What is the purpose of a sinking fund?

The purpose of a sinking fund is to help you save money toward planned expenses. You may use sinking funds to save for either one-time or recurring expenses.

How is a sinking fund different from an emergency fund?

A sinking fund is designed to pay for planned expenses. Emergency funds are used to hold money for unplanned or unexpected expenses.

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Jun

2024

Understanding Sinking Funds

By Rebecca Lake | Budgeting & Goals, Financial Independence, money | Comments Off

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

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

What Is a Sinking Fund?

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

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

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

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

Examples of s Sinking Fund

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

• Vehicle maintenance and repairs

• Pet care

• Home maintenance and repairs

• Birthdays, holidays, and other special occasions

• Wedding expenses

• Baby expenses

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

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

Benefits of a Sinking Fund

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

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

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

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

Drawbacks of a Sinking Fund

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

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

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

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

How to Create a Sinking Fund

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

List Your Sinking Fund Categories

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

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

Determine Your Savings Target

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

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

Decide Where to Keep Sinking Funds

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

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

Set Up Automatic Transfers

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

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

Sinking Funds vs Emergency Funds

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

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

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

Sinking Funds vs Savings Accounts

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

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

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

Where Can You Keep a Sinking Fund?

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

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

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

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

The Takeaway

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

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

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 is a sinking fund in simple terms?

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

How much should you have in a sinking fund?

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

What is considered a healthy sinking fund?

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

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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.

*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.

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Jun

2024

Guide to Christmas Club Accounts

By Alice Garbarini Hurley | Budgeting & Goals, Family Finances, money | Comments Off

Are you toying with the idea of opening a Christmas Club account? It may sound like a retro idea, but a Christmas Club (or Holiday Club account) is simply a short-term savings fund that can help you plan for and manage the annual spending blizzard. The strategy can be smart, since during the most recent season, consumers spent a whopping $964 billion, according to the National Retail Foundation.

Pacing yourself to save in advance of the holiday crush is great, but there can be pros and cons of a Christmas Club account. Learn the details here.

What Is a Christmas Club Account?

Christmas Club accounts started in 1909 at a Pennsylvania bank and are designed to help you save money for holiday expenses. They typically do not earn high interest but can help you pull back your purse strings when December comes along and avoid debt.

After making regular, scheduled contributions to the Christmas account, the money is withdrawn, typically in October, November, or December, depending on your bank’s rules. Christmas Club funds are transferred to your regular checking account with the bank or withdrawn in a check to cover your holiday expenses, be they toys, trimmings, or latke parties.

Saving in increments can be easier on your budget than scrambling for cash when Yuletide, Hanukkah, and Kwanzaa come around. It can also spare you from putting all those charges on your credit cards and having a high balance due.

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

How a Christmas Club Account Works

When you sign up for a Christmas Club account, you start with a deposit. Rules and regulations vary by bank. Some require a minimum to start; others don’t. Some have no minimum balance requirement in person at a branch but need a $25 minimum for setting up a Holiday Club account online.

You decide the amount you want to contribute regularly. For instance, you might opt for $25 or $100 swept from your checking account into your Christmas account every week or every payday.

Historically, banks have charged fees for withdrawing money before the club account matures. That encourages consumers to leave their money there until holiday shopping time. Just be aware that if an emergency comes up, like a broken water heater, and you take the money out, you will get hit with a fee.

Reasons to Use a Christmas Club Account

There are several benefits to Christmas Club accounts that can make them a helpful financial tool. Here are some of the reasons why people open them:

• To save for a predictable spend above and beyond your year-round monthly budget. Many of us try to celebrate the holidays on a budget. But the gifting/decorating/entertaining spree can still hit every winter. A club account plumps up a money cushion to help you avoid credit card debt.

• To afford holiday travel. Most of us need extra dough, whether to rent a car to visit family or fly the kids home from college. To score the lowest airfare, car rental, and lodging costs, brush up on smart tips for finding travel deals. (If short-term savings won’t cover your trip, shop for the best travel loans with lower APRs, no compounding interest, and no fees.) Stashing funds in a club account, of course, is a viable solution.

• To build up funds for other planned annual costs. Just because they are called Christmas Club accounts doesn’t mean they have to be used for holiday spending. Puzzling over how to save on spring break expenses or how to pay for your child’s summer sleepaway camp? In those cases, a club account can be golden.

Where Can You Find a Christmas Club Account?

Christmas Club accounts are most often available at smaller community banks and credit unions vs. banks with a national presence. You can open one in person at a branch or online at your bank’s website. (Search under savings accounts.) Often, the same banks that set up payroll direct deposit plans also offer short-term club accounts.

Christmas Club accounts are offered at credit unions all across America, from the Fidelity Bank and Trust in Iowa to the Pasadena Federal Credit Union in California, and in too many places in between to count.

Pros of a Christmas Club Account

If you’re trying to decide if a Christmas Club account is right for you, it’s worthwhile to consider the advantages of these accounts.

Simplifies the Process of Saving for the Holidays

Framing your holiday budget ahead of time can cut stress. Pacing yourself to save over months may be even better. If it helps, you can give these targeted accounts nicknames to keep your eye on the goal; say, “Christmas in Vermont” to “Kids’ Lego Fund.”

Alternative to Putting Holiday Purchases on Credit Card

Using Christmas cash can help you avoid overspending with credit cards. Once you turn to plastic, things can get out of control. You start hunting online for a scooter a child has her heart set on and then see an ad for the brown suede boots you’ve been wanting…ka-ching. Interest rates on credit cards are quite high, and you can be left with debt that takes a long time to pay off.

Recommended: How Does a Credit Limit Work?

Cons of a Christmas Club Account

It’s not all a winter wonderland; Christmas Club accounts can have downsides. Here are a few to consider.

Most Banks Have Saving Limits

Most Christmas Club accounts have a maximum dollar amount you can save. Some banks allow up to $5,000, but this number will vary. The cap might be less than what you’d like to save. If need be, consider opening a second Christmas club if the bank allows it or open an additional one at another bank, too.

Potential Fees for Early Withdrawal

If you need to get the money out before the set withdrawal date, you will most likely incur early withdrawal fees. These can vary. Find out what they are when you open your account.

Alternatives to Christmas Club Accounts

If you want to save money for the holidays but aren’t sure a Christmas Club account is right for you, consider these options.

• Certificate of Deposit. A certificate of deposit (or CD) generally offers a higher interest rate than a savings account but comes with a term. The bank holds your money for anywhere from months to years, and you collect the interest when the CD matures at the end of the term. Since a CD will lock up your money for a specific amount of time (typically between six months and 18 months, but shorter and longer terms are available), you may need to plan this right to have funds available for holiday expenses.

• Money Market Account. A money market account is an interest-bearing account that is federally insured and has competitive interest rates. It generally requires a higher opening deposit.

• High-yield Savings Account. These high-yield bank accounts earn significantly more interest than standard savings; you may find the best rates at online banks. However, the accessibility of these funds can be a downside. We all know how tempting it can be to transfer money from savings to checking when an unexpected household expense or special occasion comes up.

• Travel account. Like Christmas accounts, these savings accounts likely won’t pay great interest, but they help you save for your goal. You can pick where to keep travel fund savings, and then use the money to hop on a plane when the holidays roll around.

The Takeaway

Christmas Clubs (or Holiday Club accounts) can spur you on to save regularly for the winter holiday spend. Planning ahead reduces stress. What’s more, setting a savings goal can help you keep your eye on the limit and avoid credit card overspending. But beware of fees for early withdrawals and caps on total amount saved. In some cases, you might be better off with another savings vehicle, like a CD or money market account.

Another option is to stash cash in a high-yield account and earn more interest there.

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

FAQ

Do banks still do Christmas Club accounts?

Yes, community banks, smaller banks, and credit unions still offer Christmas Club accounts. Ask at your branch or search the bank’s website.

Are Christmas Club accounts worth it?

Christmas Club accounts generally have low interest rates. However, they can be worthwhile if they help you put money away regularly and thereby avoid a holiday spending blowout using credit cards.

Is there interest on Christmas Club accounts?

Yes, most accounts offer interest. The rates, though, tend to be lower than the interest rates for regular savings accounts, money market accounts, and certificates of deposit (CDs).

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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.

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

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

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

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Jun

2024

What Is an Income Investing Strategy?

By Michael Flannelly | Growing Wealth, invest, Investing | Comments Off

An income investing strategy focuses on generating income from your principal rather than growth, i.e. capital gains. Income investors typically seek out investments that provide a regular income stream, such as dividends from stocks, interest from bonds, or rental payments from a property.

Investors might be interested in income investing in order to create an additional income stream during their working years. Other investors may focus on generating monthly income during retirement. Income investors need to take into account several factors, including the tax implications of different types of income.

How Income Investing Works

Income investing can be a way to generate a passive income stream that supplements ordinary income as well as retirement income. Rather than creating a portfolio that’s solely focused on capital gains, i.e. growth, an income investing strategy is geared toward setting up one or more sources of steady income.

Again, dividend-paying stocks, interest-bearing bonds, and real estate proceeds are common types of income investments that may provide steady cash flow. While many people associate investment income with retirement, many investors seek to establish other income streams long before that.

That said, these two aims — growth and income — are not mutually exclusive. In fact, an income-generating portfolio must also have a growth component, in order to keep up with inflation.

Types of Income Investing Strategies

There are a range of income investing assets and strategies that investors can adopt, depending on their goals and preferences. For example, when creating an income-focused portfolio, it’s important to consider your risk tolerance, as different income investments may have different risk profiles.

1. Dividend Stocks

Dividend stocks are stocks that pay out regular dividends to shareholders. Not all companies pay dividends. Companies that do usually pay dividends quarterly, and they can provide a reliable source of income for investors.

Income investors are generally attracted to companies that pay out reliable dividends, like the companies in the S&P 500 Dividend Aristocrats index. Companies in this index have increased dividends every year for the last 25 consecutive years.

• Dividend Yield

One metric that income investors should consider is the dividend yield. While dividends are a portion of a company’s earnings paid to investors, expressed as a dollar amount, dividend yield refers to a stock’s annual dividend payments divided by the stock’s current price, and expressed as a percentage.

Dividend yield is one way of assessing a company’s earning potential.

While a high dividend yield might be attractive to some investors, risks are also associated with high-yield investments. Investors who want regular and consistent income tend to avoid stocks that pay high yields in favor of dividend aristocrats that may pay lower yields.

2. Bonds

Bonds are a debt instrument that normally make periodic interest payments to investors. Also known as fixed-income investments, bonds are typically less risky than stocks and can provide a steady stream of income. The bond’s yield, or interest rate, determines the interest income payment.

There are various bonds that fixed-income investors can consider. For example, government bonds are debt securities issued by a government to support government spending and public sector projects. Government bonds — like U.S. Treasuries and municipal bonds — are generally less risky than other types of bonds and can provide tax-advantaged income and returns.

Investors can also lend money to businesses through corporate bonds, which are debt obligations of the corporation. In return for money to fund operations, companies make periodic interest payments to investors. Corporate bonds carry a relatively higher level of risk than government bonds but also provide higher yields.

However, not all bonds offer yield to investors interested in generating regular income. Some bonds, called zero-coupon bonds, don’t pay interest at all during the life of the bond.

The upside of choosing zero-coupon bonds is that by forgoing annual interest payments, it’s possible to purchase the bonds at a deep discount to par value. This means that when the bond matures, the issuer pays the investor more than the purchase price.

Recommended: How to Buy Bonds: A Guide for Beginners

3. Real Estate

Real estate may be a great source of income for investors. Rents paid by tenants act as a regular income payout. Real estate may also offer long-term price growth, in addition to some tax benefits.

There are several ways to invest in real estate, including buying rental properties and investing in real estate investment trusts (REITs).

Recommended: Pros & Cons of Investing in REITs

4. Savings Accounts

Savings accounts are a safe and easy way to earn interest on cash. Savings accounts and other cash-equivalent saving vehicles like high-yield savings accounts or certificates of deposits (CDs) are often considered very low risk. But they also typically offer lower interest rates than you might see with other investments. Because these interest rates are typically lower than the inflation rate, inflation can erode the value of the money in these savings accounts longer term.

In addition, when you purchase a CD it may have more stringent minimum deposit requirements, as well as keeping your money locked up for a specific period of time. Still, they can be a low-risk way to earn income.

5. Money Market Accounts

A money market account (MMA) is an FDIC-insured deposit account that typically pays higher interest rates than a traditional savings account. However, MMAs may be more restrictive than a savings account, often only allowing a certain number of withdrawals each month using checks or a debit card.

Also, money in a money market account can be invested by the bank in government securities, CDs, and commercial paper — which are all considered relatively low-risk investments. With a traditional savings account, money is not invested.

But unlike most investments, money market accounts at most banks are FDIC-insured up to $250,000 for an individual, or $250,000 per co-owner in the case of joint accounts. In some cases investing in a money market account may earn a higher interest rate while still maintaining FDIC-insurance protection.

6. Mutual Funds and ETFs

Investors who don’t want to pick individual stocks and bonds to invest in can always look to mutual funds and exchange-traded funds (ETFs) that have an income investing strategy.

There are many passively and actively managed funds that invest in a basket of securities that provide interest and dividend income to investors. These funds allow investors to diversify their holdings by investing in a single security with high liquidity.

Understanding the Tax Implications of Income Investing

Another important aspect of investing for income is to consider the tax implications of different income-producing assets. Here are a few key considerations to be aware of:

• Dividends. Most dividends are considered ordinary dividends and are taxed as income. Qualified dividends are taxed at the lower capital gains rate. Be sure to know the difference.

• Real estate. Income from a rental property is generally taxed as income (although business deductions may apply). Dividend payouts from owning shares of a Real Estate Investment Trust (REIT) are typically higher than traditional equity dividends; these are also taxed as income. However, if there are profits from a REIT, these are taxed at the capital gains rate.

• Bonds. Bond income may be taxable, or not, depending on the issuer. Some municipal bonds are tax free at the federal and state level (if you live in the state where the bond was issued). Corporate bond income is taxed at the state and federal levels. U.S. Treasuries are generally taxed at the federal level, but not the state.

You may also owe ordinary income or capital gains tax if you make a profit when selling a bond.

As you can see, tax issues can be complex and it’s often necessary to consult a tax professional.

Example of an Income Investing Portfolio

When building a portfolio for any investing strategy, investors must consider their financial goals, risk tolerance, and time horizon. As with any investment portfolio, it’s possible to have lower or higher exposure to risk.

Here are some examples of hypothetical income investment allocations.

Lower Risk Tolerance

Asset type	Percent of holdings
Bonds (government and corporate)	60%
Dividend stocks	20%
Rental property or REITs	10%
Cash (savings account, money market account, and CDs)	10%

This is an illustrative portfolio and not intended to be investment advice. Nor is it a representation of an actual ETF or mutual fund. Please consider your risk tolerance and investment objective when creating your investment portfolio.

Moderate Risk Tolerance

Asset type	Percent of holdings
Bonds (government and corporate)	35%
Dividend stocks	30%
Rental property or REITs	30%
Cash (savings account, money market account, and CDs)	5%

Higher Risk Tolerance

Asset type	Percent of holdings
Bonds (government and corporate)	25%
Dividend stocks	30%
Rental property or REITs	45%
Cash (savings account, money market account, and CDs)	0%

Benefits and Risk of Income Investing

Like any investing strategy, there are both advantages and drawbacks to focusing on earning income through investments.

Benefits

The potential benefits of income investing include receiving a steady stream of payments, which can help to smooth out fluctuations in the market. In other words, even with a certain amount of market volatility, an income-generating strategy may produce income that provides a certain amount of ballast.

If an investor reinvests some or all of the income generated from a certain assets, whether bonds or dividend-paying stocks, this can add to the overall growth of the portfolio, thanks to compounding.

An income investing strategy may also provide diversification. For example, investing in REITs is considered a type of alternative investment strategy. That means, REITs don’t move in tandem with conventional assets like stocks, which may provide some protection against risk (although REITs can have their own risk factors to consider).

Risks

Investors who are pursuing an income investing strategy should be aware that investments that offer high yields may also be more volatile. The income from these investments may be less predictable than from more established investments, like blue chip stocks that pay out reliable dividends.

For example, a company with a high dividend yield may not be able to sustain that kind of payout and could suspend payment in the future.

When investing in bonds, investors need to know about the potential risks associated with fixed-income assets:

• Credit risk is when there is a possibility that a government or corporation defaults on a bond.

• Inflation risk is the potential that interest payments do not keep pace with inflation.

• Interest rate risk is the potential of fixed-income assets fluctuating in value because of a change in interest rates. For example, if interest rates rise, the value of a bond will decline, which could impact an investor who intends to sell some of their bond holdings.

Additionally, if investors take the income from their investment for day-to-day needs rather than reinvesting it, they may miss out on the benefits of compound returns. Investors could reinvest the income they earn on certain investments to take advantage of compounding returns and accelerate wealth building.

Factors to Consider When Building Your Income Investing Strategy

Building an income investing strategy takes work and time. Before creating a portfolio, you need to define your financial goals and consider your timeline for when you need the income streams. Below are some additional steps you could follow to create an income investing strategy:

• Assess your risk tolerance: It’s important to determine whether you want to invest more heavily in riskier assets, like dividend-paying stocks that may fluctuate in share price, or relatively safer securities, like interest-paying bonds.

• Choose your investments: As mentioned above, potential options for income investors include bonds, dividend stocks, and real estate investment trusts (REITs).

• Be mindful of taxes: Different types of income-producing assets may be taxed in different ways. It’s generally desirable to keep your portfolio tax efficient.

• Monitor your portfolio: It’s critical to regularly check in on your investments to ensure they are still performing according to your expectations.

• Rebalance as needed: If your portfolio gets out of alignment with your goals, consider making adjustments to get it back on track.

The Takeaway

An income investment strategy is, as it sounds, focused on using specific assets to provide income, not only growth (although income and growth strategies can work in harmony). Investing in dividend-paying stocks, interest-paying bonds, and other income-generating assets allows you to get the benefits of regular income streams and potential capital appreciation.

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

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What’s the difference between income investing and growth investing?

The goal of income investing is to create a certain amount of steady income from different types of assets. Investing for growth is focused on the potential gains of the securities in a portfolio. In a sense, income investing can be more present focused, while growth investing may be oriented toward the longer term.

What is the best investment for income?

There are various income-generating investments, each with its own risk profile and tax considerations. When choosing the best income investments for you, be sure to consider how different factors might impact your plan.

What investments give you monthly income?

While it’s possible to obtain monthly income from various types of investments, even dividend-paying stocks (dividends are often paid quarterly), a common source of monthly income is property. If monthly income is important to you, be sure to select assets that can meet your goal.

Photo credit: iStock/LeszekCzerwonka

SoFi Invest®

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

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

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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

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Jun

2024

What Is an International Bank Account Number (IBAN)?

Guide to International Bank Account Numbers (IBANs)

By Jackie Lam | Budgeting & Goals, Financial Independence, money | Comments Off

International Bank Account Numbers (IBANs) are standardized numbers that play a key role in overseas banking. They identify bank accounts so that international financial transfers can be completed quickly and accurately.

Here, you’ll learn more about IBANs, how they work, and how they differ from other banking numbers.

🛈 Currently, SoFi does not support international money transfers, and therefore does not support IBAN, BIC, or SWIFT codes.

What Is an International Bank Account Number (IBAN)?

An International Bank Account Number, or IBAN, is a one-of-a-kind identifier that banks use to refer to a specific bank account in any of 80+ countries around the world. In turn, banks use that info to quickly move money between accounts in different countries.

While IBANs are useful in sending and receiving funds, they aren’t used for withdrawing funds or for transferring ownership of accounts.

How Does an IBAN Work?

An IBAN is a standardized numbering system that includes up to 34 alphanumeric characters to identify accounts for transactions. While the length of an IBAN varies by country, the sequence remains the same to ensure proper routing:

• Country code (two letters)

• Check digits (two digits); this validates the routing numbers and accounts. It is sometimes referred to as a control code.

• Basic Bank Account Number (BBAN); this is an alphanumeric sequence that’s up to 28 characters long and represents a country-specific bank account number (which could represent different types of bank accounts, such as checking or savings).

While the format is standardized around the globe, the length of the code varies depending on the country.
It’s worthwhile to note that when using an IBAN to send or receive payments, there might be a processing fee or commission on the transfer.

IBANs are very much a part of the daily financial flow today. You may not have had international transactions in mind when you took the time to open a bank account, but they are becoming quite common. For instance, you might do business with a vendor overseas or shop online from a company based on another continent.

IBAN Example

Here is an invented example of an IBAN:

• GB 28 2021 6126 1431 9576 17

This would be for a UK bank. It begins with GB for “Great Britain” and has 22 characters.

Here are other examples:

Albania: AL 35 2021 1109 0000 0000 01234567
Denmark: DK 95 2000 0123 4567 89
Spain: ES 7921 0008 1361 01234 56789

IBAN vs. SWIFT Code

Both IBANs and SWIFT codes (aka Society of Worldwide Interbank Financial Telecommunications) are globally recognized and accepted banking transfer identifiers. They play a part in making sure a transfer goes through successfully, and they help keep international finance running smoothly.

They are not, however, the same set of digits. The main difference between an IBAN and a SWIFT code lies in what they identify. Whereas a SWIFT code identifies the financial institution, the IBAN points to a specific bank account. Both work in tandem to help a transaction proceed.

To provide a bit more detail, here are a few other key differences between IBANs and SWIFT codes:

• While an IBAN works more to identify a bank, branch, and bank account numbers, SWIFT identifies a particular bank during a transaction.

• SWIFT Codes are issued by the Society of Worldwide Interbank Financial Telecommunications, which is a member-owned cooperative. The SWIFT banking system is a messaging network that enables financial institutions around the world to talk to one another securely. IBANs, on the other hand, are issued directly by the financial institutions.

• Whereas IBANs are alphanumeric codes that are up to 34 digits, SWIFT codes include alphanumeric code that’s either 8 or 11 characters.

Do All Countries Use IBANs?

While more than 80 countries use IBANS, not every nation does. IBANs are generally used in the majority of banks in the Eurozone and other European countries. Parts of the Middle East, the Caribbean, and North Africa also use IBANs.

Some countries, such as Austria, Croatia, France, and the Netherlands make IBANs mandatory. Other countries don’t require the use of IBANs, but it is recommended. These include Albania, Brazil, Costa Rica, and the Virgin Islands.

Lastly, there are countries that don’t use IBANs. China, New Zealand, Canada, and the U.S. fall into this camp.

When Is an IBAN Number Required?

An IBAN number is typically required for international banking transactions. It allows for the accurate transfer of funds between accounts in different countries.

If, say, you need to make a payment to a business in South America or you have bought an item at an auction in Europe, you would likely need the recipient’s IBAN to complete the transaction. With that information, the money could be moved from your checking account to the payee’s account.

How Do I Find an IBAN?

If IBANs are available in both the country you live in and in the recipient’s country, you can obtain an IBAN by reaching out to your bank or checking on your bank statement. The person you’d like to send or receive money from will also need to to get their IBAN by contacting their bank or looking at their bank statement.

If you live in the U.S. and need an IBAN to complete an international transaction, the payee will typically share their banking details for the transfer of funds, including their IBAN.

Worth noting: The IBAN website also has a handy tool to calculate your IBAN code based on your country, bank code, and account number.

The Takeaway

While the U.S. doesn’t use the IBAN (International Bank Account Number) system, when you are sending funds overseas, you’ll need the other party’s IBAN. This number contains vital information that will help the money get to the intended account in another country safely and quickly. In this way, IBANs play an important role in keeping international financial transactions flowing.

FAQ

What is the IBAN number for the USA?

The U.S. does not identify bank accounts by IBANs. Instead, we use routing numbers and account numbers.

Is an IBAN the same as an account number?

An account number is specific to the individual and identifies their account, while an IBAN layers in more information. It’s an alphanumeric sequence that contains such information as an account number, along with a bank code, bank branch code, and location code.

How many digits are in an IBAN?

IBANs vary in length depending on the particular country. They can include up to 34 alphanumeric characters.

Which countries don’t use an IBAN?

Among the countries that don’t use IBANs are the U.S., Canada, China, and New Zealand. Additionally, there are some countries that suggest using IBANs, but don’t make it mandatory.

Photo credit: iStock/tolgart

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.

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.

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.

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Jun

2024

11 Work-From-Home Jobs Great for Retirees

By Susan Lahey | Financial Independence, Life & Career, money | Comments Off

Call it the Great Unretirement. Millions of Americans who are of retirement age are still working. According to one recent analysis of U.S. Census Bureau data, 22% of people aged 65 or older are still clocking hours professionally, with almost one in four of those being self-employed.

The reasons for working past age 65 can vary: The desire to stay engaged and challenged is one; the realities of needing to bring in income to keep pace with inflation and rising expenses is another.

No matter what your motivation, there are opportunities for seniors to work, including home-based ones. Here, learn about some of the most popular career paths to pursue later in life, from the privacy and comfort of your home.

11 Work-at-Home Jobs for Retirees

Consider these 11 work-at-home jobs for seniors; one or more may suit your skills and interests. Hours will vary, depending on how much time you have available and how much demand there is. Given that these are online jobs, you will probably need your own computer and headset or earbuds. Some companies may provide workers with tech gear.

1. Instructor

The online learning industry is booming: It’s expected to grow 20% year over year from now through 2030. Being an online instructor can therefore be a fast-growing job opportunity, too.

Almost anything you’ve mastered can be turned into an online course: baking, strength training, or traveling on the cheap. Whether it’s a hobby or a profession, you might be able to convert it to profit in an online course that students can purchase. Sites like Teachable and Coursera allow would-be teachers to set up an account and create courses that could provide passive income for years.

• Median pay: $30.33/hour

• Qualifications: Will depend on what you are teaching; in some cases, simply your own experience and knowledge is enough. In others, you may need credentials, such as post-grad degrees or proven success in a particular realm (whether gardening or fundraising).

2. Consultant

Using the skills you cultivated during your career can be a wise way to earn money when you’re a senior. If you happen to have years of experience in a field such as business or design, taking on clients as a consultant can be a great way to share your expertise and bring in income. Sites like LinkedIn and Indeed can also help, allowing you to search for job opportunities by location, contract status, and experience level.

• Median pay: $47.73

• Qualifications: You’ll need to show that you are qualified to advise on a topic based on a track record of business success. Using your professional and personal network to find clients can also be important.

💡 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.

3. Tutor

If you have the skills to teach but don’t want to do all the back-end work of creating and selling a course, look for jobs tutoring online. Tutors are hired not only by U.S. schools, individuals, and companies but also by international ones, making it potentially a flexible and lucrative path.

• Median pay: $18.80

• Qualifications: These will vary with the opportunity. Some people may be able to tutor simply based on having deep knowledge of a topic or having aced a subject in school. Others may require teaching licenses and credentials.

4. International English Teacher

The more interconnected the world becomes, the more important it is for people around the world to be able to speak a common language. If you are a native English speaker or if you speak English really well, you may qualify to teach English to students around the world. For this role, you’ll likely need to get a certificate, but once you are qualified, you can apply for jobs teaching online or even set up your own business.

How much you earn as a teacher can depend on whether you are teaching individuals or working with a larger agency, which may have deeper pockets.

• Median pay: $26

• Qualifications: These will vary. Some people in more informal settings may not need credentials. Otherwise, it can be vital to have a valid state teaching license and either a TEFL or CELTA certificate, reflecting that you are trained and ready to teach English to others.

5. Customer Support Agent

Customer support agents work with a business’ clients on the phone, through a chat function, on social media, or even through email to address questions. They typically help customers with things like making returns, processing exchanges, and resolving billing problems.

Agents must have good communication skills, empathy, solid problem-solving skills, and enough technical aptitude to use the company’s customer support system.

• Median pay: $18.80

• Qualifications: Depending on the job, you may need prior customer service experience. Typically, companies will offer training.

Recommended: How to Earn Residual Income

6. Technical Support Agent

This role is similar to customer support, except you will be solving customers’ technical issues, often with a device, a website, or an app. For example, the customer might need help changing their billing address on an app they use, or they could require guidance on using software they bought. You will need some technical know-how, but often companies train employees and provide a knowledge database for them to use to help resolve customer problems.

• Median pay: $21.13

• Qualifications: Varies depending on the company doing the hiring. It is common for businesses to train their agents to know the ins and outs of their product or service so they can help clients.

7. Travel Agent

Booking travel may seem to be a self-service online task these days, but there are still plenty of travel businesses that need employees. These might include travel companies that work with corporate clients or medical centers that help patients with travel logistics. Some of these hire and train individuals to manage travel booking.

Also, if you have expertise in a certain kind of travel (such as multigenerational travel to Disney properties or budget travel), you might be able to offer travel agent services on that front.

Being organized and having good customer service skills is important in this position, and having experience with the intricacies of travel arrangements can help. Some jobs, including more lucrative ones, may require specific credentials or knowledge of travel software.

• Median pay: $20.64

• Qualifications: Will depend upon the job. Some may hire those without specific travel experience but with good people skills; others may want candidates to be a certified travel associate.

8. Virtual Assistant

A virtual assistant tackles all kinds of tasks, from scheduling appointments to writing emails to updating clients’ social media accounts. Virtual assistant jobs can be great part-time gigs for seniors at home because they often only require the skills you already use to manage your own life. If you’re particularly good at management and working with executives, you can snag lucrative clients and really see your retirement earnings soar.

• Median pay: $24

• Qualifications: Will vary depending on the particular job. Some clients may seek prior administrative assistant experience; others may want an individual who is familiar with certain travel booking software.

9. Bookkeeper

Obviously, having experience in the bookkeeping field can be an asset for this role. You can help small business clients who don’t have the budget for a full-time bookkeeper or a big accounting firm manage their finances. These businesses could include local restaurants, small shops, or individual medical practitioners.

• Median pay: $24.31

• Qualifications: Some companies will train employees; others will want those who are already familiar with software such as QuickBooks, so it can be wise to train up on your own time. While a degree in business or accounting can be a plus, on-the-job learning may be possible, regardless of your degree.

10. Tax Preparer

Tax preparers can be employed by firms like H&R Block, who train them before tax season, or independently, working directly with clients. A lot of tax preparation is formulaic, but to serve clients well, it is key to be familiar with all the rules that change from year to year.

Also, this tends to be a seasonal job, with crunch time leading up to Tax Day in April.

• Median pay: $18

• Qualifications: As noted, the company you work for may train you in proper practices, and it’s important to keep on top of the latest tax code changes.

11. Data Entry Specialist

If you can type quickly and have an eye for detail, data entry may be for you. It can be a precise and rote job, putting information into spreadsheets and forms. You can generally land a data entry role without any experience, but if you go for a position in a field where you have expertise — say law, medical records, insurance, or consumer packaged goods — the pay is likely to be higher than elsewhere. That can help pad out your savings account or pay bills.

• Median pay: $20

• Qualifications: As noted, jobs may be available without related experience.

Recommended: 11 Benefits of Having a Side Hustle

Spotting a Scam

As with all things online, there’s always a possibility that something may not be quite as it seems, and that includes online job postings. Remote working opportunities are especially susceptible to fraud because everything is typically conducted digitally, via email and Zoom, so you don’t know if the person really is who they claim to be. Sadly, there are a substantial number of scams that target seniors.

As you look for remote opportunities, be cautious of listings that seem too good to be true. Offering a generous amount of money for very little work or requiring payment before work can begin are red flags. So too are job offers that involve an upfront overpayment for you to purchase supplies. Investigating opportunities thoroughly and familiarizing yourself with the latest job-related scams can help prevent you from being victimized. No one wants to have to recover from being scammed.

The Takeaway

Opportunities for seniors and retirees to beef up their savings and retirement investments through remote online work are abundant and varied. It may be necessary to spend some time searching to find gigs that tap your interests and skills and offer a suitable schedule and pay. Some jobs might include bookkeeper, tutor, and travel agent.

And when you do find the perfect remote gig to supplement your retirement income, find the right bank to partner with for storing, spending, and saving your funds.

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

Are there any work-from-home jobs for seniors that don’t require upfront costs?

Yes, most legitimate work-from-home jobs do not require upfront costs. Many companies will train employees. In fact, the request for upfront costs could signal that you are dealing with a scam vs. a legitimate job opportunity.

How much would a retiree expect to make while working from home?

The pay scale for remote work for retirees can vary tremendously. Many jobs pay around $20 an hour, though some offer less compensation. Opportunities that require specialized qualifications can pay significantly more.

What are some good work-from-home jobs for seniors?

There are an array of work-from-home jobs for seniors, such as being a business consultant, tutor, tax preparer, or customer service representative.

Photo credit: iStock/FG Trade

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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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.

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

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

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

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Understanding Sinking Funds

What Is a Sinking Fund?

Examples of s Sinking Fund

Benefits of a Sinking Fund

Drawbacks of a Sinking Fund

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How to Create a Sinking Fund

List Your Sinking Fund Categories

Determine Your Savings Target

Decide Where to Keep Sinking Funds

Set Up Automatic Transfers

Sinking Funds vs Emergency Funds

Sinking Funds vs Savings Accounts

Where Can You Keep a Sinking Fund?

The Takeaway

FAQ

What is a sinking fund in simple terms?

How much should you have in a sinking fund?

What is considered a healthy sinking fund?

Guide to Christmas Club Accounts

What Is a Christmas Club Account?

How a Christmas Club Account Works

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Reasons to Use a Christmas Club Account

Where Can You Find a Christmas Club Account?

Pros of a Christmas Club Account

Simplifies the Process of Saving for the Holidays

Alternative to Putting Holiday Purchases on Credit Card

Cons of a Christmas Club Account

Most Banks Have Saving Limits

Potential Fees for Early Withdrawal

Alternatives to Christmas Club Accounts

The Takeaway

FAQ

Do banks still do Christmas Club accounts?

Are Christmas Club accounts worth it?

Is there interest on Christmas Club accounts?

What Is an Income Investing Strategy?

How Income Investing Works

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.

Types of Income Investing Strategies

1. Dividend Stocks

2. Bonds

3. Real Estate

4. Savings Accounts

5. Money Market Accounts

6. Mutual Funds and ETFs

Understanding the Tax Implications of Income Investing

Example of an Income Investing Portfolio

Lower Risk Tolerance

Moderate Risk Tolerance

Higher Risk Tolerance

Benefits and Risk of Income Investing

Benefits

Risks

Factors to Consider When Building Your Income Investing Strategy

The Takeaway

FAQ

What’s the difference between income investing and growth investing?

What is the best investment for income?

What investments give you monthly income?

Guide to International Bank Account Numbers (IBANs)

What Is an International Bank Account Number (IBAN)?

How Does an IBAN Work?

IBAN Example

IBAN vs. SWIFT Code

Do All Countries Use IBANs?

When Is an IBAN Number Required?

How Do I Find an IBAN?

The Takeaway

FAQ

What is the IBAN number for the USA?

Is an IBAN the same as an account number?

How many digits are in an IBAN?

Which countries don’t use an IBAN?

11 Work-From-Home Jobs Great for Retirees

11 Work-at-Home Jobs for Retirees

1. Instructor

2. Consultant

Student Loan
Refinancing

Personal
Loans

Online
Investments