsider the denial. You might also try opening a savings account with the new bank first, see if you can build a relationship, and then add a checking account.

•   Try another bank. Find a bank that doesn’t rely on ChexSystems reports to evaluate potential clients. They are out there and can be found with a little research.

•   Consider a second chance bank account. These are designed for people who have been denied a checking account previously. These accounts may have higher fees or more restrictions than regular bank accounts. They can, however, help you establish a positive banking history and, if managed well, transition to a standard checking account in the future.

•   Use prepaid debit cards in the short term for spending and bill payment. You can load funds onto these cards (which typically charge fees) and then take care of daily needs with that money.

The Takeaway

ChexSystems is a nationwide reporting system for closed bank accounts. Qualified institutions may access ChexSystems reports to evaluate individuals who are applying for new checking or savings accounts. Being listed in ChexSystems means you likely have negative incidents on your closed accounts (e.g., overdrafts, fraud, unpaid negative balances). This can prevent you from opening new accounts. In this situation, you can focus on cleaning up your ChexSystems report or try some workarounds so you can manage daily financial transactions.

SoFi is among the banks that do not rely on ChexSystems when reviewing account applications.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What happens if you are on ChexSystems?

If you have a file on ChexSystems, you may find it hard to open a bank account. ChexSystems gathers negative information about past bank accounts, such as past overdrafts or involuntary account closings.

Can you remove yourself from ChexSystems?

It may be possible to remove yourself from ChexSystems if your report includes information that’s inaccurate or reported in error. You’ll need to dispute the information through ChexSystems in order to have it corrected or removed from your file. Or if, say, you owe overdraft charges on a now-closed account, you could contact your former bank, pay what you owe, and see if they would remove the negative information from ChexSystems.

How do I know if I am in ChexSystems?

You can request a free copy of your ChexSystems report annually. If there is a report on file for you (those in good standing may not be listed), getting this record can reveal the details of negative information.

How long does a person stay in ChexSystems?

Generally, negative information can stay on a ChexSystems report for up to five years. If you have multiple negative items on your ChexSystems report, the five-year reporting time frame applies separately to each one.

Which banks report to ChexSystems?

ChexSystems doesn’t specify which banks use its reporting system. If you’re unsure whether a bank reports to ChexSystems or reviews ChexSystems reports when you apply for a new account, you can call the bank and ask. You can also ask whether second-chance banking is an option, in case you’re denied a traditional bank account.

---

About the author

---

Photo credit: iStock/atakan

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.

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.

SOBK-Q224-1918851-V1

Read more

Calling California home can be expensive, and some locations carry a much higher cost of living than others. In fact, if you’re wondering where to live in the Golden State, your income may be the deciding factor. A good salary for a single person in California varies widely depending on location and industry: $50K may be enough in some areas, $150K in others.

Here, we’ll provide real-world stats to show you what the cost of living is really like. And we’ll compare annual salaries for different occupations to offer some insight into what a single Californian typically earns.

What Is the True Cost of Living in California?

California is the second-most expensive state in the U.S., according to the Missouri Economic Research and Information Center (MERIC). Only Hawaii, Washington, D.C., and Massachusetts have a higher cost of living. Data from the Bureau of Economic Analysis (BEA) calculated that the average annual cost of living in California is $60,272.

Average cost of living numbers reflect both the highs and lows of what people spend to live in California. Cost of living generally means necessary expenses, such as:

•   Housing

•   Food

•   Utilities

•   Transportation

•   Taxes

•   Health care

•   Child care

•   Clothing

•   Education

Where someone chooses to live in California and their lifestyle can influence their personal cost of living. Their choice of career can determine how easily they’re able to keep up with the cost of living. What is considered a good salary for a single person in a metro area may be very different from that of someone living in a farming community.

Recommended: What Credit Score is Needed to Buy a Car?

What Is the True Cost of Living in Los Angeles?

Households in the Los Angeles metro area spent an average of $77,024 per year in 2021-22, according to the Bureau of Labor Statistics (BLS). The majority of spending was divided across eight categories:

•   Housing

•   Transportation

•   Food

•   Personal insurance and pensions

•   Healthcare

•   Entertainment

•   Cash contributions

•   Apparel and services

August 2024 data from the BLS shows that the Consumer Price Index (CPI) for goods and services in Los Angeles has increased 2.9% from August 2023. Some of the biggest price increases have been in the food and medical care categories. Meanwhile, the average weekly wage across all industries in Los Angeles was $1,411.60, which adds up to $73,403 in annual salary.

What Is the True Cost of Living in the San Francisco Bay Area?

Residents of the San Francisco Bay Area spent an average of $101,880 per year in 2021-22, according to BLS data. San Franciscans spent the most on housing, followed by:

•   Personal insurance and pensions

•   Food

•   Transportation

•   Personal insurance and pensions

•   Cash contributions

•   Entertainment

•   Education

Similar to Los Angeles, San Francisco saw its consumer price index increase 2.7% between August 2023 and August 2024, with consumers paying more for food, energy, and apparel. In terms of weekly salary, workers in the Bay Area bring in $1,874 on average, or $97,468 annually.

Why Is the Cost of Living in California So High?

California’s high cost of living can be attributed largely to supply and demand. Generally speaking, when demand for goods and services outpaces supply, that can result in higher prices.

High demand vs. low supply for things like housing, for instance, can send real estate values soaring. California is an attractive place to live because of its strong economy and job market, prompting more people to move there, driving up demand for housing. The state ranks second for the highest rent prices. And the typical home is valued at $784,989, according to Zillow.

Meanwhile, California residents are subject to higher property tax rates, which adds to the cost of living. They also typically pay more for fuel due to a combination of higher taxes and environmental regulation surcharges.

Inflation can add to the high cost of living in California. As of August 2024, the CPI increased 2.5% year over year. When inflation rises, everything you spend money on tends to become more expensive, driving up the cost of living even further.

Recommended: Does Net Worth Include Home Equity?

Living Wage Calculation for California

A living wage in California is the hourly rate that someone must earn to support themselves and their family, if they have one. It’s not the same thing as the federal minimum wage. The gap between the two is often used as an argument for raising the minimum wage across the board.

Here’s what an hourly living wage calculation looks like for different household sizes in California. Note that the state minimum wage for companies with 26 or more employees is $16.00 an hour.

	1 Adult				2 Adults, Both Working
Number of Children	0	1	2	3	0	1	2	3
Living Wage	$27.32	$47.96	$61.58	$82.16	$18.17	$26.21	$33.26	$40.24

Data courtesy of the MIT Living Wage Calculator

So what is a good annual salary for a single person in California? Using living wage data, you could assume that $56,825 in annual pay would be a good salary for a single person with no children. On the other hand, a single adult raising three kids would need to make $170,892 yearly. Those income numbers assume a 40-hour workweek and 52 weeks of work per year.

It’s important to understand the distinction between salary vs. hourly pay, in terms of how much work is involved to earn a living wage. A salaried employee who works 60 hours a week may end up earning the same average hourly wage as someone who works 40 hours per week, even though they’re spending more time on the job.

Typical Expenses

Comparing typical spending to living wage calculations can offer some perspective on how easily Californians are able to keep up with their cost of living. Here’s a closer look at what adults spend in several key budget categories. Comparing typical spending to living wage calculations can offer some perspective on how easily Californians are able to keep up with their cost of living. (If you’re struggling to get a grip on spending, then using a money tracker app like SoFi’s can help.)

Here’s a closer look at what adults spend in several key budget categories.

	1 Adult				2 Adults, Both Working
Number of Children	0	1	2	3	0	1	2	3
Food	$4,508	$6,645	$9,967	$13,427	$8,264	$10,287	$13,248	$16,153
Child Care	$0	$14,433	$28,866	$41,020	$0	$14,433	$28,866	$41,020
Medical	$2,603	$8,317	$8,205	$8,668	$5,886	$8,205	$8,668	$8,263
Housing	$21,079	$28,494	$28,494	$38,263	$23,371	$28,944	$28,944	$38,263
Transportation	$10,655	$12,343	$15,548	$17,890	$12,343	$15,548	$17,890	$17,869
Civic	$3,032	$5,335	$6,715	$7,776	$5,335	$6,715	$7,776	$7,269
Other	$4,739	$8,459	$8,994	$12,431	$8,459	$8,994	$12,431	$11,950

Data courtesy of the MIT Living Wage Calculator

“Civic” refers to civic activities and includes costs related to entertainment, culture, pets, hobbies, and education.

Typical Annual Salaries in California

A good yearly salary for a single person in California varies widely, as does what is considered competitive pay. It mostly depends on the industry someone works in. Here’s an overview of annual salaries in California across different industries and sectors.

Occupational Area	Typical Annual Salary
Management	$160,360
Business & Financial Operations	$101,390
Computer & Mathematical	$142,270
Architecture & Engineering	$121,910
Life, Physical, & Social Science	$103,010
Community & Social Service	$69,470
Legal	$166,300
Education, Training, & Library	$80,940
Arts, Design, Entertainment, Sports, & Media	$97,180
Healthcare Practitioners & Technical	$128,010
Healthcare Support	$40,280
Protective Service	$69,330
Food Preparation & Serving Related	$40,300
Building & Grounds Cleaning & Maintenance	$44,510
Personal Care & Service	$44,170
Sales & Related	$59,650
Office & Administrative Support	$54,960
Farming, Fishing, & Forestry	$38,590
Construction & Extraction	$74,240
Installation, Maintenance, & Repair	$66,960
Production	$51,340
Transportation & Material Moving	$50,010

The highest paying jobs by state tend to be in the management, legal, technology, and healthcare fields. That makes sense, given how much big business and tech contribute to the state’s economy.

California’s large population also means greater demand for things like legal services and health care. These are not the best jobs for antisocial people, since they demand a good deal of interaction and communication, but that doesn’t mean introverts can’t find great opportunities here.

So, what is a good entry level salary in California? Entry level pay is likely to be higher in industries that have higher demand for talent. The downside is that hiring can be much more competitive.

New hires seeking jobs in the state may do well to read up on how to ask for a signing bonus or more perks in their benefits package, which can help supplement a lower entry level salary.

Recommended: What Trade Makes the Most Money?

Is the Cost of Living in California Worth It?

California is far from the cheapest state to live in. Whether it’s worth it to you to make your home there can depend on your reasons for wanting to live in the Golden State. If you’ve landed a high-paying job in a promising field, for instance, then a higher cost of living might be a trade-off you can accept to launch your dream career.

On the other hand, you might find that California’s cost of living is simply too much for your budget. In that case, you might consider relocating to a less expensive state or, at the very least, moving to a different part of California.

Regardless of where you end up, using a budget planner app can be a great way to keep track of your spending. You can link the app to your bank accounts and credit cards to keep tabs on where your money goes and see at a glance where you might need to cut back. Maintaining a budget is one of the most effective ways to keep your cost of living under control.

Recommended: Should I Sell My House Now or Wait?

The Takeaway

What is a good yearly salary for a single person? The simplest answer might be this: An amount that allows you to meet all of your basic expenses, save a little, and pay down debt or work toward another financial goal. Whether that’s $50,000, $150,000 or more can depend on your preferred lifestyle and where you choose to live.

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.

SoFi helps you stay on top of your finances.

FAQ

What is a livable salary for a single person in California?

A living wage for a single person in California with no children is $27.32 per hour or $56,825 per year, assuming a 40-hour workweek. Whether that salary is livable for someone can depend on where they live in California and how they typically spend their money.

What is a comfortable salary in California?

The salary that’s required to live comfortably in California depends on how many people live in the household, how many people in the household earn an income, where you live in the state, and your typical annual expenses.

What is a good monthly income in California?

A good monthly income in California is $5,002, based on what the Bureau of Economic Analysis estimates that Californians pay for their cost of living. A good monthly income for you will depend on what your expenses are and how much you typically spend per month.

---

About the author

---

Photo credit: iStock/lechatnoir

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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-Q324-041

Read more