Dec
04
2024

What Does It Mean to Be Unbanked?

By | Fresh Out of School, money, Terminology | Comments Off on What Does It Mean to Be Unbanked?

The term “unbanked” applies to an individual or household that doesn’t use a bank or credit union for financial services. An unbanked adult has no checking or savings account, relying instead on alternative financial services to pay for life’s expenses.

While the urge to store cash under a mattress may be strong for some, being unbanked can be both expensive and impractical. The benefits of using a financial institution may well outweigh those of the alternatives. However, many people encounter obstacles when trying to access a bank or credit union. Read on for a closer look at why people become unbanked, pros and cons of being unbanked, as well as how to open a bank account, even if you’ve had problems with bank accounts in the past.

Key Points

•   Unbanked individuals often rely on cash, prepaid debit cards, money orders, and check-cashing services instead of traditional banking.

•   High fees and no interest on savings make being unbanked costly.

•   Lack of funds, distrust of banks, and logistical challenges are common reasons for being unbanked.

•   Eliminating banking fees and offering second chance accounts are initiatives to assist the unbanked.

•   Educational outreach programs are designed to improve financial literacy among unbanked and underbanked populations.

What Does Unbanked Mean?

First, it’s important to give a definition of “unbanked.” If a person is unbanked, that means they are not served by a bank or similar financial institution. If you are over the age of 18 and have no checking account or savings account, you are considered to be an unbanked adult.

You may wonder, how do unbanked adults conduct financial transactions? How do they go about cashing checks and paying bills without a bank account?

Many unbanked individuals deal in cash, whether by their preference or due to their circumstances. In order to conduct everyday financial transactions, they may use cash, check-cashing services, prepaid debit cards, and/or money orders.

Why Do People Become Unbanked?

People become unbanked for various reasons. These can include:

•   Lack of money to meet minimum balance requirements at financial institutions

•   Lack of the credentials needed to open bank accounts (say, a Social Security number)

•   An underlying distrust of financial institutions

•   A desire to avoid any fees involved in opening a checking or savings account, or the penalties for incurring a negative bank account balance

•   Inability to open an account due to having a previous account closed by a bank or credit union

•   Living too far away from a brick-and-mortar banking location or being unable to drive or take transportation to a financial institution

•   Lacking a computer, a wifi connection, and/or the tech skills to open an account online.

How Many People are Unbanked in the U.S.?

The United States has a considerable number of unbanked adults. According to the Federal Reserve, 6% adults were “unbanked” in 2022 (their most recent statistic). While that’s a significant number, it’s worth noting that other nations have much larger percentages of unbanked people. The countries with the highest percentage include Morocco, Mexico, Vietnam, Egypt, and the Philippines, all with unbanked populations of 60% or more.

What Are the Types of People Who Are Unbanked?

According to most recently available data from the Federal Reserve, the unbanked population tends to fall into the following demographics:

•   Low-income: Families making below $25,000/year are more likely to be unbanked than those who earn more.

•   Less-educated: A higher percentage of the unbanked never graduated from high school

•   Non-white: Blacks and Hispanics make up the majority of the unbanked

•   Women: More females are unbanked than males, possibly because some women don’t view themselves as in charge of household finances, with someone else in the family managing the bank account

•   Young people: They tend to be unbanked more often than older adults, possibly because they are college students, without jobs, and lack the financial means or the know-how to open an account. (It’s worth noting that some institutions offer college student bank accounts, which are specially designed to help students begin banking. These can be a useful option.)

What Is the Difference Between Unbanked and Underbanked?

You may also have heard the term underbanked as well as unbanked. An underbanked person typically does have a checking and savings account with an FDIC-insured institution, but regularly relies on alternative financial services. Despite having traditional accounts, they may still utilize check-cashing services, money orders, and short-term payday loans.

The Federal Reserve estimates that 13% of adults in the United States are underbanked. As with the unbanked population, this could be due to a lack of access to banking services, a lack of financial or technical resources to open and maintain an account, a distrust of financial institutions, or having had a previous account closed.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Initiatives to Help the Unbanked

Being unbanked can make it a challenge for a person to manage their money and build wealth. Fortunately, government programs and some financial entities are working to solve this issue. They are developing new ways to provide incentives and encourage unbanked individuals to choose traditional banking options. These include:

•   Eliminating banking fees. Getting rid of minimum balance requirements, monthly account fees, and other financial deterrents can encourage low-income individuals to open an account.

•   Developing user-friendly apps and online platforms. Online banking via a computer or phone app can help make it easier for people who don’t have a convenient banking branch or have physical challenges.

•   Second chance accounts. Some banks may offer a second chance checking account. When opening this type of account, the bank is willing to overlook bad credit, previously unpaid overdraft fees, or past forced account closures. The account will likely have some limitations, but it can be an on-ramp to a standard checking account.

•   Bringing back postal banking. Decades ago, an individual could perform basic banking transactions at their local post office — cashing checks, bill payment processing, sending money to other branches, and issuing modest loans. There is a movement to bring back these services, and some post offices are already offering to cash payroll checks and have the amount put on a debit card for a small fee.

•   Educational outreach. Many banks and nonprofit organizations offer financial literacy programs, including workshops and videos, to educate unbanked and underbanked individuals about basic financial concepts, such as how to balance your bank account, budgeting, saving, and credit.

Why Is Being Unbanked a Problem?

Being unbanked can be a problem for a few reasons. For example:

•   It can be complicated and time-consuming to conduct banking transactions without having standard bank accounts.

•   Being unbanked can be expensive as well. A person may have to pay high fees for check cashing and other services from predatory businesses. Plus, an unbanked individual won’t earn any interest on your money.

•   It can be risky to carry cash versus safely keeping it with a bank or credit union.

•   Unbanked people may struggle to build wealth and have a solid credit and banking history.

Pros of Being Unbanked

Being unbanked could be seen as a positive for some people. The upsides include:

•   Not having to deal with the bureaucracy or paperwork of opening and maintaining accounts at banks

•   No checking or savings account fees

•   No overdraft or minimum balance fees

•   No record of one’s finances, if a person wants that kind of privacy.

•   Can be seen as more convenient to use cash vs. using debit cards, ATMs, and bank branches.

Cons of Being Unbanked

As mentioned above, being unbanked can be problematic. Those who don’t have checking and savings account may find that:

•   Using prepaid debit cards, money orders, and similar products to pay bills can be costly (fees) and time-consuming.

•   Carrying and/or keeping cash at home can be risky; what happens if you are robbed?

•   No convenient direct deposit for paychecks. The unbanked may have to utilize a check-cashing or payday loan service, which can charge very high fees or interest rates.

•   No opportunity to build up a banking history or possibly a credit history for future borrowing.

•   No access to safe and convenient money transfers.

•   No opportunity to securely save money for the future.

•   No interest earned on your money.

•   No access to other products and services that banks may offer when you are a customer, such as cashback programs or better mortgage rates.

Opening a Bank Account

There are many reasons people may shy away from opening a bank account. That said, being unbanked has a number of disadvantages. Your money may not be as secure, and it may be more costly and time-consuming to conduct transactions. What’s more, your funds won’t earn interest and grow.

Opening a bank account can be a very simple process. For most people, what you need is:

•   A valid government-issued photo ID

•   A Social Security number or taxpayer ID number

•   Proof of address.

Then, once you’ve selected a financial institution you trust, it can be fairly quick to complete the sign-up process, whether you do so in person or online. What’s more, there are banks that will allow you to open an account without an initial deposit and that don’t have minimum balance requirements either.

For those who have past banking problems, like having had accounts closed before, a second chance account can be a good move. While it may not be a full-fledged standard account (there are typically limitations, such as no overdraft protection), it can be a positive step towards becoming banked.

By the way, if you previously had an account that’s now shuttered, it’s unlikely that you can reopen your closed bank account. It’s usually best to start over with a new account, at your prior financial institution or elsewhere.

The Takeaway

By choice or circumstance, millions of Americans are unbanked. Typically, this means they don’t have a checking or savings account and don’t participate in personal banking. There can definitely be a downside to being unbanked, including factors like spending more time and money to conduct banking transactions and not earning any interest on one’s funds. For many people, becoming a client of a bank or credit union can be a positive step towards improving their money management and gaining wealth.

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 does it mean when a person is unbanked?

A person is considered “unbanked” when they don’t have a checking or savings account at a bank or credit union.

What are the needs of the unbanked?

The unbanked need to hold onto cash securely, pay bills, and transfer funds. Without using the traditional banking system, they are likely to spend more time and pay higher fees and interest rates to conduct basic banking transactions.

How do unbanked people get paid?

Unbanked people can receive funds by cash, a money order, a money transfer service for cash pickup, or by receiving a prepaid debit card.

Photo credit: iStock/Deagreez

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/.

SOBK-Q424-932

Read more
Dec
04
2024
11 Great Songs About Saving Money

Sing and Save: Our Top Songs About Money

By | Budgeting & Goals, Family Finances, money | Comments Off on Sing and Save: Our Top Songs About Money

Music offers a surprising array of benefits to listeners. Some songs are energizing, some are relaxing, and others, research suggests, can even improve physical and emotional health and manage pain.

Music can even teach us some valuable lessons about money. While you may not want to comb your Spotify playlists for stock market advice, you might find a few financial nuggets of wisdom embedded in your favorite songs.

Here’s a selection of songs from various eras and genres that are all about money, whether saving or spending it. They might nudge you to think more about your finances and relate to other people’s struggles and triumphs with their cash.

So if you’re like Rihanna and you’ve got your mind on your money, check out these 13 songs about finance that span the decades.

Key Points

•   This article lists 13 songs about money, highlighting different perspectives on personal finance, from glorifying wealth to valuing relationships over material possessions.

•   Songs like “Pennies from Heaven” and “Can’t Buy Me Love” emphasize the importance of financial freedom and love over money.

•   “Bills, Bills, Bills” and “Thrift Shop” focus on financial independence and frugality, encouraging listeners to be mindful of spending.

•   “Mo Money Mo Problems” and “Billionaire” discuss the complexities and dreams associated with wealth, reminding us of the challenges money can bring.

•   Listening to these and other songs about money can inspire financial awareness and motivate listeners to achieve their financial goals.

13 Songs About Saving Money

In each song on this list (arranged chronologically by release year), the artist shares a different viewpoint on personal finance. Some singers glorify money; others show us that there are more important things in life. Some singers tout the independence that money gives them and the hard work that got them there; others dream of making more.

No matter what money lessons you take from the music, one thing’s for sure: These 13 songs about saving money (or spending it) are likely to get stuck in your head for the rest of the day.

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

1. “Pennies from Heaven” by Bing Crosby (1973)

The oldest finance song on our list comes from the legendary Bing Crosby and the film of the same name. “Pennies from Heaven” reflects the general feelings of the time. Released during the Great Depression, the song yearns for the financial freedom of the Roaring ’20s yet provides hope that the country will weather the storm.

2. “Sittin’ in the Sun” by Louis Armstrong, Jack Pleiss, & His Orchestra (1953)

The next saving money song on our list comes from the legendary Louis Armstrong. “Sittin’ in the Sun” is so powerful that it made it on an album of his greatest hits. Armstrong paints a simple picture of sitting in the golden sunshine and counting one’s money. He speaks of the comfort of knowing what’s stored in his bank account.
Though Armstrong likely had a different point to make, his song is a reminder that having an emergency fund socked away is never a bad idea.

3. “Can’t Buy Me Love” by the Beatles (1964)

One of the Beatles’ biggest hits takes a more scathing view of money. Sure, it can buy you diamond rings, as Paul McCartney points out. But the one thing money can’t get you — no matter how much of it you have — is love. It’s a simple but crucial lesson: Money’s necessary for survival and can get you nice things, but the most important things in life can’t be bought.

4. “Money” by Pink Floyd (1973)

A well-covered hit from the Dark Side of the Moon album, “Money” starts with the “ka-ching” and register sounds of retail transactions. It’s a haunting sound once you know the lyrics that soon follow: The song serves as a reminder that money and greed can be bad. The lesson to walk away with? While it’s important for your family’s safety, health, and comfort to have money, don’t forget to share with those less fortunate and to take time for more important things.

5. “Money, Money, Money” by Abba (1976)

“Money, Money, Money” by Abba paints a picture of a girl who works hard but is still struggling with her bills. She hopes to land a rich guy because it’s “always sunny in a rich man’s world.” But if that doesn’t work, she contemplates going to Vegas or Monaco and gambling her way to wealth. Perhaps not the wisest of financial plans, but with a fun rhythm and lighthearted lyrics, it’s easy to see why this song is one of Abba’s biggest hits.

6. “The Gambler” by Kenny Rogers (1978)

An example of brilliant storytelling, “The Gambler” could have several deeper interpretations — and may spark a debate between listeners as to whether the titular gambler dies at the end. On the surface, though, it’s a killer song about two men on a train, one of whom is a gambler sharing important advice: “You’ve got to know when to hold ‘em, know when to fold ‘em, know when to walk away, and know when to run.”

7. “She Works Hard for the Money” by Donna Summer (1983)

One of the most popular songs by the Disco Queen is “She Works Hard for the Money.” It’s hard not to jump up and dance when you hear this one, especially if you can relate to the protagonist: a woman who works day in and day out to provide for herself. The lesson here? People who work hard, no matter how much they make or what line of work they’re in, deserve respect and credit for what they do.

Recommended: 5 Ways to Achieve Financial Security

8. “If I Had $1,000,000” by Barenaked Ladies (1988)

This song doesn’t take itself too seriously — just as you’d expect from a group that calls itself Barenaked Ladies. But somewhere in all the silly lyrics, you’ll notice a theme: Though the singer may splurge on a limousine or, weirdly, John Merrick’s remains, he insinuates that money wouldn’t change him or his partner. They’d still eat Kraft dinners, just more of them (and with fancy ketchup). The takeaway from this song is that money can change who we are, but we shouldn’t let it.

9. “Mo Money Mo Problems” by Notorious B.I.G. (1997)

Perhaps the clearest finance lesson from these songs that talk about money hails from this hit from Notorious B.I.G. The takeaway, after all, is right there in the title. As we hear in the song, “It’s like the more money we come across, the more problems we see.” Money can solve a lot of problems, but don’t forget that it can bring on new problems you might not be expecting.

10. “Bills, Bills, Bills” by Destiny’s Child (1999)

How could we put together a list of songs about saving money without featuring Beyoncé? This song, which came out when Bey was still in Destiny’s Child, is all about female empowerment. In it, the protagonist is in a relationship with a man who is using her for her money — and she’s having none of it. The song is a healthy reminder that, while it’s OK to treat friends, family, and partners to nice things, you shouldn’t let yourself be taken advantage of.

11. “Billionaire” by Travie McCoy feat. Bruno Mars (2010)

“Billionaire” is a song that many of us can relate to. Most people will never become a billionaire, but it’s fun to imagine what we’d do if we had that much money. While the song is playful and isn’t packed with useful tips, it’s a reminder that it’s OK to have big financial dreams. Some may be unrealistic, but you need a big dream to keep you motivated and working hard.

12. “Thrift Shop” by Macklemore & Ryan Lewis feat. Wanz (2012)

Macklemore’s brand of humor is on full display in “Thrift Shop.” In it, the rapper criticizes spending money on designer clothes when there are so many better finds in thrift shops. Sure, it’s fine to splurge on yourself now and then, but being frugal — whether it’s shopping at thrift stores, packing a lunch, or borrowing books and movies from the library — is a great way to save money and build your wealth.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

13. “Budapest” by George Ezra (2014)

The final entry on our list of songs about saving money comes from George Ezra and carries a message similar to “Can’t Buy Me Love.” In “Budapest,” Ezra promises his love interest that he would abandon all his wealth and belongings if it means he could be with the one he loves. This song is yet another reminder that possession may be nice but our relationships with people are even nicer.

Recommended: How to Get Better with Money

The Takeaway

Music can entertain us, energize us, relax us, and even heal us. It can also teach us — about life, about love, and yes, even about money. These 13 songs about finance are just the tip of the iceberg. So turn on the radio or dig through your music streaming service, and put in those earbuds the next time you’re working on your budget. You may be inspired to spend smarter, save more, and do what it takes to achieve your financial goals.

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


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

Photo credit: iStock/Talaj

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/.
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.

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

SOBNK-Q424-043

Read more
Dec
04
2024
glass piggyback mortgage house

How Are Primary and Secondary Mortgage Markets Different?

By | Home Ownership, mortgage | Comments Off on How Are Primary and Secondary Mortgage Markets Different?

The U.S. mortgage market is massive, so it’s no surprise that it’s actually composed of a primary and a secondary market.

The primary market serves the homebuying public. The secondary serves investors, but plays a big role in a borrower’s ability to get a mortgage and how much that home loan costs.

Key Points

•   The primary mortgage market involves direct interactions between borrowers and lenders.

•   The secondary mortgage market involves investors purchasing existing mortgage loans, often bundled into mortgage-backed securities, from lenders to earn returns.

•   The primary market focuses on originating loans for homebuyers, while the secondary market provides liquidity to lenders by allowing them to sell these loans.

•   Borrowers in the primary market can choose from various loan types, such as fixed- or adjustable-rate mortgages, whereas the secondary market deals with trading these loans among investors.

•   The secondary market helps stabilize the mortgage system by replenishing lender funds, potentially lowering costs for borrowers.

Primary vs. Secondary Mortgage Market

The primary mortgage market links borrowers to home mortgage lenders. The secondary mortgage market allows investors to invest in existing mortgage loans in hopes of earning a return.

What Is the Primary Mortgage Market?

Any time a homebuyer takes out a mortgage loan from a reputable lender, that is the primary mortgage market in action. Homebuyers and mortgage refinancers can work with a mortgage broker or direct lender to find the right home loan.

Direct lenders include banks, credit unions, and online mortgage companies. They originate loans with their own money or borrowed funding. Many of them originate mortgages only to sell them to investors, though the lenders may retain the servicing rights.

What Is the Secondary Mortgage Market?

With the secondary mortgage market, investors such as pension funds, banks, and insurance companies buy mortgage-backed securities and try to earn a profit on them.

Why would lenders sell some of their home loans? Because they’re able to replenish their supply of mortgage funding and remove the risk they took on by making the loans.

The mortgages that Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.), the country’s biggest residential mortgage buyers, purchase are conforming loans. That means they conform to certain lending guidelines and loan limits. In 2024 the conforming loan limit for a single-family home was $766,550 in most housing markets. In 2025 it is $806,500.

Then there’s Ginnie Mae (the Government National Mortgage Association), which buys government-backed FHA, VA, and USDA loans and bundles them into securities to be sold on the bond market.

Recommended: Try This Mortgage Calculator

Example of Both Markets in Action

Betty Borrower decides she wants to buy a home and needs help financing the purchase. She shops for a mortgage with an attractive interest rate and low costs. She finds a good fit, applies for the loan, and is approved.

She moves in; her loan moves on. Betty gets a letter from her lender saying that her mortgage has been sold to another financial entity.

The mortgage buyer, which may be an investor or mortgage loan aggregator like Fannie Mae or Freddie Mac, can repackage home loans as mortgage-backed securities or hold them and collect the interest from borrowers.

Any investor who engages with the secondary mortgage market is buying Betty’s mortgage debt and many others’ and counts on the borrowers to pay the debt, with the investor pocketing a percentage of the profit.

Recommended: Guide to Buying, Selling, and Updating a Home

Why Are There Two Mortgage Markets?

They work hand in hand. Congress created the secondary mortgage market in the 1930s to give lenders a larger, steadier stream of mortgage funding to stabilize the country’s residential mortgage markets and expand opportunities for homeownership.

Pros and Cons of the Primary Mortgage Market

The primary mortgage market has its upsides and downsides.

Advantages of the Primary Mortgage Market

Mortgage loans are plentiful: Homebuyers can choose from an array of different types of mortgage loans from banks, credit unions, savings and loans, mortgage brokers, and online financial institutions.

Borrowers have options: The most popular choice is a fixed-term loan of 30 years, but some borrowers may opt for an adjustable-rate mortgage (ARM), in which the introductory rate is fixed for a specified period of time. The 5/1 ARM has a five-year fixed rate.

Rates are reasonable: The demand for conforming loans helps rein in interest rates for borrowers who meet the lending criteria, which include down payment and credit requirements in addition to conforming loan limits. (Nonconforming loans — loans that Fannie Mae and Freddie Mac cannot buy — include government-backed loans and jumbo loans. The rates may be even lower than conforming loan rates.)

Down Payment Can Be Low: For first-time homebuyers, a 3% down payment for a conventional loan may suffice.

Disadvantages of the Primary Mortgage Loan Market

Borrowers have to be vetted credit-wise: Mortgage lenders will review a potential borrower’s credit score in order to determine their eligibility for a loan. Applicants with a bad credit score may find it challenging to secure a mortgage other than an FHA loan.

Missed mortgage payments can have negative effects: Borrowers who miss payments may face a plummeting credit score or even foreclosure (but mortgage forbearance is an option).

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Pros and Cons of the Secondary Mortgage Market

Here are two ways to view the secondary loan market.

Advantages of the Secondary Mortgage Market

Replenishes lender funding: The secondary market keeps money flowing through the mortgage system in good economic times and bad.

Fuels lower mortgage costs: The secondary market can lead to lower costs for borrowers.

May be good for investors: Most mortgage-backed securities are issued or guaranteed by a government agency such as Ginnie Mae or by government-sponsored enterprises like Fannie Mae and Freddie Mac. The securities carry the guarantee of the issuing organization to pay interest and principal payments on their mortgage-backed securities.

Disadvantages of the Secondary Mortgage Loan Market

Not for the average investor: Common buyers of mortgage-backed securities include deep-pocketed financial organizations like insurance companies, banks, and pension funds. Because of the complexity of mortgage-backed securities and the difficulty that can accompany assessing the creditworthiness of an issuer, individual investors should use caution.

Investors won’t see the properties attached to the mortgages: Secondary mortgage loan buyers usually won’t physically see and assess the properties attached to the mortgages they’re buying.

The Takeaway

The primary mortgage market and secondary mortgage market have a symbiotic relationship. Most mortgage seekers will only be interested in the primary market: getting a home loan that suits their needs.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What is the secondary market for mortgages?

When homebuyers take out a mortgage, lenders can bundle similar types of loans and sell shares in this bundle to investors, including banks, pension funds, and mutual funds. Investors are willing to buy these shares because as long as the mortgages are paid off, the investors receive a steady stream of income over the life of the mortgages in the bundle.

What is a second mortgage?

A second mortgage is a loan that uses your home as collateral that you take out while you are still paying off the primary mortgage on your home. Home equity loans are often second mortgages.

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

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

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

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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

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

SOHL-Q424-130

Read more
Dec
04
2024
Is a $40,000 Salary Good?

Is a $40,000 Salary Good?

By | Budgeting & Goals, money | Comments Off on Is a $40,000 Salary Good?

Whether a $40,000 salary is considered good can depend on a variety of factors. For a recent grad in a small town where the cost of living is low, that might be an annual income that pays the bills. In addition, the $40,000 figure represents earning more than the federal minimum wage ($7.25/hour) in 34 states and districts.

But a $40,000 salary is not typically enough for a household to live comfortably in most parts of the United States. According to the U.S. Census, the median salary was $80,610 in 2023. What’s more, in 2024, a $40,000 salary would be below the United States Census Bureau’s poverty threshold for families of up to six people. Here’s a closer look at the $40K salary figure.

Key Points

•   A $40,000 salary may be sufficient for an individual in a low-cost area, but it may not be enough for a family to live comfortably in most parts of the U.S.

•   Rising inflation has made it more challenging to live on a $40,000 salary, but it still exceeds the poverty threshold for families with five or fewer members.

•   Compared to the median household income in the U.S, a $40,000 salary falls short, but it can contribute to the median household income when combined with a second income.

•   A $40,000 salary translates to a monthly income of $3,333.33, a biweekly paycheck of $1,538.46, and a weekly income of $769.23.

•   Living on a $40,000 budget requires careful expense tracking, budgeting, debt management, and saving strategies. Location plays a significant role in how far the salary can stretch.

How Does a $40,000 Salary Compare to the American Median Income?

Here’s a look at how earning a $40,000 annual income compares to that of your fellow Americans.

•   According to the U.S. Census Bureau, the median household income in 2023 was $80,610.

A $40,000 salary could successfully contribute to the Census Bureau’s picture of the median household income, when combined with a second income from a domestic partner.

Could this salary be considered good? Consider the following:

•   As an individual, you may find that $40,000 is a good entry-level salary.

•   Couples living the DINK lifestyle (which stands for dual income, no kids) and who each make $40,000 would be well above the median household income. Plus, they would have the additional costs of raising children as part of their budget.

$40,000 Salary Breakdown

It can be helpful to know what a $40,000 salary translates to as a monthly budget, weekly paycheck, or even hourly rate. This may help you decide if $40K is a good salary.

Here’s how it breaks down:

•   Monthly income: $3,333.33

•   Biweekly paycheck: $1,538.46

•   Weekly income: $769.23

•   Daily income: $153.85*

•   Hourly income: $19.23**

*Based on 260 working days a year
**Based on 2,080 working hours a year

And remember: That’s before taxes; that’s not likely to be the amount that’s deposited in your checking account when you are paid. If you are single and make $40,000 a year, your federal tax bracket is at 12%, but you may also owe state, city, and even school district taxes as well. It’s important to keep that in mind as you plan and assess how to pay bills and save with this salary.

Recommended: What to Do When You Get a Pay Raise: 12 Tips

Can You Live Individually on a $40,000 Income?

It is possible to live individually on a $40,000 income. In fact, you may be able to afford the average monthly expenses for a single person and work on your saving and investing goals.

Your location will have the largest impact on how far your dollars will stretch. Areas with a lower cost of living will likely be easier to afford for an individual on a $40,000 income.

As an individual, you can help your salary go further by looking for ways to save money, like:

•   Having a roommate or renting out a room in your house if you own one

•   Cooking at home instead of eating out

•   Buying a used car or, depending on where you live, relying on public transportation

•   Finding a higher-yield savings account

Best Places to Live on a $40,000 Salary

If you can afford moving expenses and aren’t tied to a specific location for work, you can make your dollars go further more easily in certain locations in the United States. These are places with a lower cost of living. Here are the five cheapest cities to live in the U.S. this year, according to U.S. News:

•   Fort Wayne, Indiana

•   Huntsville, Alabama

•   Wichita, Kansas

•   Springfield, Missouri

•   Davenport, Iowa

However, there’s more to moving than just the expenses and the job. Before packing up a rental truck, consider whether you are comfortable leaving behind friends, family, and familiar places.

Recommended: Emergency Fund Calculator: How Much Should You Save?

Worst Places to Live on a $40,000 Salary

A $40,000 salary might not go far enough in a city with a high cost of living. U.S. News research indicates these are the most expensive cities to live in:

•   Los Angeles, California

•   Miami, Florida

•   San Diego, California

•   Salinas, California

•   Santa Barbara, California

And if you were expecting to see Honolulu, Boston, and Santa Barbara (which often have reputations for being pricey), you’d find them a bit farther down the list but in the top 10.

Tips for Living on a $40,000 Budget

So how can you (and possibly your family) live on a $40,000 budget? It’s important to cut costs, look for deals, pay down your debt, and build up savings for an emergency.

But living on a small salary doesn’t mean you have to completely give up entertainment. Remember that it’s OK to treat yourself to the nice things in life from time to time, as long as they are within reason. Everyone needs some fun in their life.

Here are some important tips for living on a $40,000 budget:

Carefully Tracking Your Expenses

First things first, get an understanding of your current spending habits. Your bank may offer tools that make this easy to analyze or you can download apps or check websites that make this easier.

Consider what bills you have every month, whether they are set up on auto pay, and, if so, when do they process? (This will help you schedule your bills and avoid getting hit with late fees.) Make a list of all your recurring expenses (mortgage or rent, student loans, car payment, phone, insurance, and utilities), and then analyze how much on average you’re spending on more variable expenses like groceries, gas, clothing, and entertainment.

What can you cut? What bills can you negotiate down? Where can you reallocate money toward savings?

Recommended: 20 Commonly Forgotten Monthly Expenses

Getting on a Budget

Now that you have an idea of what you’re currently spending, it’s time to design a budget around what you should be spending.

Start by plugging in necessary monthly expenses; these are things you must pay for each month, like your home, insurance, and food. Only once you can see that these basic needs are met should you begin to budget for things like dining out or new clothes, also known as wants vs. needs.

Not sure where to start? Do some online research on how to make a budget. There are different techniques including a line item budget and the 50/30/20 budget rule.

Use the 50/30/20 budget calculator below to get an idea of how your budget could be broken down.

You might also check out what tracking and budgeting tools your financial institution offers. Many (especially online banks) offer a suite of tools.


Getting Out of Debt

As you consider how to manage daily life on a $40,000 salary, it’s wise to pay attention to the role that debt plays in your personal finances. Mortgage and student loan debt are structured to be paid off over decades, and can be considered by some to be good debt, as the interest rates are often relatively low and timely payments build your credit history. The rates on credit card debt, however, can be high and therefore more detrimental to your finances (and mental health). If you have serious credit card debt, it is wise to cut back expenses as much as you can so you can focus on paying off your debt.

You can tackle your debt using the snowball method or the avalanche method. You may also consider a balance-transfer credit card or a debt consolidation program, depending on your situation. A debt counselor who works for a nonprofit, like the National Foundation for Credit Counseling (NFCC ), can be helpful as well.

Saving Your Money

If you are debt-free (house, car, and student loan payments aside) and still have wiggle room in your budget after accounting for necessary expenses and a little bit of fun money, you can allocate some of your $40,000 salary toward your saving goals. These might include vacations, a house down payment, renovations, or a wedding. An emergency savings fund is often a good place to start.

Recommended: Emergency Fund Calculator

Investing Your Money

After you have gotten a handle on your expenses, designed a budget, and opened a savings account, you might consider if there is enough leftover from your $40,000 salary for investing. This may not be possible if you live in a city or state with a high cost of living.

How can you start investing? If your employer offers a 401(k) match, consider taking advantage of that. It’s basically free money, so contribute enough to snag it.

You can also look for automated investing opportunities so you don’t have to worry about building a portfolio from scratch.

The Takeaway

Whether $40,000 a year is a good salary depends on a variety of factors. For a single person just out of school, living in a relatively inexpensive town, it might be adequate. For a family of four in a major city, it is likely a challenging sum to subsist on.

With a $40,000 salary, it’s important to follow smart financial strategies, like budgeting and cutting expenses, as well as finding the right banking partner.

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

Can you live comfortably on $40,000 a year?

Individuals may be able to live comfortably on $40,000 a year. Families, however, may struggle with this salary, especially in areas with a higher cost of living.

What can I afford making $40K a year?

If you are an individual living on $40,000 a year in an area with a low to moderate cost of living, you can afford typical monthly expenses like food, housing, and utilities and still have enough for some fun expenditures, like entertainment. If you are frugal and build a budget, you may also be able to pay down debt, build your savings, and even invest a little.

Is $40,000 a year considered middle class?

According to Pew Research’s most recent figures, a middle-class household’s median income was $106,100. An individual making $40,000 a year could qualify as middle class, especially if there were another wage earner in the household.

Photo credit: iStock/Prostock-Studio

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 Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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

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

SOBNK-Q424-060

Read more
Dec
04
2024

Learning Finance Without a Finance Background

By | Family Finances, Life & Career, money | Comments Off on Learning Finance Without a Finance Background

An advanced financial degree isn’t a requirement for taking control of your finances. In fact, you can learn much (or all) of what you need to know about finance without a financial education background at all — if you’re willing to put in the work (and, possibly, spend a little money).

Learning about how the realm of money works can boost your financial literacy and may improve how well you spend, save, and invest your hard-earned cash.

So let’s take a look at some of the easiest ways to learn finance on your own time.

Key Points

•   There are multiple ways to learn finance without a formal background, including self-education through online courses, books, podcasts, and blogs.

•   Mastering finance skills like budgeting, debt management, and investing can lead to greater financial stability and freedom.

•   You can take online finance courses for free through Coursera, edX, and Udemy.

•   Follow finance blogs and listen to podcasts to stay informed and deepen your financial knowledge.

•   Other ways to learn finance include: in-person classes, seminars, and hiring a financial professional for personalized guidance.

Why Being Sound in Finance Is Important

Even if you don’t want to become an accountant or manage clients’ investment portfolios, learning about finance is an important practice for everyone. Knowing financial basics like how to build a budget, how to pay off debt, how ,a href=”https://www.sofi.com/banking/”>bank accounts work, and even how to do basic investing in stocks and bonds can be key to your financial stability. You’ll likely become a smarter consumer and savvier money manager, not turning a blind eye to your bank and IRA statements.

With more understanding of your finances, you’ll have more control over them. Financial literacy can help you avoid (or get out of) debt, save for important goals like a wedding or vacation, and increase your net worth through investments and home ownership. This can benefit the financial health and well-being of your family, too.

8 Ways to Learn About Finance

Wondering how to learn finance without enrolling in a four-year degree? Here are some of the easiest ways to teach yourself about finance. Dive in, and you may be rewarded with knowing how to manage your own money confidently and find your way to financial freedom.

1. Taking an Online Course

Taking an online course is one of the best ways to learn finance — and you can even do it in sweatpants. LinkedIn offers several finance and accounting courses that are ideal if you are working toward becoming a practicing financial professional, but you can also find free or affordable financial literacy classes for the average person.

Popular options for online financial courses include Coursera, edX, and Udemy. Just be sure to find courses aimed at non-finance pros. Many universities, including Massachusetts Institute of Technology (MIT) and the University of Michigan, offer some courses for free; you generally just have to pay if you want the certificate of completion.

2. Reading Books

Another way to learn about finance at a deeper level is through books. Your local library probably offers shelves of books on finance (maybe even digital versions for your e-reader), but you can also order books online or shop at second-hand bookstores.

Goodreads can be a great place to research personal finance books. Popular books for learning about finance, especially for beginners, include:

•   Get a Financial Life by Beth Kobliner

•   I Will Teach You to Be Rich by Ramit Sethi

•   Your Money or Your Life by Vicki Robin and Joe Dominguez

•   The Simple Path to Wealth by JL Collins.

3. Listening to Podcasts

If reading isn’t your thing, you can instead try learning finance basics via podcasts (or audiobooks). Listening to the top money podcasts means you can use your time efficiently: Stream the podcast during your commute to and from work, while exercising or walking the dog, or even while cooking dinner.

Some podcasts are aimed at beginners while others have more targeted audiences, usually those interested in investing.

If you’re a beginner, consider checking out:

•   So Money

•   AffordAnything

•   Freakonomics

Students may benefit from The College Investor; The Dave Ramsey Show is popular with people working to get out of debt; and investors who want to learn more about the market may want to queue up What’s News, Jill on Money, or Planet Money.

Recommended: 7 Tips to Managing Your Money Better

4. Utilizing YouTube and Other Visual Media

Podcasts are great for on-the-go learning, but if you want to sit and watch financial content so you can take notes, YouTube can be a great place to start. Here are some of channels with financial literacy video content you may want to check out:

•   The Financial Diet or Two Cents for general personal finance content

•   Wealth Hacker for investing and passive income advice

•   Bigger Pockets for real estate investing.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


5. Hiring a Financial Professional

While learning about how to use a checking and savings account is important, more complex topics like debt consolidation or investing in the stock market may be too intimidating for some.

If you find yourself too busy to learn or just struggling with the concepts, consider hiring a financial professional. Some financial professionals offer specific services like tax preparation and wealth management; you can also hire a financial consultant who can offer advice on all areas of your finances, from paying down student loan debt to building an emergency savings to refinancing a mortgage. This process, beyond providing guidance, can also help you build knowledge about the areas of finance about which you are most curious.

Recommended: What Is Financial Therapy?

6. Taking an In-Person Class or Seminar

How to learn about finance if you find yourself easily distracted? In-person classes at a local college or even seminars and workshops in your area could be a good option.

You can check out nearby universities and community colleges to see what classes they offer. If you have hired a financial advisor, they might be able to recommend upcoming seminars in your area. Finally, your local library may also host workshops.

7. Subscribing to Business and Investing Publications

Beginners can likely get by on podcasts and YouTube content, but once you advance to more complex investing concepts, you might want to subscribe to one or two business and investing publications, whether in print or digitally. Popular financial magazines include Barron’s, The Economist, Kiplinger’s, Forbes, and Money. The Wall Street Journal is a popular resource for monitoring investments.

Many investment apps now offer access to news about the market. If you are using an app rather than a traditional investment firm, see what information they offer access to before signing up for any subscriptions.

Recommended: 5 Ways to Achieve Financial Security

8. Follow a Finance Blog

If a newspaper delivered on your doorstep feels too archaic, you can instead use finance blogs to learn basic topics and stay on top of the latest news. One good place to start: See what your bank or investment management firm offers. Many have top-notch blogs covering an array of topics.

You may also find blogs that suit your particular needs, whether that’s understanding annuities, managing finances for a single-paycheck family, or estate planning. If you read a book on money that you like or listen to a podcast that you find valuable in one of your key areas of interest, search for more intel on the expert involved. They may well have a finance blog that can deepen your knowledge.

The Takeaway

Learning about finance when you don’t have any background in the subject can feel intimidating. Fortunately, there are numerous resources you can tap, including online courses, podcasts, books, blogs, publications, and apps. What’s more, many of these options are free, and a fair number are tailored to complete beginners.
Taking some time to learn the basics of personal finance — from budgeting to getting the best rate on your savings to building wealth through investing — can yield rewards, both right away and many years from now.

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 finance easy to learn?

Finance can be easy to learn if you are willing to seek out informative content from books, podcasts, videos, blogs, and even professionals and then invest some time soaking up knowledge. Learning about finance requires dedication and sometimes a little investment — but knowing how to manage your money can pay off in the long run.

What should I learn first about finance?

Some of the most fundamental personal finance concepts include building a budget, opening a bank account, and understanding your credit score. Once you have mastered those more basic concepts, you can then focus on things like retirement planning, debt consolidation, and real-estate and stock-market investing.

Can I make finance a career without a degree?

Having a degree of some kind (ideally in finance but even in mathematics or other allied areas) is very helpful for building a career in finance. Completing internships and/or industry courses outside of a college setting can put you on the right path, though you may still need a certification for a specific job in finance. For example, Certified Public Accountants and Certified Financial Advisors have completed specific programs to earn their credentials. That said, self-taught individuals might be able to build careers by creating financial educational content, like podcasts and blogs.

Photo credit: iStock/fizkes

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/.
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.

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

SOBNK-Q424-036

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender