Feb
24
2025

Guide to Automatic Investment Plans

By | Budgeting & Goals, Financial Independence | No Comments

An automatic investment plan (or AIP) can refer to various options: an automatic investment plan might be part of a retirement account, or it could be an investing platform, like a robo advisor, that enables you to make regular investments, automatically.

Automatic investment plans can help you save and invest steadily over time. You can set up your plan in advance, and then leave it more or less to run on its own — until your needs or goals require a change.

Key Points

•   An automated investment plan refers to a range of methods for automating savings and investing.

•   You might use an automated investment plan to make automatic transfers that fund a retirement account or a college savings account.

•   Robo advisors are also a type of automated investment account. Here, the investment portfolio is pre-set and managed by an algorithm.

•   Automated investment plans tend to be low- or no-cost, and they can be helpful for those who don’t want the hassle of managing an investment portfolio.

•   Investors can work with a human advisor as well as using an automated plan.

What Is an Automatic Investment Plan?

An automatic investment plan might include making regular deposits into a retirement plan like an IRA or 401(k), using a robo advisor (or automated portfolio), participating in a dividend reinvestment plan, as well as other options.

What these programs have in common is they give investors the ability to choose an amount they want deposited, the timing of the deposits (e.g. weekly, quarterly), and in many cases which types of investments to fund.

The rise of sophisticated technology and algorithms have helped make automatic investment plans more accessible and secure, as well as more customizable, especially when investing online. Investors can direct money to be withdrawn from their paycheck or from a personal account on a biweekly basis, for example, and invested in a retirement portfolio.

It’s all part of the growing trend around automating your personal finances.

Types of Automatic Investment Plans

While using automatic investment plans for retirement is a common scenario, there are others — including the option to choose more- or less-automated types of investment products or preset portfolios.

Among the different types of automatic investment accounts, or accounts that can be funded automatically:

•   Automatic transfers to a 401(k), 403(b), or personal IRA accounts

•   Automatic transfers to a 529 college savings plan

•   Micro-investing platforms (or spare-change savings accounts). These use very small amounts of cash, typically rounded up from purchase amounts, to make deposits in an investment portfolio that may grow over time.

•   A dividend-reinvestment plan (DRIP) which helps investors reinvest their cash dividends automatically

Types of Automated Investment Products

There are also different types of mutual funds as well as automated portfolios (sometimes called robo advisors) which investors can use as part of an automatic investment plan.

•   Target date funds can provide investors with a long-term retirement or college savings portfolio. These funds are typically based on an allocation of different asset classes that adjust automatically to become more conservative over time, until the person needs to withdraw the funds.

•   A robo advisor, or automated portfolio, is a preset portfolio typically of low-cost exchange-traded funds (ETFs). Investors use an online platform to fill out a questionnaire about their preferences, goals, risk tolerance, and time horizon.

The securities and the allocation in each portfolio are generally fixed, but investors can typically choose from different portfolios that match their preferences.

Recommended: Automated Investing 101

How Does an Automatic Investment Plan Work?

The “automatic” part of an automatic investment plan can refer to the automated deposit of funds, usually on a regular schedule. But it’s not just a way to automate your savings. It can also refer to stock dividends being reinvested automatically, or automated mutual funds (like target-date funds), or robo portfolios, as noted above.

The foundation of almost all automatic investment plans is the use of sophisticated technology to ensure the allocation of funds in a portfolio reflects an investor’s needs and goals. While some people might view these options as “hands-off” or “set it and forget it” — and they can simplify a number of investment choices for investors — using an AIP doesn’t mean your money is on autopilot.

Investors will always need to pay some attention to any kind of investment plan, but that said many AIPs do offer investors some advantages.

Benefits of an Automatic Investment Plan

Most brokerages and workplace plans offer some kind of automated options for investors these days. The reason being that behavioral research has repeatedly shown that investors are prone to make emotional choices under certain circumstances (for example, when the market is volatile).

Automated plans provide basic guardrails that can help keep investors on track, investing steadily over time, rather than reacting impulsively to trends or headlines and trying to time the market.

Dollar Cost Averaging

Another benefit of automated plans is that they are designed so that you invest the same amount at regular intervals. This strategy, known as dollar cost averaging, is important for a couple of reasons:

•   Automating deposits may help build savings over time, because you’re less likely to spend that money once it’s invested.

•   Dollar cost averaging is the practice of investing consistently over time, whether the market is up or down, which can lower the average cost of your investments.

Time Savings

Another advantage of using an AIP is that it can save you time and energy, especially if researching or managing investments is not your strong suit.

Types of Investments to Automate

These days automatic investment plans are available for a range of goals. As discussed earlier, you can choose to automate your retirement savings, your personal investment portfolio in a taxable account, a 529 plan, stock dividends, and other options such as micro-investment accounts as well.

These kinds of AIPs can compliment other aspects of financial automation that you may already be using: from budgeting and saving to paying bills.




💡 Quick Tip: Can you save for retirement with an automated investment portfolio? Yes. In fact, automated portfolios, or robo advisors, can be used within taxable accounts as well as tax-advantaged retirement accounts.

Is Automated Financial Planning Right for You?

In general, automatic investment plans may work for people who want to be on top of their finances, but may not have the time or the inclination for detailed investment management.

In that way, the convenience and lower cost of many automated investment plans and robo platforms can help newer investors (or less involved investors) get started.

Investors who aren’t comfortable with relying on technology may not want to invest using automated systems.

Human Advice and Automation

That said, automated investing isn’t a strategy for avoiding money management or financial planning completely. Most investors’ portfolios and financial plans include details or circumstances that require human insight or input. Estate planning, owning a small business, or prioritizing among multiple goals, for example, can be complicated.

Although it can be simpler to automate some parts of the investing or financial planning process, a human advisor can help ensure that you aren’t missing anything. Also, investors who use automated portfolios typically have less control over their investments.

Fortunately, automation here can also work in your favor: You can set alerts to remind you when certain withdrawals are being made.

Recommended: Robo Advisor vs. Financial Advisor: Which Should You Choose?

Starting an Automatic Investment Plan

Starting an automatic investment plan is pretty straightforward. Start by identifying the primary goal for using an automated platform.

•   Do you want to save for retirement at work, or is this a personal retirement account?

•   Do you want an automated investment portfolio that’s preset, like a robo advisor? Or do you want to set up your own portfolio?

•   Do you own dividend stocks, and does it make sense to set up a dividend reinvestment plan?

•   Are you setting up a college-savings plan for a student?

Then, as you explore a few different options, you want to consider the following:

•   Is it a reputable platform, account, or app? Hint: Most online brokerages and financial firms offer a few automated options, so it may be possible to stay with your current provider.

•   Is the platform easy to use? Can you easily make adjustments to your deposits, as needed?

•   What are the fees?

What are the requirements?

•   Is there a minimum amount required to open the account, or for each deposit?

•   How much flexibility do you have when choosing investments (and is that important to you)?

Using an Automatic Investing Plan

Using an AIP is generally self-explanatory because generally these programs were created for investors who want a streamlined experience. Once your account is open, you typically set up a direct deposit of funds, and select the investments you want in your plan.

If you’re working with a financial advisor, they can help insure that the platform you choose will support the rest of your financial plan. If you’re flying solo, you can begin to do research into how your automatic investment plan works together with other goals.

The Takeaway

One of the best things about automated financial planning is that in most cases you can be as hands-off (or hands-on) as you choose. Using an automatic investment plan these days provides a number of options, including active investing, retirement, and robo advisor options. Automated doesn’t mean you can literally “set it and forget it”; it always pays to track your investment portfolio, and think about your long-term plans.

Ready to start investing for your goals, but want some help? You might want to consider opening an automated investing account with SoFi. With SoFi Invest® automated investing, we provide a short questionnaire to learn about your goals and risk tolerance. Based on your replies, we then suggest a couple of portfolio options with a different mix of ETFs that might suit you.


Open an automated investing account and start investing for your future with as little as $50.

FAQ

How do you automate an investment strategy?

You can find an automatic investment plan (AIP) that will match your goals and help you set up or fund a portfolio. That said, you can’t automate your entire investment strategy: Ideally, an AIP would be a tactical piece that fits into your overall strategy.

How often should I auto-invest?

You want to keep up a steady cadence of deposits to make progress toward your goals, and to reap the benefits of dollar cost averaging. You might consider auto investing once a month to start and see how it goes.

What are the benefits of starting an automatic investment plan?

There are a number of advantages to using an automatic investment plan, including the fact that it can help keep your investment plan on track, even if you’re tempted to make changes when markets fluctuate. In addition, an AIP can save time and may help lessen the impact of market volatility.

Photo credit: iStock/GarryKillian

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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.

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.

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Feb
24
2025
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How to Create a Savings Plan For a Year

By | Budgeting & Goals, money | Comments Off on How to Create a Savings Plan For a Year

A year may seem like a short period of time, but you can accomplish a lot, including developing a one-year savings plan that can help you hit some significant financial goals. A plan that lasts 365 days can give you, as an earner, the opportunity to save and feel a sense of accomplishment.

In other words, a year from today, you could be richer than you are now or potentially have a better emergency fund. Or, if you are diligent, you may be on your way to funding a European vacation or finally redoing that dated bathroom. Learn the how-tos.

Key Points

•   To create a 1-year savings plan, define clear, specific financial goals to prioritize and save effectively.

•   Track all expenses, fixed and variable, for accurate budgeting.

•   Automate savings to avoid spending intended savings.

•   Regularly review progress and adjust budget as needed.

•   Break goals into smaller, manageable milestones for motivation.

Why You Need a One-Year Savings Plan

Before you even glance at your budget, it’s important to get clear about exactly what you’re saving for. Creating a specific objective can give you the information you need to create a solid plan to make it happen — it might also help motivate you to stick to that plan once you’ve made it.

For a one-year saving plan, consider factors like your income and current cost of living to settle on something that will likely be achievable in just a year.

The Importance of Setting Clear Financial Goals

Setting clear financial goals allows you to prioritize properly, save responsibly, and achieve your aspirations. It’s important to be specific about your goals. For instance, saying “I want to save for the down payment on a house someday” is very different from committing to having $100 per paycheck automatically transferred into a high-yield savings account.

You may be familiar with the idea of SMART goals — that objectives are most easily met when they’re:

•   Specific

•   Measurable

•   Achievable

•   Relevant

•   Time-bound

In the world of yearly savings plans, that means coming up with a specific dollar figure for your goal and making sure it’s relevant enough to your life to keep you motivated.

•   You probably also want to consult your earnings and expenses to ensure that it’s a realistic goal; it’s going to be a lot harder to save up $5,000 if you’re making $30,000 than it is if you’re making $90,000 or more. (You’ll learn more about budgeting and cuts in just a second.) Divide your total goal by 12 to see how much it would require you to set aside each month, which will give you better insight as to how achievable it really is.

•   Once you’ve got your goal worked out, write it down. Studies have shown that you’re more likely to reach your financial goals if you take this simple action, so it’s worth picking up your pen!

Decide What are You Saving For

A vital step in the saving process is deciding what you are saving for. It’s not necessarily just one thing. Many people sock away cash for different purposes and in separate accounts. Often, these are for a mix of short-term and long-term goals.

Short-Term vs Long-Term Savings Goals

For instance, maybe you want to accumulate cash within a year for the following reasons:

•   A summer vacation

•   A down payment for a new car

Those are short-term goals. Examples of other dreams you may be saving for simultaneously could include:

•   A down payment (or significant portion thereof) for a new home

•   Long-awaited home improvements

•   Your child’s education

•   Your own retirement

These are longer-term goals, ones which you may not expect to realize for, say, a number of years or perhaps even decades from now.

•   A vacation you’ve been dreaming of for years (pending pandemic complications, of course).

•   A down payment for a new car.

•   A down payment (or significant portion thereof) for a new home.

•   Long-awaited home improvements.

•   Putting extra money away for retirement.

Steps to Build a Successful One-Year Savings Plan

Now that you’ve got a goal or multiple goals in mind, you need to figure out how to execute your savings plan, focusing on the year at hand.

Start with Your Existing Budget

You can’t make any big changes to your finances if you don’t know what they look like in the first place. And that means the first step toward revamping your budget is to take a closer look at how it looks right now.

If you don’t have a budget yet, there are many different budgeting methods to consider. Most will benefit from you taking a month to track exactly where all your money is going.

Be sure to include both regular, fixed expenses, like rent and insurance, as well as more flexible, discretionary spending like dining out and entertainment. Be brutally honest. Tacking every cent of fixed vs. variable expenses will give you the best chance at figuring out how to spend less.

Which leads us to our next step…

Get Creative with Budget Cuts

As you work on your 1-year savings plan, remember that there are really only two ways to save money: Make more of it, or spend less of it. And while asking for a raise or starting a side-hustle might be smart moves, you may only have so much leeway with your boss and time in your day. In other words, you likely have more control of how much you spend than how much you earn.

There are simple ways to cut down monthly expenses and save money daily. For instance, could living without streaming services be possible? Or could you quit dining out for one month and then vow not to buy any new clothes the next? A challenge like that can engage some people’s competitive spirit.

Even without these measures, how can you dial down your own living expenses? You might quit buying overpriced convenience foods or find ways to get creative with ramen. Maybe you can start doing your own oil changes rather than taking the car in for service. Think of this as an opportunity to learn some new life skills while also stashing some extra cash. It can help propel you forward on your annual savings plan.

Regardless of how you get there, your goal is to be able to set aside the monthly amount you’ll need to meet the one-year savings goal you wrote down and pinned to your bulletin board. So get out your calculator, and don’t be afraid to get creative.

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Prioritize High-Interest Debt

A good way to free up money for savings is to reduce your high-interest debt (typically credit card debt). This way, the money you are spending on interest disappears and you can put those funds toward your goals.

There are a number of ways you may be able to pay off your debt, including:

•   The avalanche method, in which you focus on paying off the highest-interest debt first while making minimum payments on your other accounts

•   The snowball method, in which you focus on paying off the smallest debt first while making minimum payments on other debts

•   A debt consolidation loan, which is a form of a personal loan that allows you to combine multiple credit card debts into one more convenient payment, potentially at a lower interest rate.

•   You might get a balance transfer card, which will allow you to pay 0% interest for a period of time, during which you can focus on eliminating your debt.

Make a Plan for Your Money

No matter how much money you save, it won’t go as far as it could if you just stash it under your mattress. Figuring out where to put your savings is an important step in your planning.

Different kinds of accounts are used to help individuals save for different goals.

•   For example, a long-term goal like retirement may be best suited for an investment vehicle like a Roth IRA, which can offer some tax advantages. (Keep in mind that investments are not insured and carry risk.)

•   For shorter-term goals like starting an emergency fund, an account that offers more flexibility and has fewer restrictions, like a high-yield savings account, may be a better option.

Recommended: Savings Calculator

Keep it Simple

Having a plan is one thing. Sticking to it is another. But if you keep a simple savings plan, you’ll stand a much better chance of actually making it work.

For instance, automating your finances by setting up recurring transfers can direct a portion of each paycheck into your savings account. This makes saving seamless — and ensures you don’t get stuck in that all-too-familiar situation at the end of the month where you accidentally spent what you intended to set aside.

And building in systemic cuts that you don’t have to think about (like ditching some monthly subscription services, for example) can be a lot easier than poring over the coupons that have flooded your email inbox and may just entice you to spend more.

Recommended: Money Management Guide

Tips for Staying on Track With Your Savings Plan

Regularly Review Your Progress

Given that you are implementing a yearly savings plan, it can be wise to check in frequently on your progress. Reviewing your progress at least once a month can help you see how much you’re saving and tweak your budget if needed.

Also, your financial institution, whether you bank at a traditional or online bank, may offer tools to help you track your money. See what they have that could help in your savings journey.

Automate Your Savings

As mentioned above, having money whisked out of your checking account into savings can be a valuable way to make the process seamless and effort-free.

You don’t need to remember to make a transfer, nor do you see the money sitting in checking, possibly tempting you to spend it: That’s the beauty of automatic savings.

The Takeaway

As with most money goals, embracing a 1-year savings plan is going to take some planning and energy. But by being clear about your aspirations, breaking them down into manageable chunks, and having the right banking tools and partner to help you make progress, you can likely be on the road to success.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 up to 3.80% APY on SoFi Checking and Savings.

FAQ

What are common challenges in sticking to a savings plan?

Common challenges to sticking with a savings plan include not having budgeted well (and therefore running out of cash for essentials), not automating the process, and experiencing unexpected expenses. These and other factors can derail a savings plan

How much should I aim to save in a year?

How much you should aim to save in a year depends on a variety of factors, such as your income, expenses, and cost of living. That said, the popular 50/30/20 budget rule recommends that people spend 50% of their take-home pay on necessities and 30% on wants (discretionary spending), and 20% of their earnings should go toward savings and additional debt payments. That can help you determine the right amount to save.

What’s the best way to track my savings progress?

The best way to track your savings progress will likely be a personal decision. Some people like to check in with their money (say, by a banking app) daily. Others like to sit down monthly or quarterly to review where they stand. There are also a variety of tools that can highlight your savings progress and even gamify it. See what your financial institution offers, or you might consider third-party options.

How do I adjust my savings plan for unexpected expenses?

When unexpected expenses occur, you might use funds in your emergency fund. If so, you will need to earmark money to gradually rebuild what you deducted. Or you might temporarily lower the amount you are saving in order to cover the costs that cropped up and then return to your previous level of savings at a later date.

How can I stay motivated to reach my savings goals?

You can stay motivated to reach your savings goals in a few different ways. First, breaking down goals into smaller, manageable chunks can help you see your progress, which can build confidence and motivation. You might also celebrate your successes in a low-cost way or let a trusted friend or family member know that you’ve hit a goal so they can offer congratulations. In general, having a savings buddy to encourage you can be a smart step.

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SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).

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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
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INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
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For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.


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Feb
20
2025
50-30-20 budget rule

The 50/30/20 Rule: Budgeting Your Money Wisely

By | Budgeting & Goals, money | No Comments

The 50/30/20 budget rule (aka the 50 30 20 rule) is a simple budgeting technique that involves dividing your money into three basic buckets. It can be an effective way to manage your earnings, allocating 50% of your take-home income to “musts,” 30% to “wants,” and 20% to saving for your future.

For anyone who has ever felt that budgeting was too complicated and headache-triggering to take on, this guideline can make things clear and easy.

Key Points

•   The 50/30/20 budget rule simplifies financial planning by allocating income into three categories: needs, wants, and savings.

•   Essential expenses should take up 50% of after-tax income, covering necessities like housing and food.

•   Discretionary spending, or “wants,” should account for 30% of the budget, including entertainment and non-essential purchases.

•   Savings and financial goals should receive 20% of income, emphasizing the importance of future financial security.

•   This budgeting method was popularized by Senator Elizabeth Warren to help individuals manage finances more effectively.

What Is the 50/30/20 Rule?

The 50/30/20 budget or “rule” is a budgeting framework that can be relatively easy to create and implement. It’s one potential way to help keep your finances on track and help you work towards your goals.

The 50/30/20 numbers refer to percentages of your take-home income that you would allocate to three main categories: ”needs” or “musts” (essentials), “wants” (nonessentials), and saving (financial goals), respectively.

The primary goal of the 50/30/20 rule is to learn to prioritize saving money by making it a key part of your spending plan.

Everyone’s financial needs and goals are different, however. And, while these percentages can be a great starting point, you may find that you need to tweak these exact numbers to better suit your needs and current financial situation.

Where Did the 50/30/20 Rule Come From?

The 50/30/20 budget rule gained popularity when Sen. Elizabeth Warren explained it in her book, “All Your Worth: The Ultimate Lifetime Money Plan,” which was first published in 2005.

The simplicity of the concept (and the math) contributed to its appeal. The idea of dividing one’s money into three instantly understandable buckets proved to have staying power.

How the 50/30/20 Rule Works

In the 50/30/20 budget, you allocate your take-home (or after-tax) income into three main categories or buckets according to percentages.

Recommended: Check out the 50/30/20 calculator to see a breakdown of your money.

50% to “Needs”

These are things you cannot live without and the bills you cannot avoid paying. Consider them the “musts;” the items that you need to survive or that would leave you in a difficult situation if you didn’t pay them.

Here are some examples of typical needs:

•   Rent or one of the different kinds of mortgage payments that are possible (in a nutshell, your housing costs)

•   Utilities, including electricity, wifi, and water

•   Car payments and/or other transportation expenses (say, to get to work)

•   Groceries (but not that pricey takeout salad)

•   Basic clothing (what you need to wear in daily life, at work, and/or to stay warm; not the latest style of jeans just because they’re cool)

•   Insurance payments

•   Healthcare costs

•   Debt payment, such as the minimums on student loans and/or your credit card

The “needs” category does not include items that are extras, such as Netflix, dining out, and clothing beyond what you need for work. Those fall under the next category.

30% to “Wants”

Also known as personal, discretionary, or nonessential spending, these are the things you buy that you could technically live without. This includes:

•   Dining out or takeout food

•   Going to the movies, a show, or a concert

•   Vacation/travel costs

•   Streaming channel subscriptions (unless they are somehow vital for your work)

•   New clothes, simply because you feel like buying them

•   Electronics that are cool but not vital to your job

•   Spa treatments

•   Ubers or taxis instead of public transportation.

Wants are all the little extras and upgrades you spend money on that make life more fun.

20% to Savings

This is the money you save for future financial goals. This category often provides a means to financial security. This includes:

•   Money put into an emergency fund

•   Saving for a down payment on a home

•   IRA or other retirement contributions

•   Extra payments to help pay off your loans sooner (minimum payments are part of the “needs” category).

Even though the budget is written as 50/30/20, the purpose of this system is to prioritize the saving aspect, this 20%. (It may be more appropriately named the 20/50/30 budget.) The goal here is to get people to save for tomorrow rather than just spend today.

The idea is to make space for the 20% without laboring over the rest. The minutiae of where your fun money is going ($5 for a latte here, $10 for an appetizer there) isn’t super important if you’re saving enough to meet your financial goals.

Another point to note: If you aren’t saving 20% of your income right now, that’s okay. The process of setting up the 50/30/20 budget will help you find out where your money is going so that you can make adjustments. After completing your budget breakdown, you can address the areas where you’d like to cut back.

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Benefits of the 50/30/20 Budget

The 50/30/20 rule may be a minimalist budget, but it can pack the same powerful benefits you would get with a more labor-intensive budget.

Some of the payoffs of setting up and following a 50/30/20 include:

•   Knowing where you stand. As a popular adage goes, “what gets measured gets improved.” It can be hard to start spending less and saving more if you aren’t clear on how much and where you are currently spending.

•   Identifying easy ways to cut back. As with any budgeting process, the 50/30/20 budget can reveal opportunities to cut back on spending. Simply going through the process – and seeing exactly where your money is going each month – can help to motivate you to make some relatively pain-free adjustments.

•   Reducing financial stress. While building a budget may seem like a stress-inducing exercise, it can ultimately relieve a lot of financial worry. It can add structure and clarity to your spending. Instead of angsting over every purchase, you’ll have built-in boundaries that allow you to spend freely within your budget.

•   Simplifying the budgeting process. By having fewer categories than a traditional monthly budget, the 50/30/20 rule of thumb can be easy to set up and to maintain. It can also be simple to track a 50/30/20 budget digitally.

•   Achieving your savings goals. By making saving a priority and setting some money aside before you start spending, a 50/30/20 budget can help you work effectively towards your financial goals. Whether that’s creating an emergency fund, making a down payment on a home, or going on a great vacation is your decision.

Tips for Implementing the 50/30/20 Budget

Want to give the 50/30/20 budget a try? If you decide to go this route, or you’re just looking for some budgeting basics, here are some steps you can take to get started.

Gathering Your Financial Records

To get started with any kind of budget, it’s helpful to collect the last three months or so of bank and credit card statements, pay stubs, receipts, and bills.

Calculating Your Monthly Income

You can use your statements to figure out exactly how much money you are bringing in each month after taxes are taken out. You can think of after-tax dollars as the pot of money you have to siphon into the three budget categories each month.

Setting a Savings Target

You may want to begin with the most important category, which is the 20% (savings). Since the goal for this budget is to turn the 20% into a nonnegotiable part of the plan, you’d calculate 20% of your monthly after-tax income and set that figure aside for things like debt repayment, cash savings, retirement investing, and any other financial goals that you have.

Even if you don’t feel it’s realistic for you to put 20% into saving right now, you might run the exercise assuming that you will. You’ll be able to tinker with the numbers later.

Calculating Essential Monthly Expenses

Next, you may want to make a list of all of your monthly essential or fixed expenses, such as rent/mortgage, utilities, groceries, and insurance.

Currently, do essential items absorb more than 50% of your take-home income each month? If so, what percentage do they comprise? And, is there any way to reduce any of these monthly expenses?

Building a Hypothetical Budget

After adding up savings and essentials, what is left over is what can be allocated towards discretionary spending, or the “wants” outline above.

It can be helpful to keep in mind that the 50/30/20 numbers are just a guideline. If the cost of living is high where you live, for example, it may not be feasible to keep essentials to 50% of your take-home income. In this case, you may need to reduce spending on wants.

Or, you may decide that at this point you can’t quite afford to put 20% into savings. There are variations on the 50/30/20 theme that accommodate these situations, such as the 70/20/10 rule, which acknowledges that for some people, a hefty 70% will be needed for the “musts” of life.

Recommended: Cost of Living by State Comparison

Once you see your numbers in black and white, you can play with the percentages and come up with a workable plan for roughly how much you can spend on nonessentials, or fun, each month.

Putting Your Plan into Action

Now that you have a basic guideline of how much money you will put into one type of savings account each month and how much cash you can spend each month on wants, it’s time to give your budget a try.

You may want to plan on tracking your spending for two to three months to start. You can do this by saving receipts and logging expenses according to the three categories at the end of the day. Or, you could use a budgeting app that makes it easy to track and categorize expenses.

Another tip: Try automating your finances and having money transferred from your checking account to your savings right after payday. That way, you won’t see the cash sitting in your checking account and think it’s there for the spending.

Making Some Tweaks

After tracking your spending for several months, you’ll probably have enough data to refine your original 50/30/20 budget. From there you can adjust the categories based on your actual spending, not just your projected spending.

You may also find that you need to adjust your spending. Discretionary spending is typically the easiest place to do some trimming.

You may decide you need to cook at home (rather than get takeout) a few more times a week, save on streaming services by dropping a channel you rarely watch, or ditch the gym membership and work out at home.

It may also be possible to pare back some of your fixed monthly expenses. Reducing utility bills, saving on gas, and, if possible, rent, could free up more money for fun spending. You may also want to look into whether you are paying bank fees. Switching to an online bank or other financial institution with low or no fees could free up a bit more money in your budget.

After making some adjustments, you can execute your new and improved budget. You may want to continue to track spending in a method that works best for you until spending according to your budget becomes second nature.

Recommended: How to Make Money From Home

The Takeaway

The 50/30/20 rule of thumb is a set of easy guidelines for how to plan your budget. Using them, you allocate your monthly after-tax income to the three categories: 50% to “needs,” 30% to “wants,” and 20% to saving for your financial goals.

Your percentages may need to be adjusted based on your personal circumstances and goals. But using this simple formula can be a good way to get a better handle on your finances, and to start working more effectively towards your goals.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 up to 3.80% APY on SoFi Checking and Savings.

FAQ

Is the 50/30/20 rule a realistic goal?

For many people, the 50/30/20 rule is a realistic way to budget for essentials, discretionary expenses, and savings contributions. For others, it may not be realistic. If you are just starting your work life, earn a lower salary, live in an area where housing is very expensive, or have considerable debt to manage, you might do better with a different budget guideline.

Is the 50/30/20 rule weekly or monthly?

When budgeting, people typically work with their monthly expenses, since that is how housing costs, utilities, and other payments (say, student loans and credit card debt) are assessed. You could, however, apply the 50/30/20 guideline to your weekly spending and see how your finances are tracking.

What is the 60/30/10 rule budget?

The 60/30/10 budget is a different version of the 50/30/20 rule that can work well for those with higher costs of living. It allocates 60% more for the “musts” of life and 30% for discretionary spending. The remaining 10% is for saving and paying off debt.

What is the 70/20/10 rule for money?

The 70/20/10 rule is a budgeting system that allocates 70% of one’s take-home income towards “needs” (minus debt) and “wants” (discretionary spending), 20% to saving and investing, and 10% towards debt repayment or donations.

About the author

Julia Califano

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.


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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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

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As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

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Examining the Price of Eating at Home vs Eating Out

By | Budgeting & Goals, money | Comments Off on Examining the Price of Eating at Home vs Eating Out

Americans are spending more money to eat out than they do for groceries. According to USDA (U.S. Department of Agriculture) data, in the most recent year studied, 58.5% of money spent on food went toward food away from home, and the remaining 41.5% went toward food at home.

These expenses can be tweaked to stick to a budget, if needed. While cooking meals at home can be time-consuming, there are ways to make the process easier. And when you do eat out, there are a few simple steps you can take to save money.

Key Points

•   Americans currently spend more of their food budget on dining out than on groceries.

•   Cooking meals at home can lead to significant savings and healthier eating habits.

•   To save money when dining out, consider sharing meals, skipping drinks, or ordering appetizers.

•   To save on groceries, use what ingredients are on hand, buy what’s on sale, and shop at wholesale clubs.

•   Gradually increasing the number of home-cooked meals can improve both health and finances.

Cooking at Home vs Eating Out: How They Stack Up

The pros and cons of eating at home vs. eating out have long been debated. As you’re deciding between the two, here are some factors to consider.

Is It More Expensive to Eat Out?

Because of inflation, grocery prices have been on the rise over the past year, though not as much as eating out. According to USDA data, the cost of food at home rose 1.2% in 2024, while the cost of food away from home rose 4.1%. That percentage for food at home is a bit below the usual figure, while the change for food away from home outpaced the typical annual statistic. That means dining out may drain your checking account more quickly than eating at home would.

Also, of course, eating out can involve additional charges vs. eating at home. You might have to pay for parking or transportation to the restaurant, you might order a pricey cocktail (or pay for bottled water), and then there will likely be a tip left as well. These can be reasons why eating at home can cost around $4-$6 per person, while dining out can be $15 or significantly more per person.

Is it Healthier to Eat at Home?

When you cook at home, you’re able to control what goes into each dish. You can easily make adjustments like reducing the amount of butter or using milk instead of cream.

And if you have any dietary restrictions or allergies, you don’t have to worry about consuming something you shouldn’t when you cook for yourself.

Research has shown that cooking at home typically leads to healthier choices. Generally, the more people cook at home, the healthier their diet, and the fewer calories they consume.

It can also be financially healthy to eat at home. For instance, you can cook with ingredients you have on hand or design your menu around what’s on sale at the supermarket. These moves can help you save on groceries.

How Much Time Will It Take to Cook at Home?

There’s no way around it, cooking can be time-consuming. But it also takes time to go out to eat or pick up a takeout order.

If you’re trying to do more cooking, don’t overextend yourself upfront. If you’re used to dining out several nights a week, pick one or two nights to make dinner at home. You can gradually increase the frequency to three nights a week, and so on.

Cooking is like any other skill. The more you do it, the better you’ll get. Find some go-to recipes that are easy to prepare and affordable. For instance, sheet pan dinners can be great for those with a hectic schedule. Stock your pantry with the essentials so you’ll have all the staples you need on hand. (Tip: Shopping at wholesale clubs can reduce the costs of those staples.)

Over time, you’ll become more comfortable in the kitchen, and what used to take you a half hour to do, will take you just minutes. Plus, you’ll be rewarded with a delicious meal you made yourself. Now you’ve maximized your time and money!

Recommended: Guide to Practicing Financial Self-Care

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Tips for Saving Money While Dining Out

Going to your favorite restaurant is one of life’s little pleasures. And you don’t have to give it up. There are a few ways to curb your spending, and manage your money, while still enjoying a great meal. Here are some simple strategies that could help reduce your bill.

1. Not Ordering a Drink

Skip the drink the next time you want to cut down on your restaurant tab. Restaurants tend to substantially mark-up the prices of drinks. They may charge two to three times the bottle cost for craft beer, for instance.

Or, if you want to treat yourself to one drink, spend wisely by sticking to just one and really savor it.

2. Skipping Dessert

A lot of the mark-up for desserts goes toward labor costs. A talented, creative pastry chef can be expensive to keep on staff. As a result, many high-volume casual restaurants outsource their desserts.

One creative way to save money is to eat your dinner out and then have dessert at home.

3. Sharing a Meal

Portion sizes at restaurants tend to be oversized. Share a salad and an entree with your dining mate to cut costs and calories. (You can use a peer-to-peer transfer app to split the bill.)

If your friend or family isn’t interested in sharing, save half of your meal for lunch or dinner the next day.

4. Go During Happy Hour

Instead of meeting friends for dinner, join up for happy hour instead. You can catch up over drinks and an appetizer or two, while enjoying discounted happy hour prices. You’ll get the experience of eating out, and pay less for it. You can put the money you save in your bank account.

5. Ordering an Appetizer as Your Meal

Instead of a full entree, order from the appetizer menu instead. These items typically cost less and may come in smaller portion sizes, too.

6. Limiting the Number of Times You Eat Out

If you go to restaurants a lot, you could start to cut back. For example, you could save eating out for once or twice a week. Not only does that make it feel more special, you can savor every bite without blowing your budget.

Recommended: 10 Personal Finance Basics

The Takeaway

Eating out can be expensive, but there are ways to trim costs so that you can enjoy your food without stressing over the bill. For instance, skipping extras like dessert can keep the price down. And eating at home a little more often could help you save money — and may be healthier as well. With a bit of effort, you can likely hold onto more of your cash when paying for food.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 up to 3.80% APY on SoFi Checking and Savings.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).

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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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.

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 Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOBNK-Q125-045

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20
2025
Tips to Track a Money Order

Tips for Tracking a Money Order

By | Budgeting & Goals, Family Finances, money | Comments Off on Tips for Tracking a Money Order

A money order can be a safe and reliable way to send money, but what happens when the recipient doesn’t receive or cash it? It’s possible to track a money order to make sure it is delivered to the intended person, but doing so may come at a cost. While the process for tracking varies by issuer, it’s usually helpful to have the receipt and money order details before filing a request.

If you are handling money orders and want to verify that they arrive at their destination and are cashed, read on.

Key Points

•   Money orders can be tracked using the receipt and details provided at the time of purchase.

•   Tracking methods vary by issuer, but typically involve using a tracking or serial number.

•   If the receipt is lost, a request can be filed with the money order issuer, but fees may apply.

•   Contacting the recipient directly can sometimes save time and cost in tracking a money order.

•   Money order tracking can help recover lost payments and protect against fraud, but it may take time and incur fees.

What Is Money Order Tracking?

Money orders are a way of transferring money. They are prepaid with cash or a debit card vs., say, pulling money from your checking account when they are cashed.

They differ from personal checks and cashier’s checks in one important way: There is no sign in your bank transaction history if and when the money order has cleared. This can raise the question “How do I track a money order?”

Figuring out how to trace a money order is fairly straightforward if you’ve kept your receipt. When you purchase a money order, the issuer should provide a receipt with a tracking or serial number that can verify if it has been cashed or deposited. Senders can submit details from the receipt through the issuer’s website or automated phone line to track the money order.

Without a receipt, however, money order tracking becomes more difficult. You’ll likely need to file a request with the money order issuer. Doing so will probably incur fees and may take several weeks to complete but can hopefully help reduce your financial stress.

Recommended: Ways to Manage Your Money

What Do You Need in Order to Track a Money Order?

Depending on the issuer you used, extra information could be needed beyond the tracking or serial number on the receipt. Additional information will probably be necessary if you’ve misplaced the receipt. Here are more specifics:

•   Tracing a postal money order can be done online or by phone. The following details, which are listed on the USPS money order receipt, are required.

◦   The dollar amount

◦   The post office number

◦   The money order’s serial number, which is typically a 10 or 11-digit code.

However, if you don’t have a copy of the receipt, you’ll have to fill out and submit PS Form 6401 to initiate a money order inquiry.

•   Tracking money orders from other issuers, such as MoneyGram and Western Union, can usually be done online or by automated call center. This is provided that you have the serial number and exact payment total.

   If you’ve lost the receipt, you’ll need to supply more details about you and the recipient, such as:

•   Your name, phone number, and address

•   The exact money order amount

•   The purchase location address

•   The date and time of purchase

•   The payee’s (or recipient’s) name, if included on the money order.

Recommended: How to Cash a Postal Money Order

Get up to $300 with eligible direct deposit when you bank with SoFi.

No account or overdraft fees. No minimum balance.

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Tips to Track a Money Order

Before picking up the phone or filling out any paperwork, consider these tips for tracking money orders.

Contact the Recipient

Before you get to work tracking a money order, consider that you might be able to save time and potential cost by reaching out to the intended recipient. This individual or business is referred to as the payee on the money order.

You can ask if the money order was received. It’s possible that the money order arrived and has yet to be cashed or deposited. Contacting the recipient directly could be simpler than submitting a request with the money order issuer.

Make Sure You Keep the Issuer Receipt

Another route involves using the details from the receipt. Money orders can be purchased at banks, post offices, check-cashing businesses, and retail stores like supermarkets and pharmacies. When you buy a money order, you may receive receipts from both the issuer and location you purchased it. For example, a money order bought at a pharmacy could be issued by MoneyGram or Western Union. Note that the issuer receipt is the one with the information (i.e., serial number and dollar amount) you’ll need to track your money order.

You might have to pay an extra fee and complete additional forms to track a money order without a receipt and the serial or tracking number.

Check the Status Before Submitting a Request

There are multiple ways to check the status of a money order. If you have your serial or tracking number and the money order amount, you should be able to verify online or by automated phone line whether it has been cashed or deposited. This could be free, or there may be fees (up to $15 or more), depending on the vendor.

There are also likely fees and significant waiting times when submitting a request for a copy of the paid money order. The situation is similar if you choose to investigate a money order you believe to be missing or stolen. Checking the money order status beforehand can quickly determine if it’s been cashed and guide your next steps.

Recommended: How to Deposit a Check

Reasons Why Someone Tracks a Money Order

Money orders are considered a safe form of payment, but there are reasons why you might want to track one. Accounting for your money, after all, can be an important aspect of managing your cash effectively and reaching your financial goals.

Recover Lost Payment

A lost money order can be a major inconvenience, especially if you were waiting for the funds to make timely payments. Tracking the money order can help determine if it’s gone missing and recover funds more quickly.

If you are expecting a money order that doesn’t arrive, it’s wise to contact the issuer and complete any required documents quickly.

Protect Against Fraud

Tracking a money order can help protect senders in cases of theft or fraud. In such an event, requesting a photocopy of a cashed money order can support a fraud claim and potentially get your money back. The photocopy will indicate who endorsed the money order. If the signer does not match the payee, you could get a refund since their identity wasn’t properly verified.

How Long Does It Take for a Money Order to Send?

A money order can be purchased and prepared quickly — simply add the recipient’s information, put your address, fill out the memo (if desired), and sign. From there, how long it takes to send depends on the delivery method. If handing it over in person isn’t feasible, sending it via USPS First-Class Mail can deliver the money order in one to five business days, though it might take longer in some cases.

Once received, a money order can show as available almost immediately, but in terms of how long it takes to clear fully, that might be from a couple days to up to a couple of weeks.

Recommended: Emergency Fund Calculator

Tips for Protecting Yourself When Tracking a Money Order

Although money orders are generally a secure form of payment, they can potentially be used for money scams and fraud. Consider using these tips to protect yourself.

Fill out the Recipient Information Immediately

As soon as you purchase the money order, enter the recipient name in the payee field to help safeguard yourself from fraud.

Save the Receipt

After filling out the money order, be sure to detach the money order stub and any receipt. Storing the receipt in a safe and accessible place will make it easy to track the money order in real time. It also provides the necessary information to file a request for cancellation and alert law enforcement in case the money order is damaged, lost, or stolen. It’s recommended to hold onto the receipt until the money order has been cashed.

Wait Before Spending Any Funds

If you receive payment by money order, it’s advised to hold off on using any funds until they’ve been verified by the issuer or cleared by your bank. In the event a money order is fraudulent, you could be liable for any amount spent.

Recommended: How to Send and Receive Money From Someone Without a Bank Account

The Takeaway

A money order is usually a secure way to transfer funds to a payee instead of using cash or a check. It can typically be tracked to ensure that it has been received and cashed by the designated payee. Keeping the receipt and other details will streamline the tracking process if you do need to verify the money order’s status. It can take a bit of time and money to trace a money order if it goes missing.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 up to 3.80% APY on SoFi Checking and Savings.

🛈 While SoFi does not currently offer money orders, our checking and savings accounts offer other ways to transfer money.

FAQ

Does it cost money to track a money order?

Some issuers let you use the serial or tracking number to track the money order for free online. Otherwise, you may have to pay a small fee. Investigating a lost or stolen money order typically carries fees, often around $15.

Where can I track a money order?

You can track a money order online, by phone, or going to the issuer in person.

How do you cash a money order?

You may be able to cash a money order at a bank or retailer that issues money orders. In addition, retailers where you have cashed checks in the past (such as your local supermarket) may cash money orders. Cashing it typically requires signing the order, verifying your identity, and paying a service fee to receive the funds.

Photo credit: iStock/Prostock-Studio

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).

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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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.

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 Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

This content is provided for informational and educational purposes only and should not be construed as financial 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.

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