Life & Career Archives

Jan

2025

A Guide on Splitting a Joint Bank Account

By Sarah Li Cain | Family Finances, Life & Career, money | Comments Off

Closing a joint account typically involves the same steps as you would take with many other types of bank accounts. Whether it’s due to ending a relationship, preventing any legal liabilities, or any other valid reason, understanding the right protocol to close or separate a joint bank account can help make the process much smoother.

Read on to learn the steps usually required to split a joint bank account.

Key Points

• Closing a joint bank account typically follows similar steps as other bank accounts, often due to relationship changes or legal concerns.

• Both account holders must agree to close the account, which starts by contacting the bank.

• It’s advisable to wait for all pending transactions to clear before fully closing the account.

• Funds should be equitably divided between the owners, based on contributions or an agreed-upon method, before withdrawal.

• Opening a new individual account may be necessary as banks usually don’t allow splitting a joint account into two separate ones.

What Is a Joint Bank Account?

A joint bank account is a checking, savings, or other type of deposit account owned by more than one person. When one is owned by two people (which is a common arrangement), both of your names will be on it. Either of you can conduct transactions such as make deposits, withdrawals, write checks, and take steps to close the account.

Almost anyone can be a joint account owner as long as they meet the requirements of the bank. Most commonly, spouses or an adult child and their elderly parent(s) tend to be joint account holders. Sometimes parents open a bank account with a child who is a minor as well.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

Steps to Separating Joint Bank Accounts

Splitting or closing a joint bank account is fairly straightforward, the first of which includes contacting your bank.

1. Call Your Bank

In most cases, the first step in how to separate a joint bank account is both joint owners agreeing to close the account. Contact your bank via any of their available methods to ask what it will need from you to be able to separate your joint account. Closing the account could mean the bank will check to see if you have any outstanding fees you owe. Or you might need to complete written documentation stating that you want to close the account.

2. Wait for Current Transactions to Clear

Consider holding off on any transitions until all pending transactions clear from your account. For example, you and your joint account holder both receive your paychecks via direct deposit. It’s probably best to wait until the payment clears before taking any additional steps to split a joint bank account. (That way, you can avoid having direct deposit go to a closed account.)

3. Withdraw Your Money

You should allocate the money in the account between the two of you, the joint owners. Take the time to determine whether you want to divide the money equally, a percentage based on the amount each of you contributed, or another fair agreement. Once you’re both happy with the arrangement, you can withdraw the money, either to another bank account or another option.

4. Apply for New Bank Account

In most cases, the bank won’t let you split a bank account into two. Instead, you will likely have to apply for a new individual bank account. You can choose to open one with the same financial institution or a new one. Follow the steps to open one, such as providing your personal details, Social Security number, and how you plan on making your initial deposit. (How much you need to open an account can vary depending upon the financial institution and kind of account you have chosen.)

Opening this new bank account while you’re waiting for the transactions to clear on the joint one may be a wise choice. It could take some time for certain transactions to kick in, such as your direct deposit payments and automatic payments on your utilities.

Ways to Close Joint Account

There are many ways you can separate your joint account separation, such as through the phone, in person, online, or via the app.

Online

Many banks and especially online vs. traditional banks let you close your joint account after you log into your account online. The steps to do so may vary: Some may require you to submit a form via an automated process, or you may have to contact customer service through secure messaging. Banks will most likely need both account owners’ permission, which could mean you sign in separately to e-sign documentation or provide some other verification that you each agree to the decision.

Through the Mail

Some banks, like the more traditional ones, may allow you to mail in a form with both your signatures to close the account. Contact your bank to see what forms you may need to fill out. You may need to take additional steps, such as notarizing the paperwork.

In Person

In the case of traditional brick and mortar banks, you may have to (or can) close your bank account in person. You may need to bring documentation such as your ID. It could also be more time-consuming, as you’ll need to speak with the joint account holder when they’re available, and the process at the bank could take some time.

Reasons to Close a Joint Bank Account

Closing a joint checking or savings account is a sound decision if you’re doing it for certain reasons, such as trying to minimize fees, prevent legal liabilities and if you end your relationship with the joint account owner. Before doing anything, carefully consider your decision first.

Prevent Penalties

If your joint account owner hasn’t been using the account responsibility and racking up a bunch of fees, it may be time to close the account. For example, perhaps the joint account owner keeps overdrafting an account or goes over the allotted debit card transactions per month. Before closing the account, you will need to make sure to pay off all penalties.

Minimize Fees

Some joint accounts can come with maintenance fees or even other features that you’re no longer happy with. Closing the existing account and opting for a new one (individual or joint) could save you some serious bucks.

Legal Liabilities

Remember, a joint account means that both owners own the money held there. If you’re unsure of the joint account holder or you believe they’re in legal trouble, it may be better to close the account. For instance, if someone sues your joint bank account owner, you could lose the assets in the account as well.

Relationship Ending

Joint bank accounts and divorce usually don’t coexist. If you and your spouse have joint bank accounts and you’re now splitting up, closing the bank account could help ensure your assets are divided equitably. Or maybe you just want to move on from the relationship and don’t want the joint account open as a reminder of this person.

Getting Rid of Full Shared Access

Since any one of the joint account owners can move funds around, you may not want this other person having shared access if you can’t trust them. For example, separating money into different bank accounts may be the best move if you’ve broken up with your business partner and have moved onto other ventures.

Recommended: Guide to Bank Account Closure Letters

The Takeaway

There can be several reasons to end a joint account, including divorce, irresponsible use of the account by one party, or simply the high price of some account fees. The process is fairly simple to close the account, but both parties must agree and determine how to divide the funds.

When you open a separate account, consider whether your current financial institution is the best choice for your needs.

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

Is it easy to close a joint account?

Depending on the financial institution, it could be easy to close a joint account. Many banks offer multiple ways to do so, such as online, by app, by mail, or in person.

How do you change a joint account to single?

Most financial institutions don’t allow you to separate or change a joint account to a single owner. You will likely need to open your own separate bank account and close the joint one.

Do both parties have to agree to close a joint account?

Yes, most state laws stipulate that both account owners need to agree to close a joint account.

About the author

Sarah Li Cain

Sarah Li Cain, AFC is a finance and small business writer with over a decade of experience. Her work has been featured in numerous publications, including Kiplinger, Fortune, CNBC Select, U.S. News & World Report, and Redbook. Read full bio.

You may also be interested in:

Should Married Couples Have Joint Bank Accounts?

Can You Remove Yourself From a Joint Bank Account?

What Happens to Joint Bank Accounts When Someone Dies?

Photo credit: iStock/Riska

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.

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 article is not intended to be legal advice. Please consult an attorney for advice.

SOBK0124039

Jan

2025

Is a $70,000 Salary Good?

By Sarah Li Cain | Financial Independence, Life & Career, money, Money & Life | Comments Off

Whether or not $70,000 is considered a good salary depends on a number of factors. These include where you live, your lifestyle, what kind of work you do, your financial goals, and how many people are in your household.

While $70,000 is higher than average U.S. salary, it may be difficult to live well on this salary in certain parts of the country where the cost of living is high or if you’re supporting a family.

Here’s a closer look at whether or not earning $70,000 is a good salary and what factors influence this.

Key Points

• A $70,000 salary’s adequacy largely depends on geographic location, household size, lifestyle, and financial obligations.

• In high-cost areas or for larger families, this salary might not suffice for a comfortable living.

• Nationally, $70,000 is above the average salary, but personal financial goals and living costs are key to determining its sufficiency.

• For single individuals in regions with a lower cost of living, $70,000 can offer a comfortable lifestyle and savings potential.

• Budgeting wisely and managing expenses are essential for making a $70,000 salary work, especially in more expensive urban areas.

Factors to Determine if a $70,000 Salary Is Good

A $70,000 salary can be considered good or not depending on various factors such as where you live, your lifestyle, and your financial obligations. Let’s explore these considerations in more detail.

Where you live: Living expenses vary significantly depending on where you live in the U.S. Your dollars won’t go as far in a metropolitan city as they would in a rural area. It’s a good idea to look into the costs of housing, groceries, transportation, and other necessities in your area and weigh them against your salary to determine if $70k is enough for you to live comfortably.

The size of your household: Whether you live alone or have a family has a major impact on how far your $70,000 salary can go. A single person may be able to live well on this income in many places. But if you’re supporting a spouse and children, it may prove more difficult. If you’re supporting others, consider your family’s monthly expenses to determine if $70,000 is enough to pay for everyone’s needs.

Debt and other obligations: You’ll also want to factor in any debt and other payments you must make each month when determining if your $70k salary is enough. If you have student loans, credit card debt, and/or mortgage payments, that could eat up a significant portion of your monthly take-home salary. Run through your essential monthly expenses and then see how much is left over for discretionary purchases. Paying down debt could help make your $70k go further.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

Where Does a $70,000 Salary Compare to the American Median Income?

According to the Bureau of Labor Statistics’s most recent data (May 2022), the mean, or average, salary nationwide is $61,900.

That means that on a nationwide scale, you’re earning more than most people. However, the cost of living in your area, personal lifestyle choices, and your financial expectations and goals also play a crucial role in determining whether $70k is a good salary for you or not.

What Percentage of Americans Make Over $70,000 Annually?

U.S. Census data reports that in 2022 (the most recent data available), 49.8% of Americans made $75,000 and more, and 16.2% earned between $50,000 and $75,000. Based on these statistics, at least half of Americans make $70,000.

$70,000 Salary Breakdown

Here’s a look at exactly how a $70,000 annual salary breaks down. Keep in mind that these numbers look at gross income, which is what you earn before any taxes and other withholdings (such as health insurance, social security, and retirement contributions) are deducted from your paycheck.

• Monthly income: $5,833.33

• Biweekly income: $2,916.66

• Weekly income: $1,346.15

• Daily income: $191.78

• Hourly income: $7.99

Your actual take-home pay will depend on where you live, your household income, whether you’re a full-time employee or self-employed, and what employee benefits you participate in.

Can You Live Individually on a $70,000 Income?

If you’re single and have a salary of $70k, you are part of above-average earners in the U.S. Depending on where you live, you may be able to live comfortably on a $70,000 salary as a single person. You may even be able to save for goals, like building an emergency fund, contributing to a retirement fund, and saving for a downpayment on a home.

However, in high-cost-of-living areas, this salary might require careful budgeting to maintain a good standard of living. Indeed, economists estimate that someone making $70,000 a year in other parts of the country would need to make $166,000 in New York City to enjoy the same standard of living.

Can You Live as a Family on a $70,000 Income?

Living as a family on $70,000 could be challenging. According to the Economic Policy Institute’s Family Budget Calculator, the monthly household cost for two adults and two children living in Dayton, Ohio, for example, adds up to $7,658, including housing, food, childcare, transportation, healthcare, and taxes.

If your monthly gross income is $5,833.33 (which it would be if you earn 70k a year), that would likely not be enough to support a family in a midsize midwestern city. You might find it easier, however, if you live in a more rural part of the country.

How Much Rent Can You Afford Living on a $70,000 Income?

One popular guideline is to spend no more than 30% of your gross income on rent. So if your monthly gross income is $5,833.33, you would ideally try to spend no more than $1,750 per month on rent.

However, this guideline isn’t realistic for everyone. Sticking to spending 30% on rent may not be feasible in a place like New York City or San Francisco, for example, where median rents for a one-bedroom apartment are over $2,000.

If you need to spend more than 30% of your $70 salary on rent, you may need to watch your spending in other areas, such as clothing, entertainment, and dining out.

Best Places to Live on a $70,000 Salary

The following cities each have a median household income of below $70,000 and a lower-than-average cost of living, making them among the best places to live on a $70,000 salary.

• Decatur/Hartselle, Alabama

• Charleston, West Virginia

• Rockford, Illinois

• Knoxville, Tennessee

• Amarillo, Texas

• Waterloo/Cedar Falls, Iowa

• Oklahoma City, Oklahoma

• Anniston, Alabama

• Winston-Salem, North Carolina

• Great Falls, Montana

• Morristown, Tennessee

• Springfield, Missouri

Worst Places to Live on a $70,000 Salary

Here’s a look at the 12 most expensive places to live in the U.S. — and some of the worst places to live on a $70,000 salary.

• San Diego, California

• Los Angeles, California

• Honolulu, Hawaii

• Miami, Florida

• Santa Barbara, California

• San Francisco, California

• Salinas, California

• Santa Rosa, California

• San Juan, Puerto Rico

• Vallejo, California

• Fairfield, California

• New York City, New York

Recommended: Cost of Living by State

Tips for Living on a $70,000 Budget

Living on a $70,000 budget requires careful planning and smart financial decisions. Whether you’re just starting out or looking to improve your financial situation, these tips can help you make the most of your income.

💡 Quick Tip: Are you paying pointless bank fees? Open a checking account with no account fees and avoid monthly charges (and likely earn a higher rate, too).

Saving Up for Retirement

One of the most important aspects of managing your finances is saving for retirement. Even on a $70,000 budget, it’s crucial to prioritize saving for your golden years. Consider contributing to a 401(k) or IRA, which can provide tax advantages and help your money grow over time. A good rule of thumb is to try to save at least 10% to 15% of your income for retirement, and increase this amount as your income grows

Getting on a Budget

Creating and sticking to a budget is key to living within your means on a $70,000 budget. Start by tracking your income and expenses to get a clear picture of where your money is going. Then, set realistic goals for saving and spending. Consider using budgeting apps or tools to help you stay on track.

Getting Out of Debt

If you have debt, such as credit card balances or student loans, it’s important to prioritize paying it off. You might start by paying off high-interest debt first, as this will save you money in the long run. Consider consolidating your debt or negotiating with creditors to lower your interest rates. Once you’ve paid off your debt, focus on staying debt-free by living within your means.

Saving Your Money

Saving money is a crucial part of living on a $70,000 budget. Look for ways to cut expenses, such as dining out less often or shopping for discounts. Consider setting up automatic transfers to a savings account to make saving easier. Additionally, consider building an emergency fund to cover unexpected expenses, such as car repairs or medical bills. This will help you avoid running up high-interest credit card debt in the event of the unexpected.

Managing Finances With SoFi

Whatever your salary, it’s important to not only live within your means but also to put some money into a high-yield savings account each month. This will give you a cushion for emergencies and help you work towards — and reach — your financial goals.

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 jobs pay over $70,000?

According to the U.S. Bureau of Labor Statistics, occupations that make over $70,000 include jobs in the medical and healthcare field, managers (in a variety of industries), engineers, software developers, financial advisors, jobs in the legal field, commercial pilots, economists, and actors/producers/directors, among many others.

Is making $70,000 a year common?

According to the Bureau of Labor Statistics’s most recent data (May 2022), the average salary nationwide is $61,900, which means that $70,000 is a common salary — but above the national average.

Can I make a living on $70,000?

You may be able to live comfortably off $70,000, depending on where you live and how many people are in your household. If you’re single and live in an area where the cost of living is below average, you can likely live well on $70,000.

About the author

Sarah Li Cain

You may also be interested in:

Average US Salary by State

Is $100K a Good Salary for a Single Person?

Is $95K a Good Salary for a Single Person?

Photo credit: iStock/Eleganza

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.

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.

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.

SOBK0124051

Jan

2025

Trade School Costs Need to Knows

By Kayla McCormack | Life & Career, student_loan | No Comments

A trade school, often called a vocational or technical school, provides specific job skills to start a career quickly in a given trade, with the requisite certifications and licenses. That career can range from being an electrician to a physician’s assistant to a cook. As opposed to a four-year college, a trade school education is generally completed in just two years and focuses on getting students hands-on experience and securing the job they want.

Trade school costs an average of $12,000 to $20,000+ per year. While trade school can be significantly less costly and require less time than a four year degree, there are still expenses to consider. Continue reading for more information on how expensive trade school is and planning for trade school costs.

Key Points

• Trade schools offer focused training in specific job skills, allowing students to enter careers quickly, typically completing programs in less than two years.

• The annual cost of trade school tuition can range from approximately $4,200 to $25,000+, depending on factors like the school and program.

• Additional expenses for trade school often include costs for books, supplies, and living expenses, which can vary greatly based on individual circumstances.

• Financial options for attending trade school include federal aid, grants, scholarships, and part-time work, which can help cover educational costs.

• When selecting a trade school, important considerations include program accreditation, completion time, available on-the-job training opportunities, and employment support services.

What Is Trade School?

College is not for everyone. Trade school can provide a path to a rewarding career, without the time and money required to pursue a four-year degree.

Trade school is a type of education that provides training in a specific job or skill set to allow students to start a given trade or career with the requisite certifications and appropriate licenses. Also known as vocational or technical schools, trade school can be a stepping stone into a career as a plumber, electrician, dental hygienist, pharmacy technician, paralegal, and more.

Trade schools may be private or public institutions, and it can take as little as a few months to two plus years to complete a trade school program. Community colleges may offer vocational programs or more general education classes for students planning to transfer to a four-year institution.

How Much Does Trade School Cost

The cost of trade school varies widely based on factors including the school, the program you are pursuing, and your location. According to the Integrated Postsecondary Education Data System (IPEDs), the average cost of trade school was $15,070 for the 2022-23 school year.

Tuition

The cost of tuition for trade school can range dramatically, from $4,200 to $25,000+ per year. Here is the average cost of tuition and fees for popular trade school programs, according to IPEDs:

• Patient Care Assistant/Aide: $4,280

• Welder: $11,230

• HVAC Tech: $11,630

• Licensed Practical Nurse: $14,700

• Cosmetologist: $16,230

• Auto Tech: $25,870

Books and Supplies

The cost of books and supplies will vary based on the vocational program or trade school. According to data from IPEDs, the average cost of books at a two-year public institution was $1,720 for the 2022-23 school year.

Living Expenses

Unsurprisingly, the cost of living expenses can also vary quite dramatically from student to student. Some students who are attending trade school may be able to live at home with family members. This could help them reduce costs because they may have little to no rent, and share meals with family members.

Trade school students who are living on their own may need to budget for more expensive living costs.

Paying for Trade School

When it comes to paying for college, or trade school, there are a few options available to students, including loans, federal aid, grants, and more.

Trade School Loans

The term “trade school loan” is just a way to refer to a student loan, personal loan, or outside funding measure used to pay one’s way through a training or vocational school.

Many trade and vocational schools may qualify for federal student loans and other forms of federal financial aid. To apply for federal loans, students will need to fill out the Free Application for Federal Student Aid (FAFSA®) each year.

There are limits for federal student loans, and some students may consider a private student loan to supplement the cost of tuition and living expenses. Private student loans are available from private institutions, but they may not offer the same benefits or protections as federal student loans.

Working Part-Time

Trade schools generally offer flexible programming — for example, night classes — so students may be able to work part-time to fund their education. Students may consider getting a part-time job in the field they are studying, or working at a gig that is willing to accommodate their school schedule so they have enough time to take classes and study.

Financial Aid for Trade School

As already mentioned, trade schools may qualify for federal financial aid — including student loans, grants, and scholarships. Federal aid can be used for technical schools and some certificate programs as long as the schools are accredited and eligible for federal funds. You can check the Department of Education’s database of qualifying schools to confirm your chosen trade school program qualifies.

Grants

Students at eligible trade schools may qualify for a Pell Grant. A Pell Grant is a type of federal grant that is awarded to students who demonstrate exceptional financial need. The maximum amount for the 2024-25 school year is $7,395.

Scholarships

There may also be scholarships available for trade school students. Certain trade schools may offer scholarships, and there are vocational school scholarships available from private organizations, as well. To find trade school scholarships, check with your school’s financial aid office or search online scholarship databases.

Recommended: SoFi’s Scholarship Search Tool

Tips on Selecting a Worthwhile Program

Trade school can make sense for students who are interested in pursuing a specific vocation and are not interested in attending a more traditional four-year school. To evaluate trade schools, consider the following factors:

• Program accreditation: This can give you an idea of a program’s reputation. Accredited schools may qualify for federal financial aid, as well.

• Time to complete: This will tell you how long it will take you to complete the program, along with the total cost of the program.

• Opportunities for paid, on-the-job training: Some programs may offer a combination of in-classroom learning and paid job training. Gaining this real world experience can be valuable.

• Employment assistance or support: Some trade schools have close connections with local businesses or industries. Find out if there is a career connections office or any job placement assistance from your school.

Private Student Loans for Trade School

SoFi doesn’t offer student loans for trade school programs, but does offer private student loans for eligible graduate certificate programs. If you’re a college student interested in pursuing a certificate program, a SoFi private loan could be a tool to help you finance the program.

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

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Are trade schools more affordable than four-year universities?

Trade schools are generally more affordable than a college or university. In addition to having a more affordable annual tuition, typically trade school programs can be completed in less than four years.

What are the most high-paying trade jobs?

Some of the highest-paying trade jobs include elevator and escalator installers, radiation therapists, dental hygienists, aircraft mechanics, and construction managers. These roles typically require specialized training or certification from trade schools and offer competitive salaries, job stability, and opportunities for career growth in high-demand industries.

How long is trade school?

The length of trade school can vary based on the program. Some trade school programs can be completed in a few months while others may take two years to complete.

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Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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Jan

2025

Financial Assistance Options for the Disabled

Financial Assistance for People With Disabilities

By Ashley Kilroy | Family Finances, Life & Career, money | Comments Off

Approximately 26% of Americans live with a disability that can impact cognition and mobility skills, according to the National Center for Birth Defects and Developmental Disabilities. These disabilities can make it challenging to manage daily tasks or full-time employment, putting a significant strain on finances and possibly making it challenging to make ends meet.

On top of that, according to research from Stony Brook University, the University of Tennessee, the National Disability Institute, and the Oxford Institute of Population Ageing, a household containing an adult with a disability (with limited ability to work) requires 28% more income (or an extra $17,690 annually) to meet the same standard of living as a household without someone with a disability.

Fortunately, various programs are available that provide financial assistance to disabled adults. So, whether you need help with housing costs or healthcare, understanding your options can help you get the assistance you need.

Read on for the details.

How Many People Have Disabilities in the U.S.?

As briefly noted above, about 26% of Americans live with a disability; that means more than one in four people are facing issues with mobility or cognition.

That is a significant number. If you or someone you care about is living with a disability, it’s important to know about the programs that can help access aid.

Types of Help Available for People With Disabilities

When it comes to financial help for the disabled, there are many options. Here are some programs that can assist in this situation.

Healthcare

There are healthcare programs that provide financial help for disabled adults, so medical bills don’t seem so overwhelming. Available programs include:

• Medicare. Usually, enrolling in Medicare is a program associated with seniors. However, Medicare also offers medical cost assistance for folks with disabilities under 65 years old. If you just began receiving Social Security Disability Insurance (SSDI) benefits, you usually have to wait 24 months before your Medicare coverage kicks in. However, eligible applicants can forgo the waiting period if they meet specific requirements.

• Medicaid. Medicaid is designed to offset the cost of medical bills for low-income and disabled individuals. To see if you qualify for this federal and state-funded program, you can check with your state’s Medicaid office. Usually, your eligibility depends on your age, income, the number of people in your family, and if you’re disabled.

• Marketplace health insurance coverage. If you don’t qualify for instant Medicare coverage, you can apply for a low-cost private insurance plan to fill in your coverage gap while you complete the waiting period. In addition, depending on your income and level of need, you may qualify for a “premium tax credit,” which can reduce your monthly premium payment.

Housing

Housing assistance can help you identify an affordable place to live, modify your home for your disability, or help you toward a path to live independently. Housing programs that provide financial help for people with disabilities include:

• State-run independent living centers. Living independently can be difficult for those with a disability. That’s why states and local municipalities offer independent living centers to help folks develop their skills to live without assistance.

You can also contact your state’s department of human services or disability office to discover programs that assist with home modifications, locating housing, and housing counseling for first-time home-buyers.

• Housing Choice Vouchers (HCV). Public Housing Agencies (PHA) offer this government-backed housing program to help people with disabilities buy homes and pay housing expenses. However, since every PHA jurisdiction is allowed to decide whether or not HCVs are offered within their jurisdiction, check with your local PHA to see if this program is available in your neck of the woods.

• Non-Elderly Disabled (NED) Voucher. If you’re not a senior but have a disability, you may qualify for a Non-Elderly Disabled (NED) Voucher. This voucher gives you access to housing communities usually explicitly reserved for seniors.

• Public housing. Local housing agencies (HA) offer affordable public housing to low-income families or individuals with disabilities. Each local HA determines eligibility based on your income and disability. Nationwide, close to a million families live in public housing units.

• Low-Income Home Energy Assistance Program (LIHEAP). This government-funded program offers financial help for people with disabilities who have difficulty paying their utility bills. Also, if your utilities are turned off due to unpaid bills, the LIHEAP can provide emergency assistance.

Income and Daily Expenses

If you have a disability, you may also need help paying for basic expenses, such as food and clothing. Here are some programs available that can provide monthly financial assistance for disabled individuals and their families.

• The Social Security Administration. Through the Social Security Administration (SSA), you may qualify for either Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), which both offer financial assistance for people with disabilities. SSDI offers financial support to disabled individuals who have worked and paid Social Security taxes long enough to qualify for assistance (you may be able to have a savings account while on SSDI incidentally). SSI also offers financial support to meet the basic needs (food, clothing, and shelter) of disabled people with limited (or no) income.

Recommended: 9 Common Social Security Myths

• Supplement Nutrition Assistance Program (SNAP). Also known as the food stamp program, SNAP helps low-income or disabled folks suffering financial hardship save on their grocery bill. This can include using food stamps online. As a disabled adult, you could qualify for increased assistance.

• Temporary Assistance for Needy Families (TANF). If your SSI benefits haven’t kicked in yet and you’re tight on cash, you may qualify for TANF. This is another government-backed program that offers grants to families in need of immediate financial support. It can be a source of financial assistance for the disabled in the short-term.

• Veteran disability compensation. If you have a disability that either resulted from or worsened due to service in the military, you could qualify for a government grant or other financial assistance through government disability programs.

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

Education

If you have a disability but want to achieve a degree, financial assistance for people with disabilities is available. Here are some programs worth exploring.

• Free Application for Federal Student Aid (FAFSA). To ease the financial burden of higher education costs, you can use the FAFSA to determine if you qualify for a variety of aid programs such as the Federal Supplemental Educational Opportunity, Grant Federal Pell Grant, and Federal Work-Study programs.

• State and independent education agencies. You can also seek financial support from your state’s department of education or independent agencies around where you live. Remember that eligibility requirements and guidelines will vary by state and organization.

• Total and Permanent Disability (TPD) Discharge. If you took out federal student loans to pay for higher education costs but can no longer work due to your disability, you could qualify for a TPD discharge. If you’re eligible, the TPD will serve as a disability discharge for student loans, wiping away your student debt.

What’s more, you won’t have to repay your federal loans or meet your TEACH Grant service obligations.

Other Financial Assistance for Disabled Adults

There are other programs that can offer financial assistance for disabled adults. Here are a few other options to consider.

• Achieving a Better Life Experience (ABLE) savings account. Individuals with disabilities may qualify for an ABLE account, a tax-advantaged saving vehicle. This means account holders are not taxed on the earnings if they use the money within the account to cover qualified disability expenses such as education, housing, or medical costs.

• Disability loans. A disability loan is a personal loan that provides financial support for disabled adults while they wait for disability benefits to kick in. Applicants can use this type of loan to cover living costs, medical bills, or any other expense they have pertaining to their disability. Borrowers must meet the lender’s eligibility requirement to qualify. Remember, the disability loan must be repaid according to the lender’s terms and conditions.

• Disability insurance. Many employers offer disability insurance as part of their compensation package. So, if you become disabled, your disability insurance will pay a portion of your income. Usually, short-term disability insurance supplements your salary for three to six months, while long-term disability can supplement your income from two years until the time when you can retire, depending on the plan and your condition. Plans can pay between 40% and 70% of your salary.

Worth noting: You can buy private disability insurance if you don’t have a plan through your employer.

• Debt repayment plans.You can consider a debt management plan if your credit card debt is weighing you down. With a debt repayment plan, you work with a credit counseling agency that helps you create a solid repayment plan and can even negotiate with your creditors.

• Loan forbearance. Some lenders offer forbearance programs if you’re struggling to pay your mortgage, halting your payments for a provisional amount of time. Your lender may also be willing to revamp the terms of your loan to make payments more manageable.

Tips on Applying for Financial Assistance

Applying for disability benefits from the Social Security Administration (SSA) might be a great place to start sourcing financial assistance if you have recently become disabled from a medical disorder.

To determine if your disability meets the eligibility requirements for benefits, you’ll want to complete the Social Security Disability (SSD) application online, via or at your local Social Security office. The application is detailed and requires documentation to support your case. Preparing carefully in advance may help you improve your chance of approval.

Here are some tips to streamline the process.

• Include detailed responses to all application questions. It’s best to provide as much information on your application as you can. Since the purpose of the application is to prove your disability doesn’t allow you to work, you’ll want to make your answers very detailed. Simply providing “yes” or “no” answers can result in an application denial.

• Submit ongoing medical records. Your doctor will provide your initial medical records for your application proving your disability. In addition, you should provide any other medical records when you receive them. Medical records can include lab tests, medication paperwork, treatment documents, and more. Whenever you receive a medical record from your medical professional’s office, you could forward it to the SSA. The more supporting documentation you have, the better your chances of qualifying.

• Partner with a disability lawyer. Disability lawyers are well-versed on SSD applications. Yes, it could be an additional expense, but their expertise could be advantageous when completing the application. It might even increase the odds of benefit approval.

You can expect the entire application process usually takes anywhere between three to six months. However, the SSA may grant you an expedited process if you have a rare condition or aggressive disease.

In addition to benefits from the SSA, other government and non-profit organizations provide financial assistance to disabled adults and their families. If you’re in need, explore all available options starting with the list above. Once you pinpoint several programs to apply for, gather all your documentation (i.e., income documents, medical records, etc.) in advance to streamline the application process. Keep in mind there might be a waiting period before benefits are approved. So, it’s best to apply as soon as you can.

The Takeaway

Having a disability can be emotionally, physically, and financially challenging. The same applies if you care for a person with disabilities, literally or figuratively. Fortunately, plenty of programs are available to help with medical bills, income, housing, education, and much more. These can be available to help with short-term and ongoing needs. By doing some research and outreach, you may be able to get financial assistance to help with your needs.

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

Is there an income limit for these financial assistance options for the disabled?

Income limits vary by the program you’re applying for. For example, the monthly income limit is $1,620 for non-blind disabled SSDI or SSI applicants, and $2,700 for blind SSDI applicants in 2025.

Is there a chance that someone can get denied assistance?

Yes, but it depends on the program. For example, only about 20% to 30% of disability benefits applicants are awarded financial support. Denials can result from a variety of factors, including technical errors and issues with medical information.

What is the criteria for getting financial assistance as a disabled person?

Criteria and eligibility depend on the program. So, before you apply, make sure you understand the requirements of the aid you are hoping to qualify for.

Photo credit: iStock/Renata Hamuda

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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.

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.

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Jan

2025

Guide to Custodial Accounts and How They Work

By Marcy Lovitch | Family Finances, Life & Career, money | Comments Off

Many parents want to save for their child’s future. One way to do this is by setting up a custodial account. This type of account specifically allows an adult to put money into a savings or investment account for a minor, which they can then access once they reach adulthood.

Custodial accounts can be a great way to give a child a financial gift. These funds can eventually be used for such expenses as their education, a car, wedding, renting an apartment, or even buying a home. If college is a particular goal, you can even open a custodial account designed for this very purpose.

If you’re considering opening up a custodial account for a young person, read on to learn what a custodial account is, the different types, and how they operate.

What Is a Custodial Account?

A custodial account is savings or an investment account, established with a bank, brokerage firm, or mutual fund company, that’s managed by an adult on behalf of a minor, also known as the beneficiary.

Custodial accounts typically allow a parent, grandparent, family friend, or guardian to start saving for the child, until they reach adulthood, which depending on the state of residence, could be 18, 21, or even 25 years of age.

Even though the custodian manages and oversees the funds, the account is in the child’s name. Once the child reaches adulthood, the account legally transfers to their control.

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How Custodial Accounts Work

Opening a custodial account is simple. You can likely start one with almost any financial institution, brokerage firm, or mutual fund company. All a custodian probably needs to establish one is to provide basic personal information about themselves and the child. Once a custodial account is created, the adult can start contributing funds into the account.

The financial institution sets the terms of the account, which may include a minimum balance, maintenance fees, and initial investment requirements, among other stipulations. Individuals can usually contribute as much as they want to a custodial account, but there’s a federal cap on how much you can contribute that’s free of the gift tax imposed by the IRS. In 2024, this amount is up to $18,000 for individuals and $36,000 for married couples per child, per year. In 2025, this amount is up to $19,000 for individuals and $38,000 for married couples per child, per year.

Custodial bank accounts usually come with protections for the beneficiary. While the custodian can withdraw money from the account, legally the money must only be used to benefit the minor. This means the adult in charge of the account can’t use the funds for their own personal reasons. Additionally, any contribution made becomes the property of the child, so transactions can’t be changed or reversed.

A monthly contribution to a custodial account can make a big difference in a child’s life because the money can substantially accumulate over the years. According to Fidelity Investments, starting to contribute $50 a month to a custodial account when a child is 5 years old can result in $21,000 once that child reaches age 21. Put in $150 a month and that amount goes up to $63,000, while $250 a month clocks in at $104,900.

Types of Custodial Accounts

There are two main types of custodial accounts: the Uniform Gift to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA). While both have the same objective and eliminate the need to start a trust, they work in slightly different ways. Another option is the Coverdell ESA and 529 accounts that can help with saving for college.

Uniform Gift to Minors Act (UGMA)

The Uniform Gift to Minors Act (UGMA), established in 1956, is a custodial account that grants adults the opportunity to give or transfer many different kinds of financial assets to a child. Here’s what is important to know:

• Besides cash, assets in an UGMA account can include individual stocks, index funds, bonds, mutual funds, and insurance policies.

• UGMA accounts aren’t limited to educational expenses. In fact, the money can be used by the beneficiary for anything once they come of age. A UGMA doesn’t have restrictions or contribution and withdrawal limits, but, as previously noted, gift tax limits apply.

• This kind of custodial account is available in all 50 states and is easy to set up at many financial institutions and brokerages nationwide. Keep in mind there may be a minimum deposit required to open an UGMA.

• There aren’t any tax benefits for contributions, but up to $1,300 of any earnings from a custodial account in 2024 may be tax-free (up to $1,350 in 2025). And earnings above the tax-free threshold are taxed at the child’s (not parent’s) tax rate, up to certain limits.

• Since education costs are one main reason parents or loved ones open a custodial account, one thing to know is because the funds are considered an asset owned by the child, it can affect their ability to get financial aid and student loans.

Uniform Transfers to Minors Act (UTMA)

The Uniform Transfers to Minors Act (UTMA), is a newer, expanded version of an UGMA. There are some differences between them to be aware of:

• The main difference is that an UTMA account can include physical assets, such as cars, art, jewelry, and real estate.

• You are not able to open a UTMA in every state. Currently, South Carolina and Vermont are two that don’t allow you to open a UTMA custodial account. And many states have a higher age at which a beneficiary can take control of a UTMA compared to a UGMA account.

• The zero contribution limits, tax benefits, and financial aid impact that come with UGMAs are the same for UTMAs.

Coverdell Education Savings Account (ESA) and 529 Plans

There are two educational savings plans that fall under the umbrella of custodial accounts and can help a parent save for college for their child. One is the Coverdell Education Savings Account (ESA).

• This type of custodial account exists solely for saving for a child’s future educational needs. According to the IRS, ESA contributions made must be in cash and are not tax deductible.

• Unlike UTMAs and UGMAs, there’s a $2,000 limit per year to how much you can contribute to the ESA’s account beneficiary.

• ESA custodial accounts also have income-based restrictions and are only available to families who fall under a certain income level. Coverdell ESA’s are created by each state so you’ll need to see if your state offers one.

A 529 College Savings Plan, also known as a “qualified tuition plan” is often considered a kind of custodial account because it’s created to pay for the beneficiary’s educational expenses, whether it’s for college, tuition costs for kids in grades K-12, certain apprenticeship programs, and even to pay student loans.

• Unlike other custodial plans, a 529 College Savings account can remain in the holder’s name even when the beneficiary reaches the age of majority in their state.

• There aren’t any income limits for a 529 Plan, which differentiates it from a Coverdell ESA.

• The 529 Plans are state-sponsored and most states offer at least one. You must be a U.S. resident to open a 529 Plan.

• You don’t have to be a resident of the state and can pick another state’s plan, but your state may offer a tax deduction if you live there and open one. The Federal Reserve features a list of state 529 Plans.

Custodial Accounts vs. Traditional Savings Account

Both a custodial account and a traditional kid’s savings account can be opened with the goal of putting money away for a child’s future. However, they are two separate types of accounts that operate in different ways.

• A traditional savings account opened for a minor is a type of joint account that typically can be accessed and used by both the minor and their parent or guardian. Some states and financial institutions have age limits or restrictions on whether a child can be on a joint account. With a custodial account, as previously mentioned, a minor can’t make any transactions until they reach the age of maturity.

• Traditional savings accounts typically have no limits on how much money you can keep in the account, but banks may have a base amount you need to open an account along with minimum balance requirements.

• Custodial accounts may be better for long-term savings, while a traditional savings account can teach kids about banking and good finance habits.

Pros and Cons of Custodial Accounts

Custodial accounts have their upsides and downsides. Here’s some pros and cons to consider, presented in chart form:

Pros of Custodial Accounts	Cons of Custodial Accounts
Easy to set up	Custodian loses monetary control when beneficiary comes of age
Can be inexpensive to establish	May have a cap on how much you can contribute due to gift-tax laws
May have tax benefits	Not as tax-exempt as other types of financial accounts
Money is the property of the child	Can impact the ability to get financial aid
Anyone can make a contribution to the account	Contributions are irrevocable

4 Steps to Opening a Custodial Account

Setting up a custodial account is simple and doesn’t take up a lot of time. Here’s how to open a custodial account in four steps.

🛈 Currently, SoFi does not offer custodial bank accounts and requires members to be 18 years old and above.

1. Decide on the Type of Custodial Account

Research the various options to determine which kind of account would best suit your goals and those of the child. For example, is the goal strictly for educational expenses? Are there limits to contributions? Do you want contributions to include physical assets as well as monetary funds?

2. Figure out Where You Want to Open the Account

Banks, brokerage firms, and mutual fund companies all offer custodial accounts. Pick the one that best suits your comfort level, familiarity, and goals for the child.

3. Gather the Child’s Personal Information as Well as Your Own

When you open the account, you’ll want to have the necessary information ready, such as the custodian and child’s Social Security numbers, addresses, phone numbers, and dates of birth.

The person who will be controlling the account will most likely have to provide employment information and have the account number(s) ready for another bank or investment account they want linked so they can transfer the money between accounts.

4. Open the Account

Many financial institutions make it easy for you to start an account online through their websites, or you can go to the financial institution in person.

The Takeaway

Custodial accounts can be a solid way to sock money away for a child’s future, whether it be for their education, a financial gift, or to provide them with a leg up on savings once they become young adults. These accounts can be opened at financial institutions and banks around the country, and you don’t even need to leave home to set one up. Depending on which type of custodial account you choose, you may also enjoy some tax-advantages too.

FAQ

Are custodial accounts a good idea?

They can be. Saving and investing money on behalf of a child can make their lives easier once they’ve become an adult. Having a built-in financial cushion they can use for their education, housing, a trip, or even towards retirement can be a valuable gift to someone as they start their adult life.

How does a custodial account work?

A parent, grandparent, guardian, or loved one can open a custodial account for a child, at a bank, brokerage, or mutual fund firm. The account is for the benefit of the child and managed by an adult or the custodian of the account, with contributions added over time, if desired. Once the child turns 18, 21, or 25 (depending on which state they live in), the money is turned over to them.

What are the pros and cons of custodial accounts?

The advantages of a custodial account are an automatic savings available to the child when they become of age, typically to spend on whatever they want; some potential tax breaks for the person who opens the account; and the ease of setting them up. Downsides of a custodial account include a possible cap on how much you can give because of gift-tax restrictions; the inability to reverse any transaction after its completed; and, since the account is considered an asset of the child, it could affect their ability to be eligible for financial aid when applying to schools.

Photo credit: iStock/Drazen Zigic

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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.

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.

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 article is not intended to be legal advice. Please consult an attorney for 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.

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