Life & Career Archives

Dec

2024

11 Ways to Make Money While You Drive

By Emily Greenhill Pierce | Financial Independence, Life & Career, money | Comments Off

If you enjoy driving and have access to a reliable vehicle, you may be able to use that everyday skill to make money. There are numerous ways to earn money while driving, whether through ridesharing, delivering food, or being a tour guide.

Not only is this an easy way to bring in some cash, it can be a very flexible gig. You can set your own hours or get behind the wheel when your schedule allows.

Want to learn more about all the ways you can get paid for driving? Then read on, and get ready to start your engine. Here are 11 tips on how to make money while driving.

Key Points

• Before you jump into making money by driving, consider the costs and wear and tear on your car.

• Ridesharing involves using apps like Uber or Lyft to pick up passengers.

• Food delivery through apps like Uber Eats or Grubhub is another way to make money while driving.

• Grocery delivery can be done via apps such as Instacart.

• Other options include delivering goods via services like Shipt or Amazon Flex and helping people move large items through platforms like Taskrabbit or Dolly.

What to Consider Before Using Your Car to Make Money

Before you set out on your new road to earning extra income, it’s wise to make sure that driving to make money is right for you. There are risks and complications when using your personal vehicle that may outweigh the potential side hustle benefits you would reap.

Consider the following before embarking on using your car to make money:

• Wear and tear on your car. Using your car to earn money while you drive can rack up a lot of miles. An uptick in use will put stress on your vehicle, leading to its overall depreciation and potentially more trips to the mechanic.

• Age of your vehicle. The age of your car may impact your ability to earn money. For example, some rideshare companies require newer cars.

• Car insurance. You will need proper insurance to cover yourself and possibly a passenger. There are usually specific insurance requirements to be eligible for ridesharing and other driving gigs, so scrutinize your policy to see how car insurance works for you in this situation.

• Taxes. If you earn more than $400 while driving your car to make money, the IRS considers you an independent contractor. Along with a Form 1040, you’ll have to fill out a Schedule C form. You’ll also be subject to the self-employment tax.

• Cost of doing business. This isn’t necessarily a low-cost side hustle, since you’ll be responsible for gas, vehicle maintenance, and repairs. But as a self-employed worker, you’ll be able to write off those expenses and others, such as mileage, on your tax return.

Bottom line: Make sure you know what you and your car are getting into. You don’t want a scenario where you end up wasting money and your valuable time instead of earning more income.

💡 Quick Tip: Tired of paying pointless bank fees? When you open a bank account online you often avoid excess charges.

11 Ways to Earn Money by Driving

How can I make money driving my own car?

How can I make money driving my own car? The answer depends on where you live, the kind of car you own, other skills you may have, and your personal preferences. But whether you own your car or lease it, the opportunities are out there if you’re willing to grab them.

Here are 11 suggestions on how to make money by driving:

1. Ridesharing

If you’ve ever hopped in an Uber, then you likely understand what ridesharing is all about. A driver uses their car to pick up passengers on demand. This has become a popular way to earn money while driving in recent years. You can drive as suits your schedule, and rideshare companies such as Uber and Lyft strive to make the driver sign-up process as streamlined as possible.

If you have a good driving record, a flexible schedule, and newer four-door vehicle, working for a rideshare app can potentially be a great source of extra income, especially if you’re willing to give up your Friday and Saturday nights to earn prime-hour cash. Your specific earnings will depend on how often you drive, when, and for how long, as well as where you are located. Uber drivers can earn anywhere from $7.70 to $38.65 per hour, with the average coming in at $20.29, according to Indeed.

Recommended: How to Make Money From Home

2. Food Delivery Service

Another way you can be driving to make money: by delivering anything from a smoothie to Pad Thai and back again. When you sign up with food delivery apps such as Uber Eats, Seamless, and Grubhub, you’ll get notifications to pick up food from participating restaurants and drive them to hungry patrons. For every delivery, you’ll get paid.

Drivers for Door Dash can earn anywhere from $7.25 to $40.00 per hour, but the national average hourly pay is $17.14, according to Indeed.

3. Delivering Groceries

If you want to earn money driving without the smell of takeout in your car, consider delivering groceries instead of prepared meals. Apps such as Instacart rely on independent drivers to shop and deliver groceries to people’s homes.

Grocery deliverers can make between $14 and $43 an hour, depending on how busy the local area where you live is. Be sure and check for any requirements. For example, to work for Instacart, you need to be age 18 or older, have a bank account, and be able to lift at least 40 pounds.

4. Delivering Goods to Others

Food isn’t the only thing you can deliver to earn money while driving. There’s a whole world of goods out there that people want delivered. Apps such as Shipt work with drug stores (like CVS) and large retailers (like Target and Lowe’s) to get people what they need.

Looking for another idea? Amazon Flex allows independent drivers to deliver packages on their own schedules for an hourly wage. They do require you to have a mid-size, four-door sedan or larger.

5. Moving Large Items for Others

If you own a van, SUV, or truck and can do some heavy lifting, you could use your vehicle and your strength to make big bucks by helping move items.

Maybe a recent grad can finally afford to move out from their parents’ place, or someone is moving to a new, nearby neighborhood. People like these often need help moving oversized items such as furniture or multiple heavy boxes a short distance.

You can check out websites like Taskrabbit or Craigslist to see if someone needs moving assistance, or register with an online service such as Dolly or GoShare that will connect you with clients.

6. Shuttling Children

With the proper qualifications, you can drive to make money by transporting children. Many working parents need help getting their kids to and from school or to their after-school activities. You can search Care.com or other childcare employment sites for part-time gigs, driving children where they need to be.

Companies such as HopSkipDrive work with school districts and independent drivers to solve child transportation issues. Most of these types of jobs require around five years of experience working with kids, in-person interviews, and background checks.

7. Transporting Elderly People

Some seniors need help getting around town but prefer not to use rideshare services. Check with elder-care services in your community. They may need drivers to help get their clients to a store, an activity, or a doctor’s appointment.

You will likely need similar vetting to that mentioned for chauffeuring children.

8. Driving Tours

If you have the gift of gab and knowledge of your area, being a tour guide could be a fun way to make money while driving. You could register with online companies such as ToursByLocals and create a private driver profile to promote your insider savvy. This could involve showing tourists local highlights so they can take some photos for social media, or sharing hidden treasures that they might not otherwise learn about. It’s a win-win when you use your hometown smarts to boost your financial security.

9. Putting Advertising on Your Car

Here’s a passive income idea that works, though it’s not for everyone: Consider turning your car into a mobile billboard. Companies such as Wrapify and Carvertise will match you with a local advertising campaign and supply you with temporary “wraps” for your car that promote a product. Depending on where you drive and the size of your car, you could make between $264 and $452 a month.

Typically, these businesses want to wrap cars that are on the road and visible for much of the time. If you are doing deliveries by car, this might be a way to bring in more cash.

10. Renting Out Your Car

You can make money off your car without even driving it. Companies such as Turo and Getaround allow you to rent out your vehicle à la Airbnb. They will vet borrowers, cover insurance, and provide you with a device that allows renters to unlock your car without a key.

If you don’t want to do ridesharing, let others do it for you. Companies like HyreCar arrange to lend your car to other vetted drivers who want to earn money for Lyft or Uber. But to really make some dough, you would have to be willing to part with your vehicle often.

11. Being a Safe Driver

Here’s another way that driving can bring in some cash: If you are a safe driver, you may be eligible for a bit of money. For example, Allstate will reward you with a Safe Driving Bonus every six months if you don’t get in a fender-bender.

The State Farm insurance app will track your car to determine if you are driving safely — it monitors things like staying within the speed limit and coming to a complete stop versus a rolling one. You could get up to a 30% discount on your auto insurance.

Recommended: How to Deposit Cash at an ATM

The Takeaway

If you have a vehicle, you can make extra money. Signing up with the right apps and online services can get your car (and your new income stream) up and running. Whether it’s doing deliveries, transporting a sofa, or helping a person get to their destination, you can turn your vehicle (plus your driving skills) into a profit-mobile.

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 4.00% APY on SoFi Checking and Savings.

FAQ

What are the pros of making money while driving?

By using your car to make money, you may be able to set your own hours and be your own boss. It’s also a pursuit that doesn’t require much specialized training. In many cases, you are using a skill you already have.

What are the cons of making money while driving?

Using your car to make money can place a lot of stress and miles on your vehicle. Gas and maintenance prices can really add up. Plus some pursuits, such as helping people move furniture, can be physically challenging.

Is making money with your car better as a side hustle?

Earnings from most car-driving gigs can be sporadic and unpredictable, unless you live in a major city with consistent high demand. For this reason, it may be best to have another form of steady income and drive for cash on the side.

How much can you potentially earn with your car?

How much you can make driving your car depends on the type of job and where you live. On average, Uber drivers earn $20.29 per hour, according to Indeed.

Photo credit: iStock/Hispanolistic

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Dec

2024

12 High Income Skills to Learn

By Rebecca Lake | Building Your Career, Life & Career, money | Comments Off

Want to boost your earning power? High-income skills can translate to a bigger paycheck since employers or clients may be willing to pay a premium to workers who possess them. Generally, high-paying skills are specialized skills that are considered to be in demand. Here, you’ll learn about 12 high-paying job skills, from generative AI (artificial intelligence) to UX (user experience) know-how, that may be worth picking up. They can hold the potential to help earn more money and achieve your financial goals.

Key Points

• High-income skills like generative AI, data analysis, and UX design are in demand and can significantly boost earning potential.

• Learning new skills is essential for adaptability and job security in a rapidly changing job market.

• Specialized training, whether received through degree programs, online courses, or trade schools, is often required to acquire high-paying skills.

• Soft skills, including communication and problem-solving, are valuable and can lead to high-income positions.

• Freelancing and side hustles provide opportunities to apply high-income skills and increase earnings.

Why Learning New Skills Matters

Adaptability and the ability to learn can be invaluable, whether trying to land your first job or gig or one farther along in your career. Learning new skills can help you to better keep up with a changing job landscape. Here, some points to consider:

• Acquiring high-income skills could make it easier to stand out among the crowd when competing for positions or freelance gigs. You may have a more diverse range of job options to choose from. Your skills may also translate to a larger paycheck if they’re sought-after by employers or clients.

• Some of the highest paying jobs are in the computer and information technology fields. If you’re able to learn the skills needed to get those jobs, either as a full-time employee or a freelancer, that could substantially boost your lifetime earnings.

• Relevancy is also a factor. If you’re up to date on the latest high-paying skills that could make you much more valuable in an employer or client’s eyes. Should the company or client need to cut back on staffing, your job could be secure if you hold a skill set that your colleagues can’t match.

Recommended: 25 High-Paying Trade Jobs

15 High-Income Skills to Learn

The best high-income skills to learn are ones that can help you to increase your earnings while also doing work that you enjoy. Certain lucrative job skills may require a college degree to learn, while others can be acquired through online courses and certification programs. There are also skills you might be able to pick up without going to school.

Here are some of the best high-paying job skills to learn now, including remote job skills and tech skills, whether you are looking for a full-time or freelance job.

1. Artificial Intelligence (AI)

As you have likely heard, artificial intelligence, especially generative AI (aka GenAI), is a new technology that is transforming many fields. AI tools can enhance productivity and can be used in a variety of ways, from writing content for websites to providing customer service. One of the keys needs in this realm is to engineer prompts; that is, to fine-tune AI requests to get optimal feedback.

How Much Can Someone With AI Skills Make?

If you build AI skills, you might find a role as an AI developer (average base pay at the end of 2024 is $109,000) or an AI engineer (with a base pay of almost $133,000 on average). That could help you keep a competitive income flowing into your checking account.

What Education Do You Need?

Working with AI likely requires specialized training. This might be offered by a continuing education, professional skills, or trade school program, whether from a renowned university or a smaller organization. You may also find online courses from businesses like Coursera, which specialize in online learning.

2. Data Analysis

Another key skill to consider if you want to earn more is data analysis. Data plays a critical role in decision-making across an array of industries, and being able to gather, parse, and share data is a rising skill. There are many tools that can be part of succeeding at data analysis. Some may focus on working with programs such as Python, SQL, Tableau, or others.

How Much Can Someone With Data Analysis Skills Make?

With skills under your belt, you might expect to earn an average of about $85,000 base pay as a data analyst (who interprets data) to an average of almost $117,000 as a data scientist (who typically uses data to create predictive models). That could help you stash more money in your savings account or pay down debt.

What Education Do You Need?

You will likely need to build your skills. There are online courses, often ranging from four to 16 weeks, to start your education. These could be hosted by small, focused companies, local colleges, or high-profile universities, such as Harvard or Cornell’s online continuing education divisions. A data scientist will typically require a graduate degree.

3. SEO Skills

SEO, or search engine optimization, involves knowing how to structure website content in order to push it to the top of search engine rankings. This skill is in high demand, and businesses are willing to pay well for it. The reason: Higher search rankings can translate to more clicks and more purchases.

How Much Can Someone With SEO Skills Make?

It’s possible to find full-time SEO jobs, but you could also offer freelance SEO services if you’d like to be your own boss. The average annual pay for an SEO strategist is currently about $95,000.

What Education Do You Need?

Studying guides and information published by SEO experts can be a good starting point for learning more about this skill, and there are online courses as well, many of which provide certificates.

4. Cybersecurity

As so many aspects of our lives shift to digital realms, cybersecurity has been rising as a key need, for private individuals, enterprises, and the government. There has unfortunately been a significant uptick in online security breaches. These hacks can lead to sensitive data falling into the wrong hands as well as financial loss, bank fraud, and identity theft.

How Much Can Someone With Cybersecurity Skills Make?

Learning how to protect platforms and systems from these issues can be a valuable skill as well as one that can pay a competitive salary. According to the Bureau of Labor Statistics, the median pay for an information security analyst is approximately $120,000 per year.

What Education Do You Need?

Cybersecurity can involve training at such options as a trade school, continuing-ed program, or online academy to build skills. Certifications can be a valuable achievement as you gain deeper expertise. While you don’t necessarily need a college or postgrad degree, it can be helpful in opening doors to some paths in cybersecurity.

5. Copywriting

Copywriting involves creating written content that’s intended to inform, entertain, and/or persuade. Similar to email marketing, copywriters help businesses and brands to sell their products and services.

Some of the ways you could leverage high-income skills as a copywriter include writing website content, sales pages, marketing emails, sales brochures, or newsletters. Copywriting allows for further specialization if you’re focusing on a single niche. For example, you might write for petcare companies or companies in the beauty or wellness niche. If you cultivate a niche, copywriting can allow you to channel your personal interests (such as travel or fitness) into your work.

How Much Can Someone With Copywriting Skills Make?

The average salary for a copywriter is about $62,000, but the top 10% earn more than $121,000. Additionally, copywriting can be a pursuit that lends itself to gig work and freelancing, so it can be a way to bring in additional income.

What Education Do You Need?

Some people have an innate “way with words” and don’t need any specialized education to hold a job as a copywriter. Others may want to build their copywriting skills, which may be offered by a professional or continuing education school.

6. Software Development

Software developers create operating programs for computers and other devices. Keeping user needs in mind, they typically design, build, test, and then maintain software. They use a variety of skills and tools to do so, and may also create applications for mobile devices and computers.

How Much Can Someone With Software Development Skills Make?

According to the Bureau of Labor Statistics, software developers earn a median pay of about $120,000 per year, so this could be a good high-income skill to learn if you’re hoping to earn a six-figure salary.

What Education Do You Need?

Becoming a software developer starts with learning the basics of coding, which is something you might be able to do through a trade school or online coding bootcamp. Some of the skills you may need include knowledge of program languages Python, Java, JavaScript, and C++, among others.

7. Web Development

Web development is similar to software development, but the focus is on creating websites and web applications. Web developers need to be knowledgeable about programming languages like HTML, CSS, and JavaScript. They also have to be familiar with different website-building platforms, such as WordPress. A web developer may work with a web designer to create new sites for clients or redesign existing ones.

How Much Can Someone With Web Development Skills Make?

According to Ziprecruiter, typical pay for a web developer is around $93,000 in the U.S.

What Education Do You Need?

To learn web development, you’ll likely need to take an in-person or online course to start learning programming languages. There are likely many options, from those offered by coding academies to community colleges to universities professional studies divisions.

8. Project Management

Project managers oversee the completion of large-scale projects from start to finish, often in information technology (IT) or computer-related fields. The project manager’s primary duty is to help the company or client they’re working with achieve their end goals for the project.

How Much Can Someone With Project Management Skills Make?

According to the Bureau of Labor Statistics, the average salary of a project management specialist is just under $100,00 per year.

What Education Do You Need?

Project managers may require certain hard skills, such as coding knowledge, which can be learned via specialized training at, say, a trade school or via an online course. However, they can also utilize soft skills (more on those below), such as effective communication and the ability to direct a team.

9. UX Design

UX refers to user experience, or how a person interacts with a product or service. It’s an important element of websites and apps, as well as physical products and services. When consumers visit a website or log in to their favorite apps, they want them to be fast and easy to navigate. Likewise, when someone purchases something or signs up for an online service, they want it to function the way they’re expecting it to. UX design experts help to iron out the kinds to deliver the best user experience possible.

How Much Can Someone With UX Design Skills Make?

A UX designer can expect to make around $123,000 per year, according to Glassdoor.

What Education Do You Need?

User experience jobs can require specialized training, depending on whether UX design is delivered for a digital property or something more rooted in the offline world. You may need skills in the realm of information architecture, prototyping, and usability testing. These are typically learned via online courses, bootcamps, and certification programs, though there are also masters degree programs available.

10. Affiliate Marketing

Affiliate marketing means marketing another entity’s products or services and earning commissions each time someone makes a purchase. For example, a blogger who includes affiliate links to Amazon products in their web content might earn money if a reader clicks their links and buys something.

How Much Can Someone With Affiliate Marketing Skills Make?

If pursued as a full-time job, affiliate marketing typically earns a person about $82,000 per year. But affiliate marketing could be an ideal high-income skill to learn if you’re interested in generating passive income online or picking up some freelance work.

What Education Do You Need?

Affiliate marketing can typically be learned (at least the beginning stages) via online guides and courses.

11. Mobile App Development

Mobile apps are part of many people’s daily lives. They can offer convenience if you’re using them to log in to your online bank account or manage your investments. Other apps can provide entertainment if you’re using them to watch videos, play games, or listen to music.

Companies can hire mobile app developers to create apps and test them before releasing them to the market. It’s possible that you could even try moonlighting work, and create your own mobile app and sell it, in some cases building a six-figure business in the process. Or it could be your main gig.

How Much Can Someone With Mobile App Development Skills Make?

The current average salary for a mobile app developer is around $110,000, according to Ziprecruiter.

What Education Do You Need?

Mobile app development can be learned in a variety of ways, but one popular avenue is to take online courses at such platforms as Coursera, Udemy, and the like.

Recommended: 15 Low-Cost Side Hustles

12. Soft Skills

Soft skills are a diverse professional toolkit. They’re based on a different sort of knowledge that doesn’t involve learning how to code or develop software. Examples of high-paying soft skills include good communication skills, problem-solving skills, creative thinking, and time management skills. Employers and clients can value those skills just as much as some of the other high-income skills on this list. These skills can be used in high level administrative, coordinator, and management positions.

How Much Can Someone With Soft Skills Make?

While there’s no single skill to cultivate or average salary to cite, these capabilities can help propel a person to a high-income position.

What Education Do You Need?

Building soft skills doesn’t typically require formal coursework. You may find books and podcasts by respected experts that can help you cultivate some of these skills.

Recommended: Life Skills That Can Help You Save Money

What Will Be the Highest-Paying Skills in 2025?

There isn’t one single skill that is destined to pull in major money in 2025. For instance, one person might make loads of money via affiliate marketing due to excellent instincts or having a product go viral, while another person might earn a minimal amount at the same pursuit.

However, a review of an array of sources finds that most say that AI, coding, and data analysis will be very valuable skills to have in the year ahead.

Tips for Developing High-Paying Skills

There are several options for learning the high-paying job skills you might need to succeed. Which one you choose can depend on the skills you want to learn and how much you know about them already. Some of the possibilities for developing high-income skills include:

Completing a two- or four-year degree program at a college or university

• Attending a trade school

• Utilizing online resources, like YouTube or blogs

• Taking paid online courses and earning certifications that are independent of a degree program

• Applying for internships or freelance jobs that could allow you to learn the skills you need

• Asking someone who already possesses your desired skill set to act as your mentor

• Working with a professional coach to help you develop your skills

Some of these options cost money; others don’t. If you’re on a tight budget, then you might want to start with free resources like well-rated YouTube tutorials. After that, you could consider what kind of investment you might want to make in a paid course or degree program.

Trade school can be more affordable than a four-year college or university for learning certain skills. Web development and coding are just two of the high-paying skills you could brush up on. Community colleges and continuing ed programs at universities may also offer affordable classes that will allow you to develop your talents.

If you’re considering applying high-income skills to start a freelance business, it’s also a good idea to give some thought to the financial side. Financial planning for freelancers includes things like budgeting for irregular income, learning how to set your rates, filing taxes, and saving for retirement.

The Takeaway

If your goal is to earn more money, learning some new high-income skills can definitely be worthwhile. From generative AI to UX design to copywriting, there are many avenues to pursue as you build expertise that can help you earn more money.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

What high-income skills can you learn in college?

Depending on what classes a college offers, a student might learn about AI, data analysis, coding, web development, UX, and other high-income skills. Also, many colleges offer online courses or continuing education programs in these topics.

What high-paying skills can you learn for free?

Many of the skills that are high-paying can be learned for free, but it can be wise to make sure that free sources you may use (such as downloadable guides, YouTube videos, and the like) are from respected and reliable sources and have good reviews.

What is the easiest high-income skill to learn?

Determining the easiest high-income skill to learn is typically a matter of “it depends.” So much varies from person to person. One person might be a “natural-born” writer and thrive as a copywriter; another might find that they really spark to data analysis and can whip through a course on the topic.

Photo credit: iStock/nensuria

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 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 a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% 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 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 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 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 Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% 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 12/3/24. There is no minimum balance requirement. Additional information can be found 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.

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.

SOBNK-Q424-068

Dec

2024

What Is Income Tax Withholding and How Does It Work?

By Susan Guillory | Life & Career, money | Comments Off

“What happened?!” may be your response when you look at your paycheck and see all of those deductions, whittling your hard-earned cash down to a (much) lower figure than you expected.

And perhaps, if you look more closely, you’ll notice a line on your paystub that shows a major amount of money subtracted and think, What is withholding tax? And why do they take so much?

Federal and state withholding taxes, also known as “taxes withheld,” are funds that your employer takes out and sends to the government to help federal programs. These taxes have a purpose, and in the long run, you’ll probably be glad they are deducted from your check rather than owed as a mega lump sum on Tax Day.

Read on to learn more about tax withholding, including factors that impact how much gets deducted and how to calculate your withholding taxes.

Key Points

• Income tax withholding deducts money from your paychecks to cover your estimated tax liability, preventing large year-end bills.

• Factors that affect tax withholding include income, filing status, claimed allowances, and extra withholding requests.

• You can adjust your W-4 form to balance withholding, avoiding overpayment or tax debt.

• Withholding exemptions are available for those with no tax liability.

• Withheld taxes support federal programs and public services.

What is Income Tax Withholding?

Many people think their taxes are due mid-April, but the Internal Revenue Service (IRS) actually requires you to pay as you go, meaning you need to pay most of your tax during the year, as you receive income, rather than at the end of the year. When you see those federal and possibly state and local taxes being whisked out of each paycheck, that’s exactly what is happening.

A withholding tax is an amount, based on your salary, that your employer sets aside and then pays directly to the government on your behalf. It’s a credit against the full amount of personal income tax you will owe for the year. By doing this, your employer is helping you avoid a surprise tax bill come April. Tax withholding also helps ensure you won’t owe interest or a penalty for paying too little tax during the course of the year.

That said, how much is deducted from your paycheck can vary depending on a variety of factors. You are able to designate what portion of your check goes toward your taxes on the IRS W-4 form (more on that in a bit).

• If you allocate too much, that means more than necessary is taken out, and you will likely receive a tax refund when you file your taxes.

• If you set aside too little, you will probably owe a balance or have what’s known as a “tax bill” due during tax season to make up the difference.

Your federal withholding tax rate depends on your income and tax bracket.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.00% APY, with no minimum balance required.

Factors That Determine Tax Withholding

There are several factors that determine just how much tax is withheld from your paycheck, whether it arrives as a paper check or via direct deposit. These include:

• How much you earn: Generally, the more you earn, the higher the rate at which taxes are withheld

• Your filing status: For instance, you might file your taxes as single, married filing jointly, or married filing separately.

• How many (if any) withholding allowances you claim: Typically, if you claim a higher number of allowances, your withholding will be lower. This means more cash will flow your way on each payday, but you might owe taxes when you file. If you have a lower number of allowances, more money is taken out for taxes, and you could wind up getting a refund when your tax return is processed.

• Whether you decide to have additional money withheld: Some individuals may ask their employers to withhold, say, an extra $100 or more per pay period if they find they typically owe taxes at year’s end.

Recommended: How to Reduce Your Taxable Income

What Is State Income Tax Withholding?

If you live in a state that levies income tax, you will also see tax withholding for that type of tax on your paycheck. There are just nine states that don’t tax earned income. In other words, you will not pay state taxes if you live in:

• Alaska

• Florida

• Nevada

• New Hampshire

• South Dakota

• Tennessee

• Texas

• Washington

• Wyoming

The concept of tax withholding works in the same way at the state level as it does at the federal: A certain portion is put toward your future state tax bill, and you may either owe or get a refund, depending on how much you paid in.

💡 Quick Tip: Did you know online banking can help you get paid sooner? Feel the magic of payday up to two days earlier when you set up direct deposit with SoFi.

What Is the Purpose of Tax Withholding?

As briefly mentioned above, tax withholding saves you from owing a huge bundle of taxes in April. If people were left to their own devices to set aside money for taxes, well, that might not always be a success. Every time you receive your paycheck, there are bills to pay, dinners out and movies to tempt you, and vacations to plan and take. As a result it can be hard to save money from your salary.

In addition to helping you avoid a surprise tax bill, tax withholding is also a way for the government to maintain its pay-as-you-go income tax system. If you pay too little in taxes throughout the year, you can get hit with an underpayment penalty and interest payments (on top of that surprise tax bill).

Tax and Employment Documents to Know

When you are first hired at a company, you typically fill out a W-4 form. This form is designed to help your employer estimate how much tax you’ll owe by the end of the year. To do this, the form asks you about your family, potential deductions you might claim, and any additional income you earn outside your W-2 job. Based on your answers, your employer will determine how much tax to withhold from your paychecks.

Then when tax time rolls around, you will receive IRS Form W-2. This includes information on how much income you earned in a given tax year, as well as how much you paid in federal, state, and other taxes.

You’ll use this W-2 to file your taxes, and it will determine whether you receive a tax refund, owe more taxes, or break even.

Calculating Income Tax Withholding

It can take a bit of tweaking to find that balance between overpaying in federal withholding and having to pay more when you file your taxes.

Some people like getting a tax refund because it’s a lump sum they can put toward debt or invest. But realize that overpaying is a bit like giving the government a free loan throughout the year.

While there may be fast ways to get a tax refund, perhaps you’d rather just hold onto that money in the first place. If you better balance what is taken out of your paychecks, you could take the excess you would have paid and put it in a high-yield savings account or invest it for the future.

If you’re wondering what is a withholding tax allowance that’s right for you, there’s help. The IRS has a Tax Withholding Estimator you can use based on your current situation. In general, the more allowances or exemptions you have, the less will be withheld from your pay; the fewer the exemptions, the more will be withheld.

While you aren’t asked to fill out a new W-4 each year, you may request one if you think you need to adjust the withholding amount.

Some of the times it might be wise to adjust how much income tax is withheld include:

• Starting a new job or position

• Having a child

• Getting married or divorced

• Buying a house.

Can I Be Exempt from Tax Withholding?

To be exempt from tax withholding means that no federal taxes will be withheld from your pay. You might also have no state or local taxes (if applicable) deducted. Here are the ways in which someone might qualify to be exempt from such taxes:

• If all of your federal income tax was refunded because you have no tax liability and you expect the same thing to happen this year, then you may be exempt from withholding taxes. (But note, Social Security and some other taxes may still be withheld as part of other types of payroll deductions.)

• Certain types of income are considered exempt. For instance, money paid to foster parents for their taking care of children in their homes may be tax-free. Payments from workers’ compensation is another example of funds that may be tax-exempt.

The Takeaway

Paying taxes may not be fun, but it’s important to remember that this money is put toward things we all enjoy, like smooth roads and education programs. And federal withholding from your paycheck keeps you from having a giant bill when you file taxes.

When it comes to tax withholding, it’s important to understand how much is being withheld from each paycheck and whether you need to modify your W-4 to find a better balance between overpaying and owing more money come Tax Day.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Does the government pay for income tax withholdings?

Money that is withheld from your earnings, known as income tax withholding, goes to the government. These dollars help pay for federal programs that benefit citizens and keep our country running, from education to transportation to security.

How can someone qualify for a withholding exemption?

To qualify as tax-exempt, you would have to have had no tax liability in the previous year and expect the same status in the current tax year. Also keep in mind that some forms of income may be tax-exempt, such as payments for in-home foster care of children or for workers’ compensation.

Why has my employer withheld too much income tax?

If your employer withheld too much income tax, then you will likely get a refund at tax time. You can update your withholding on your W-4 form; the more allowances you have, the less money will be withheld to cover your tax liability.

Why has my employer withheld too little income tax?

If you wound up owing the IRS money at tax time, the issue could be that you have too many exemptions or allowances claimed on your W-4 form, meaning your employer is not withholding enough money from your paycheck. You may want to adjust your W-4, knowing that the lower your number of allowances, the more money your employer with withhold and send to the IRS on your behalf.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 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 a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% 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 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 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 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 Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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

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

SOBNK-Q424-083

Dec

2024

What Happens to Joint Bank Accounts When Someone Dies?

By Rebecca Lake | Financial Topics, Life & Career, Life Stages | Comments Off

Setting up a joint bank account can make your financial life easier. But it’s important to understand all the rules and regulations, particularly should tragedy strike.

Typically, joint bank accounts are set up so that both account holders have the right of survivorship. This means that should one owner die, the remaining partner retains full ownership of the funds in the account, and the account doesn’t become part of the probate estate. However, this may not always be the case. There are also some potential tax consequences to keep in mind. Here’s a closer look at the rules that apply to joint bank accounts after the death of an account holder.

Key Points

• With a joint bank account, owners have equal rights to deposit, withdraw, and manage the funds in the account.

• Joint accounts typically include rights of survivorship, allowing the surviving owner to control the account without probate.

• A joint account may be part of the deceased’s taxable estate, potentially incurring estate taxes.

• Inheritance taxes may apply depending on state laws, but spouses often inherit tax-free.

• Income taxes on account earnings are the responsibility of the surviving owner after the co-owner’s death.

What Is a Joint Bank Account?

A joint bank account is a financial account, such as a checking account, shared by two or more individuals. It’s common for married couples to open a joint account to make it easier to manage shared income and expenses. You might also set up a joint account with an aging parent, an adult child, or a business partner.

Joint bank accounts work in much the same way as other types of bank accounts. The main difference is that both people who own the account have full control over it. Each can get a debit card, write checks, and make purchases or cash withdrawals. The money in a joint account belongs to both owners, regardless of which person deposited the funds. For this reason, it’s important to only open a joint bank account with someone you trust.

Like other bank accounts, joint bank accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor in the event of bank failure. That means that a joint account owned by two people is protected up to $500,000. If one of the owners dies, however, their insurance coverage no longer applies. Credit unions offer similar insurance through the National Credit Union Administration (NCUA).

Joint Bank Account Rules After Death

If two people own a joint bank account and one of them dies, the surviving co-owner will typically become the account’s sole owner. The account will not need to go through probate (the legal process of distributing a deceased person’s assets and paying their debts) before it can be transferred to the surviving account owner.

Rights of Survivorship

Most joint accounts at banks and credit unions are set up as “joint with rights of survivorship,” sometimes abbreviated to JWRS. This means that, upon the death of one account holder, the assets are transferred to the surviving account holder or equally to the rest of the owners if there are multiple people on the account. This directive would override any instructions outlined in the deceased person’s will. Some banks may refer to rights of survivorship as “tenants by the entirety.”

While this is the typical set-up for a joint account, it’s wise to check with your financial institution to make sure your account carries automatic rights of survivorship. In some cases, a bank may require you to sign additional documents to indicate this is what you and your co-owner(s) want.

What to Do When a Joint Account Owner Passes

If you co-own a joint account with someone else and that person passes away, the first step you’ll want to take is to notify the bank. You can do this by calling the customer service line and asking to speak with a representative.

Typically, you’ll need to provide the bank with a death certificate or other documentation to confirm the death. If the account includes rights of survivorship, you would not lose access to the account and the joint account would not be frozen after someone dies. The bank may offer you a choice of removing the deceased person from the account or opening a new individual bank account.

What Happens When You Inherit a Joint Bank Account?

Unlike most other assets, joint bank accounts usually don’t need to go through probate. That means you can continue using the funds in the account and won’t have to hand them over to an executor. The transfer of assets could, however, trigger certain taxes depending on the value of the estate and the laws in your state.

Tax Implications of Inheritance

Generally, inheriting assets from someone who dies can mean paying certain taxes at the federal or state level. Here’s a look at taxes associated with an inherited joint bank account.

Estate Taxes

If one of the owners of the joint account dies, a portion of that bank account will contribute to the deceased person’s taxable estate This happens despite the fact that the joint account is not subject to probate or the wishes outlined in the deceased person’s will. However, the federal estate tax in the U.S. only applies to estates that exceed a certain threshold, which as of 2024, is $13.61 million. Unless the deceased has a very large estate, it’s not likely that you would have to worry about any estate taxes associated with an inherited joint account.

Several states have their own estate taxes with thresholds that differ from federal ones. It’s a good idea to consult with a local attorney to find out whether your state is one of them and whether you have any estate taxes to consider at the state level.

Inheritance Taxes

Inheritance taxes differ from estate taxes in that they are paid by the individual receiving the inheritance, rather than by the estate itself. The federal government does not impose an inheritance tax, but some states do have them.

Even if you live in a state with an inheritance tax, however, you may be exempt from paying inheritance taxes on an inherited joint account. Generally, spouses inherit a deceased spouse’s assets tax-free. Immediate family members often pay a reduced inheritance tax rate; unrelated co-owners or beneficiaries to a bank account tend to pay the highest inheritance tax rates.

Income Taxes

When you take on sole ownership of a joint account after the death of your co-owner, you become fully responsible for paying any taxes owed on income earned by the account (such as interest or dividends). Income earned on the account prior to your becoming the sole owner would be reported in the same way it was before the person’s death. For example, if that person reported all of the income earned on the joint account, then 100% of income earned on the account prior to their death would be reported on their final tax return.

The Takeaway

Knowing what to do when there are two names on a bank account and one dies can help you avoid headaches during what’s likely an already trying time. As a first step, you’ll need to report the death and provide a death certificate to the bank. After that, you will likely have sole ownership of the account and can decide what you’d like to do with the money moving forward.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Do joint bank accounts get frozen when someone dies?

Joint bank accounts with rights of survivorship typically do not get frozen when one account holder dies. The surviving account holder usually retains full access to the account without any interruptions. Once the bank receives the death certificate, they will take the deceased person’s name off of the account.

Do joint bank accounts go through probate?

Joint bank accounts with rights of survivorship generally do not go through probate. This is because the funds automatically transfer to the surviving account holder upon the death of the other. The surviving account owner takes over full ownership of the account, regardless of how assets get divided based on the deceased’s will. Once the surviving owner presents the bank with a death certificate, the bank will update the account to reflect the surviving account holder as the sole owner.

Is a joint bank account part of an estate?

If one owner of a joint account dies, a portion of that account will be part of their taxable estate. This is the case even though joint accounts are typically not subject to probate or considered part of the deceased person’s probate estate. Estate taxes may apply to the deceased person’s portion if their estate exceeds certain tax thresholds.

Can creditors go after joint bank accounts after death?

Not typically. After someone dies, their probate estate is responsible for paying off any remaining debts. A joint bank account generally bypasses probate and is transferred directly to the surviving account holder and can’t be used by the estate to pay outstanding debt. One exception: If the co-owner on the joint account co-signed the outstanding debt, they would be fully liable for repayment and a creditor could go after the joint account.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 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 a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% 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 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 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 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 Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% 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 12/3/24. There is no minimum balance requirement. Additional information can be found 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.

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

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.

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

photocredit: iStock/Jacob Wackerhausen
SOBK0223026

Dec

2024

What Are Labor Market Indicators?

By Michael Flannelly | invest, Life & Career | Comments Off

The labor market is a key component of the economy, as it represents the supply and demand for workers and their respective wages. Labor market indicators are statistics that reflect the state of the labor market, providing information about employment levels, wage growth, and other factors that can impact the overall economy.

A wide range of analysts, from economists to investors to business owners to policymakers, pay close attention to various labor market indicators to help gauge the state of the economy. These data can play a critical role in determining how investors and businesses make investment decisions and how policymakers shape laws and regulations that affect society. They can also be important for investors, too.

Key Points

• Labor market indicators offer insights into employment levels, wage growth, and economic health, influencing investment decisions and policy-making.

• Key indicators include the unemployment rate, nonfarm payrolls, and average hourly earnings, reflecting labor market conditions.

• The employment-to-population ratio and labor force participation rate assess workforce utilization and availability.

• JOLTS data provides insights into job openings, hires, and separations, indicating labor market dynamics.

• Initial and continuing jobless claims measure unemployment benefits filings, reflecting layoffs and employment challenges.

What Is the Labor Market?

The labor market, also known as the job market, is where workers and employers come together to find jobs and workers, respectively. It is critical to the economy because the supply and demand for labor determines wages and other employment-related issues. That, in turn, can affect how people invest, which can be helpful to know if you’re actively online investing or figuring out your strategy.

The labor market is influenced by various factors, including the overall health of the economy, the level of education and training of the workforce, and government policies that impact employment and wages. The labor market can also be affected by broader economic trends, such as globalization and technological change.

Low unemployment and rising wages often characterize a healthy labor market. These developments may indicate a robust economy and can lead to improved living standards for workers and their families. On the other hand, a weak labor market can signal economic difficulties, like a recession, and result in lower wages and higher levels of unemployment.

The labor market plays a crucial role in the functioning of the economy. By paying attention to the labor market and labor market indicators, investors can better evaluate the health and well-being of the economy, which may help inform investment strategies.

Common Labor Market Indicators

Investors, economists, and policymakers use several common economic indicators to evaluate the state of the labor market. These indicators, most of which are released by the Bureau of Labor Statistics (BLS), can provide valuable information about employment levels, wage growth, and other factors that can impact the economy.

Some of the most common labor market indicators include the following.

Unemployment Rate

One of the most closely watched labor market indicators is the unemployment rate, which is the percentage of the labor force that is not currently employed but is actively seeking work. This number can give insight into the overall health of the economy, as a high unemployment rate can indicate a sluggish economy. A low unemployment rate may signal a strong economy where most people are able to find jobs if they’re looking for one.

The unemployment rate is calculated by dividing the number of unemployed workers actively seeking work by the total number of individuals in the labor force (which includes both employed and unemployed workers). The unemployment rate is expressed as a percentage. For example, if there are 100 unemployed workers and 500 individuals in the labor force, the unemployment rate would be 20% (100/500 = 0.20).

Nonfarm Payrolls

Nonfarm payrolls, also known as nonfarm employment or total nonfarm payrolls, measure the number of people employed in the United States. The nonfarm payrolls number is derived from the monthly Employment Situation report (also known as the Jobs Report), which is based on a survey of nonfarm establishments. This survey excludes farm workers, private household workers, employees of nonprofit organizations, and other types of businesses.

The nonfarm payroll number is considered an essential indicator of the state of the labor market, as it provides information about employment levels across a wide range of industries. A rising nonfarm payroll number can indicate a strong labor market and a growing economy, while a falling number can signal economic difficulties.

Average Hourly Earnings

Average hourly earnings is a measure of the average wage earned by workers. Along with the nonfarm payrolls report, it is released monthly by the BLS and is considered an important indicator of wage growth and the well-being of workers.

Average hourly earnings are calculated by dividing the total wages paid to workers by the number of hours worked. This number is then expressed in terms of an average hourly wage. For example, if the total wages paid to workers are $100,000 and the total number of hours worked is 2,000, the average hourly earnings would be $50 per hour (100,000/2,000 = 50).

Average hourly earnings can provide valuable information about the state of the labor market and the well-being of workers. Rising average hourly earnings may indicate that workers are seeing their wages increase, which may signify a strong labor market and a growing economy. However, rising wages may be a cause of inflation. On the other hand, falling average hourly earnings may signal economic difficulties and stagnant wages.

Employment-to-Population Ratio

Another critical labor market indicator is the employment-to-population ratio, which is the percentage of the population that is currently employed. This indicator is calculated by dividing the number of employed individuals by the total population.

The employment-to-population ratio can give a sense of the extent to which the labor force is being utilized. A high employment-to-population ratio can indicate a strong labor market, while a low ratio can signal economic difficulties. Additionally, this ratio can also be used to compare the employment levels of different groups within the population. For example, analysts may use the ratio to compare the employment levels of men and women or to evaluate the employment levels of different age groups.

Labor Force Participation Rate

The labor force participation rate (LFPR) is the percentage of the population that is either employed or actively seeking work. It is calculated by dividing the number of individuals in the labor force (which includes both employed and unemployed workers) by the total population and is expressed as a percentage. The LFPR can provide information about the availability of workers in the labor market and can be used to evaluate trends in the workforce.

JOLTs

JOLTS, or the Job Openings and Labor Turnover Survey, is a monthly survey conducted by the BLS. It provides data on job openings, hiring, separations (including layoffs, discharges, and quits), and other labor market dynamics in the United States.

The JOLTS data can provide insight into employment and job growth trends and can also be used to identify potential labor shortages or surpluses. For example, a high number of job openings and quits can indicate a strong labor market, while a low number can signal a weak labor market.

Recommended: Tips for Financially Surviving a Layoff

Initial Jobless Claims

Initial jobless claims, also known as new unemployment claims or jobless claims, measure the number of individuals who have filed for unemployment benefits for the first time. This number is released weekly by the United States Department of Labor (DOL).

The number of initial jobless claims is a measure of the pace of layoffs in the economy. A rising number of initial jobless claims can lead to a weak labor market and a slowing economy. In contrast, a falling number can signal a strong labor market and a growing economy.

Continuing Jobless Claims

Continuing jobless claims, also known as continuing unemployment claims or continuing claims, is a measure of the number of individuals who have filed for unemployment benefits and have yet to find a job. Like initial jobless claims, this indicator is released weekly by the DOL.

The number of continuing jobless claims provides information about the number of individuals who have been unable to find work after filing for unemployment benefits. A high number of continuing jobless claims can indicate a weak labor market, suggesting that many workers are struggling to find employment. On the other hand, a low number of continuing jobless claims can signal a strong labor market, as it suggests that most workers can find jobs.

The Takeaway

Labor market indicators are an important tool for understanding the state of the economy and the health of the labor market. By tracking these indicators, you can better understand the factors that drive employment, wage growth, and the economy and make more informed decisions about your investments. Depending on the data, labor market indicators may show a strong economy, which may be a positive sign for your portfolio, or vice versa.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

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SOIN-Q424-023

11 Ways to Make Money While You Drive

What to Consider Before Using Your Car to Make Money

11 Ways to Earn Money by Driving

1. Ridesharing

2. Food Delivery Service

3. Delivering Groceries

4. Delivering Goods to Others

5. Moving Large Items for Others

6. Shuttling Children

7. Transporting Elderly People

8. Driving Tours

9. Putting Advertising on Your Car

10. Renting Out Your Car

11. Being a Safe Driver

The Takeaway

FAQ

What are the pros of making money while driving?

What are the cons of making money while driving?

Is making money with your car better as a side hustle?

How much can you potentially earn with your car?

12 High Income Skills to Learn

Why Learning New Skills Matters

15 High-Income Skills to Learn

1. Artificial Intelligence (AI)

How Much Can Someone With AI Skills Make?

What Education Do You Need?

2. Data Analysis

How Much Can Someone With Data Analysis Skills Make?

What Education Do You Need?

3. SEO Skills

How Much Can Someone With SEO Skills Make?

What Education Do You Need?

4. Cybersecurity

How Much Can Someone With Cybersecurity Skills Make?

What Education Do You Need?

5. Copywriting

How Much Can Someone With Copywriting Skills Make?

What Education Do You Need?

6. Software Development

How Much Can Someone With Software Development Skills Make?

What Education Do You Need?

7. Web Development

How Much Can Someone With Web Development Skills Make?

What Education Do You Need?

8. Project Management

How Much Can Someone With Project Management Skills Make?

What Education Do You Need?

9. UX Design

How Much Can Someone With UX Design Skills Make?

What Education Do You Need?

10. Affiliate Marketing

How Much Can Someone With Affiliate Marketing Skills Make?

What Education Do You Need?

11. Mobile App Development

How Much Can Someone With Mobile App Development Skills Make?

What Education Do You Need?

12. Soft Skills

How Much Can Someone With Soft Skills Make?

What Education Do You Need?

What Will Be the Highest-Paying Skills in 2025?

Tips for Developing High-Paying Skills

The Takeaway

FAQ

What high-income skills can you learn in college?

What high-paying skills can you learn for free?

What is the easiest high-income skill to learn?

What Is Income Tax Withholding and How Does It Work?

What is Income Tax Withholding?

Get up to $300 when you bank with SoFi.

Factors That Determine Tax Withholding

What Is State Income Tax Withholding?

What Is the Purpose of Tax Withholding?

Tax and Employment Documents to Know

Calculating Income Tax Withholding

Can I Be Exempt from Tax Withholding?

The Takeaway

FAQ

Does the government pay for income tax withholdings?

How can someone qualify for a withholding exemption?

Why has my employer withheld too much income tax?

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