A cash balance pension plan is a defined benefit plan that offers employees a stated amount at retirement. The amount of money an employee receives can be determined by their years of service with the company and their salary. Employers may offer a cash balance retirement plan alongside a 401(k) or in place of one.
If you have a cash balance plan at work, it’s important to know how to make the most of it when preparing for retirement. Read on to learn more about what a cash balance pension plan is and the pros and cons.
What Are Cash Balance Pension Plans?
A cash balance pension plan is a defined benefit plan that incorporates certain features of defined contribution plans. Defined benefit plans offer employees a certain amount of money in retirement, based on the number of years they work for a particular employer and their highest earnings. Defined contribution plans, on the other hand, offer a benefit that’s based on employee contributions and employer matching contributions, if those are offered.
In a cash balance plan, the benefit amount is determined based on a formula that uses pay and interest credits. This is characteristic of many employer-sponsored pension plans. Once an employee retires, they can receive the benefit defined by the plan in a lump sum payment.
This lump sum can be rolled over into an individual retirement account (IRA) or another employer’s plan if the employee is changing jobs, rather than retiring. Alternatively, the plan may offer the option to receive payments as an annuity based on their account balance.
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How Cash Balance Pension Plans Work
Cash balance pension plans are qualified retirement plans, meaning they’re employer-sponsored and eligible for preferential tax treatment under the Internal Revenue Code. In a typical cash balance retirement plan arrangement, each employee has an account that’s funded by contributions from the employer. There are two types of contributions:
• Pay credit: This is a set percentage of the employee’s compensation that’s paid into the account each year.
• Interest credit: This is an interest payment that’s paid out based on an underlying index rate, which may be fixed or variable.
Fluctuations in the value of a cash pension plan’s investments don’t affect the amount of benefits paid out to employees. This means that only the employer bears the investment risk.
Here’s an example of how a cash balance pension works: Say you have a cash balance retirement plan at work. Your employer offers a 5% annual pay credit. If you make $120,000 a year, this credit would be worth $6,000 a year. The plan also earns an interest credit of 5% a year, which is a fixed rate.
Your account balance would increase year over year, based on the underlying pay credits and interest credits posted to the account. The formula for calculating your balance would look like this:
Annual Benefit = (Compensation x Pay Credit) + (Account Balance x Interest Credit)
Now, say your beginning account balance is $100,000. Here’s how much you’d have if you apply this formula:
($120,000 x 0.05) + ($100,000 x 1.05) = $111,000
Cash balance plans are designed to provide a guaranteed source of income in retirement, either as a lump sum or annuity payments. The balance that you’re eligible to receive from one of these plans is determined by the number of years you work, your wages, the pay credit, and the interest credit.
Cash Balance Plan vs 401(k)
Cash balance plans and 401(k) plans offer two different retirement plan options. It’s possible to have both of these plans through your employer or only one.
In terms of how they’re described, a cash balance pension is a defined benefit plan while a 401(k) plan is a defined contribution plan. Here’s an overview of how they compare:
Cash Balance Plan
401(k)
Funded By
Employer contributions
Employee contributions (employer matching contributions are optional)
Investment Options
Employers choose plan investments and shoulder all of the risk
Employees can select their own investments, based on what’s offered by the plan, and shoulder all of the risk
Returns
Account balance at retirement is determined by years of service, earnings, pay credit, and interest credit
Account balance at retirement is determined by contribution amounts and investment returns on those contributions
Distributions
Cash balance plans must offer employees the option of receiving a lifetime annuity; can also be a lump sum distribution
Qualified withdrawals may begin at age 59 ½; plans may offer in-service loans and/or hardship withdrawals
Pros & Cons of Cash Balance Pension Plans
A cash balance retirement plan can offer both advantages and disadvantages when planning your retirement strategy. If you have one of these plans available at work, you may be wondering whether it’s worth it in terms of the income you may be able to enjoy once you retire.
Here’s more on the pros and cons associated with cash balance pension plans to consider when you’re choosing a retirement plan.
Pros of Cash Balance Pension Plans
A cash balance plan can offer some advantages to retirement savers, starting with a guaranteed benefit. The amount of money you can get from a cash balance pension isn’t dependent on market returns, so there’s little risk to you in terms of incurring losses. As long as you’re still working for your employer and earning wages, you’ll continue getting pay credits and interest credits toward your balance.
From a tax perspective, employers may appreciate the tax-deductible nature of cash balance plan contributions. As the employee, you’ll pay taxes on distributions but tax is deferred until you withdraw money from the plan.
As for contribution limits, cash balance plans allow for higher limits compared to a 401(k) or a similar plan. For 2024, the maximum annual benefit allowed for one of these plans is $275,000. For 2025, the maximum annual benefit allowed is $280,000.
When you’re ready to retire, you can choose from a lump sum payment or a lifetime annuity. A lifetime annuity may be preferable if you’re looking to get guaranteed income for the entirety of your retirement. You also have some reassurance that you’ll get your money, as cash balance pension plans are guaranteed by the Pension Benefit Guaranty Corporation (PBGC). A 401(k) plan, on the other hand, is not.
💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.
Cons of Cash Balance Pension Plans
Cash balance pension plans do have a few drawbacks to keep in mind. For one, the rate of return may not be as high as what you could get by investing in a 401(k). Again, however, you’re not assuming any risk with a cash balance plan so there’s a certain trade-off you’re making.
It’s also important to consider accessibility, taxation, and fees when it comes to cash balance pension plans. If you need to borrow money in a pinch, for example, you may be able to take a loan from your 401(k) or qualify for a hardship withdrawal. Those options aren’t available with a cash balance plan. And again, any money you take from a cash balance plan would be considered part of your taxable income for retirement.
Pros
Cons
• Guaranteed benefits with no risk
• Tax-deferred growth
• Flexible distribution options
• Higher contribution limits
• Guaranteed by the PBGC
• Investing in a 401(k) may generate higher returns
• No option for loans or hardship withdrawals
• Distributions are taxable
Investing for Retirement With SoFi
A cash balance retirement plan is one way to invest for retirement. It can offer a stated amount at retirement that’s based on your earnings and years of service. You can opt to receive the funds as either a lump sum or an annuity. Your employer may offer these plans alongside a 401(k) or in place of one, and there are pros and cons to each option to weigh.
If you don’t have access to either one at work, you can still start saving for retirement with an IRA. You can set aside money on a tax-advantaged basis and begin to build wealth for the long-term.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
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FAQ
Is a cash balance plan worth it?
A cash balance plan can be a nice addition to your retirement strategy if you’re looking for a source of guaranteed income. Cash balance plans can amplify your savings if you’re also contributing to a 401(k) at work or an IRA.
Is a cash balance plan the same as a pension?
A cash balance plan is a type of defined benefit plan or pension plan, in which your benefit amount is based on your earnings and years of service. This is different from a 401(k) plan, in which your benefit amount is determined by how much you (and possibly your employer) contribute and the returns on those contributions.
Can you withdraw from a cash balance plan?
You can withdraw money from a cash balance plan in a lump sum or a lifetime annuity once you retire. You also have the option to roll cash balance plan funds over to an IRA or to a new employer’s qualified plan if you change jobs.
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A Health Savings Account (HSA) can be set up in three simple steps, and once it’s up and running, it can help you bridge the gap between what your health insurance covers and your actual costs, among other benefits.
Let’s face it: Many of us these days select a High Deductible Health Plan, or HDHP, when it comes to health insurance. That means you may be paying a lower monthly premium in exchange for a high deductible. You could potentially get hit with a lot of unforeseen healthcare expenses before your benefits kick in. And even after you meet that deductible, you may have charges that are not reimbursed. A Health Savings Account (HSA) can help you set money aside to fill that gap.
Setting up an HSA may sound intimidating, as if you’ll have to fill out reams of paperwork, but that’s not at all the case! Whether through an employer or on your own, once you’re ready to start saving, the steps to opening an HSA account can be as simple as filling out an online form with basic information — easy peasy.
Here’s a look at the steps involved, plus a few important considerations before you take the leap.
Key Points
• Eligibility for a Health Savings Account (HSA) requires enrollment in a high deductible health plan without other health coverage or Medicare.
• Setting up an HSA involves selecting a provider, completing paperwork, and verifying health plan coverage.
• Contributions to an HSA are pre-tax, reducing taxable income and allowing tax-free growth, with a maximum limit set annually.
• Funds from the HSA can be used to pay for a wide range of medical expenses, including those not covered under typical health plans.
• After age 65, funds can be used for any purpose without penalties, though they will be taxed if not used for qualified medical expenses.
What Is a Health Savings Account (HSA)?
The HSA will be turning 21 soon: In 2003, Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act which created the Health Savings Account. These accounts were meant to help people with high deductible health plans set aside money to pay for out-of-pocket medical expenses: copays, dental care, eyeglasses, prescriptions, psychiatric help, and more. This can happen both before and after you reach your deductible.
In addition to covering health costs, these tax-free accounts can lower your amount of federal income tax owed. What’s more, HSAs can help with saving for retirement and unforeseen emergencies.
How Does an HSA Work?
A Health Savings Account can work just like a checking account. You can make deposits (or contributions), pay bills online, make transfers, and even pay for qualified medical expenses with an HSA debit card. You are free to withdraw HSA funds at any time to pay for health costs not covered by your high deductible health plan. One big note: Once you enroll in Medicare, you can no longer contribute to an HSA.
Deposits can also be contributed by your employer, with direct deposits made into your HSA straight from payroll. A nice aspect of these plans: Health Savings Account contributions roll over every year, so you don’t have to race to spend the pre-tax funds in your account. If you stay healthy, you can build up your emergency fund as well as your retirement nest egg. Your good health can lead to wealth down the line!
Who Can Open an HSA?
According to Federal Guidelines, you qualify to open a Health Savings Account if you:
• Are covered under a high deductible health plan, or HDHP.
• Are not covered by any other health plan, including a spouse’s.
• Are not claimed as a dependent on someone else’s tax return.
• Are not enrolled in a disqualifying alternate medical savings account, such as an FSA (Flexible Spending Account) or an MSA (a Medicare medical savings account).
• Are not currently enrolled in Medicare.
How to Set Up a Health Savings Account
Once you’ve established that the pros outweigh the cons, you may wonder exactly how to set up a Health Savings Account (HSA). Fortunately, the process is pretty straightforward:
Step 1: Research Your HSA Options
If an HSA plan is offered directly through your employer, go to Step Two.
If you’re self-employed, investigate HSA options online, or reach out to banks or other financial entities.
Step 2: Fill Out the Necessary Paperwork
The set-up for an HSA is not unlike opening a bank account. You’ll be provided with paperwork or an online form, where you’ll give basic information such as your Social Security Number and proof of your identity (typically verified by a government-issued photo ID).
Step 3: Complete Verification
Be prepared to offer verification of your high deductible health plan (HDHP).
That’s it! It’s a quick and simple process to set up a Health Savings Account.
Once your HSA is up and running, you may be able to opt for automatic regular deposits from your bank account or straight from your paycheck. There is no minimum amount required to open an HSA, but you typically need at least $1,000 in the account in order to invest in certain mutual funds.
HSA Contribution Limits
For tax year 2024, HSA contribution limits are $4,150 for individuals and $8,300 for families with HDHP coverage. For 2025, HSA contribution limits are $4,300 for individuals and $8,550 for families. Those 55 and older can contribute an additional $1,000 as a catch-up contribution in either tax year. There is never a minimum requirement for deposits. Some ground rules to be aware of:
• You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
• You have no supplemental health coverage except what is permitted under other health coverage.
• You aren’t enrolled in Medicare.
• You can’t be claimed as a dependent on someone else’s tax return.
Advantages of an HSA
There are many benefits to opening an HSA. Sure, it can provide a cushion or safety net when it comes to out-of-pocket medical costs. But there are other perks beyond covering the price of a new pair of glasses.
Covering Expenses for You and Your Family
From ambulances to acupuncture, a Health Savings Account can cover the costs your HDHP doesn’t. The IRS has an extensive listof ways you can use your HSA funds. One example: Did you know you can also use your Health Savings Account to pay for medical expenses for a spouse or a child — anyone who is part of your tax household — even if they aren’t on your HDHP? It’s true!
Lowering Taxable Income
Here’s another bonus to having this kind of account: Your HSA contributions are made before taxes are deducted, thereby lowering your taxable income. As a result, you may pay less in taxes.
Rollover Contributions
There’s no “use-it-or-lose it” pressure when you have a Health Savings Account. Unused HSA funds don’t disappear at the end of the year. You can roll them over again and again, accumulating tax-free interest. Those earnings can turn into savings to be invested in the future or used for life’s little surprises — say, a chipped tooth.
Saving for Retirement
At age 65, you can start using the funds in your Health Savings Account for anything, without penalty. Withdrawals will be taxed the same as they would from a 401(k) or IRA, but any funds waiting for use will avoid taxes while earning interest.
Additionally, if you are lucky enough to be able to max out your annual IRA and/or 401(k) contributions, an HSA is another way to save more tax-free money toward retirement. Beyond covering copays, an HSA is a great way to get your money working for you.
Disadvantages of an HSA
Okay, now you know the upside of opening an HSA. But there are potential downsides that are worth knowing about and considering before you sign up.
Penalties for Unqualified Expenses
Until you turn 65, HSA funds cannot be used for anything but eligible medical expenses. To do so would subject withdrawals to income taxes and a 20% penalty.
Monthly Fees
Health Saving Account providers may charge a monthly fee. These fees generally tend to be lower than $5 bucks per month, but they do add up. While there are providers out there that don’t charge account management fees, all will assess an investment fee. Do your homework to find the vehicle with the lowest fees.
Potential Losses
Like an IRA or 401(k), any invested money in an HSA can mean monetary gains and losses. As with any investment account, you need to be prepared for your HSA balance to dip if the market trends downward.
Keeping Tabs for Your Tax Records
HSA contributions and expenditures must be reported on your tax return. It may not be a deal-breaker, but for some people, keeping records of your HSA activity can be a nuisance.
HSA Advantages vs. Disadvantages
Pros
Cons
• Covers an extensive list of out-of-pocket health expenses
• Can be used for family members
• Lowers taxable income and therefore may decrease your taxes
• Contributions roll over to the next year
• Promotes tax-free savings for retirement
• Penalties for nonqualified expenses
• Unexpected and potentially hidden fees
• Account balance can fluctuate with the marketplace
• Activity must be reported on your tax return
Things to Consider When Choosing an HSA
If your job offers a Health Saving Plans, great! They’ve done the research for you. Employers may also offer Flexible Spending Accounts (FSAs). But unlike FSAs, which are owned by an employer and can be inflexible, a Health Savings Account has higher contribution limits and is controlled by you.
If you are self-employed, do your research. You’ll find an array of Health Savings Plans to choose among; HSA comparison websites can help you navigate the search. Remember to pay attention to any monthly/annual fees so you know exactly what to expect. Ideally, you’ll want an HSA that makes it easy to manage your account online. Many banks and credit unions offer HSAs, so check with your financial institution.
The Takeaway
Once you’ve made the decision to enroll in a Health Savings Account, the steps to set it up are relatively painless. You can start using your HSA funds right away to help cover qualified health-related costs. Contributions are made with pre-tax dollars, don’t need to be used up by the end of the year, and can potentially even help boost your retirement fund. A Health Savings Account goes beyond just covering your healthcare expenses and can serve as one of the best tax-advantaged savings vehicles available. It can enhance your sense of security and keep your wealth growing.
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.
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🛈 While SoFi does not offer Health Savings Accounts (HSAs), we do offer alternative savings vehicles such as high-yield savings accounts.
FAQ
How do I set up an HSA account?
With a valid government-issued photo ID, Social Security number, and proof of your HDHP, you can fill out a basic paper or online HSA form, provided by an employer or financial institution.
Can I start an HSA on my own?
Yes. As long as you are enrolled in an HDHP and not covered under someone else’s policy, you can start an HSA.
How much does it cost to open an HSA?
The initial sign-up is free, and there is no minimum deposit amount to start. But expect investment fees and possibly monthly management fees.
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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.
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In addition to spoiling them with toys and ice cream, many grandparents also want to help secure a solid financial future for their grandkids. That can mean setting up a custodial account, considering tax-advantaged savings options, and exploring other ways to start building a child’s wealth.
Below, you’ll learn about the different ways to save money for your grandkids, plus the pros and cons of each.
Why Open an Account for Grandchildren?
Sure, your grandkids might prefer a new video game or Lego set, but you’ll do them a favor, today and tomorrow, by opening a savings account for them. Here are a couple of good reasons to open a savings account for your grandchildren.
Teaching Financial Literacy Early
Money management skills are crucial, but personal finance education can be virtually nonexistent during school. It’s not typical for schools to teach kids how to balance a checkbook, how to invest in stocks, how to save for a down payment on a house, and how to file taxes.
Thus, it’s up to parents — and grandparents — to equip the next generation with financial literacy. Opening an account for your grandchildren can help teach them concepts such as interest, budgeting, and investing.
Getting a Head Start for College and Life
While teaching children how to manage money can give them a head start on the path to financial wellness, so too can providing them with a nest egg that can grow over time through various savings and investing accounts. Consider these options:
• When you open a savings account for grandchildren early on, they could wind up having a sizable chunk of cash in young adulthood to put toward their first car or even a house down payment.
• A 529 college savings plan could help them avoid taking on too much debt from student loans.
• Retirement accounts, such as a Roth IRA, can help them achieve their retirement goals, even if those are more than half a century away. Remember, the earlier someone starts investing, the more they stand to earn in the long run.
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Many banks and credit unions offer savings accounts designed for kids. Do a quick search for “best savings accounts for grandchildren” or you could start by seeing if your own bank offers such an account.
Having money in savings at an early age will let your grandkids benefit from compounding interest, especially if you find a high-yield savings account for kids.
You can also consider opening a certificate of deposit (CD) or purchasing savings bonds for your grandchildren. CDs are savings accounts that typically provide a higher interest rate than a standard savings account in exchange for keeping your money in the account for a fixed period of time. Savings bonds, issued by the U.S. Department of Treasury, are a very low risk, longer-term investment that provides interest in return for lending the government money.
With both of these options, the money is less liquid, but if the CD or bond matures when your grandchild is older, they stand to have a reliable source of funds they can use in future years.
Custodial Accounts (UGMA/UTMA)
Beyond savings accounts for grandchildren, you can consider helping your grandkids actually start investing with a custodial account, through the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). Once your grandchild is between 18 and 25 (the exact age varies by state), they’ll take control of the account.
These accounts are taxable (meaning you will owe taxes on interest earned) and have no contribution limits. They’re an easy way to purchase stocks, mutual funds, and other securities for your grandchild — and you can even transfer your own securities into the custodial account.
529 College Savings Plans
The cost of college tuition continues to skyrocket, meaning it’s never too early to start saving. There are several benefits of a 529 college savings plan: While the contributions to this qualified tuition plan aren’t tax-deductible, your grandchild’s distributions from the account tax-free at the federal level, as long as the money is used for qualifying expenses.
A 529 college savings may have “college” in the name, but your grandchild can also use it for other higher education programs, such as a trade or vocational school. You can also roll over 529 funds into a Roth IRA if your grandkids don’t use all (or any) of the funds.
Contributions to a grandchild’s 529 account are not deductible on your federal income tax return. However, close to 30 states offer either a deduction or credit for this kind of contribution.
Another consideration: There’s an annual limit to how much you can give as a gift without triggering taxes. For 2024, the annual gift tax exclusion is $18,000 (for married couples, the combined limit is $36,000). For 2025, the annual gift tax exclusion is $19,000 ($38.000 for married couples). If you were to put more than that into a 529 for a grandchild, you would have to pay a gift tax bill.
IRAs for Minors
Similar to custodial investment accounts, you can open custodial retirement accounts for your grandchildren, including a traditional IRA and a Roth IRA. While your grandkid won’t benefit from this account for decades, starting them early on the path to retirement savings means they could have considerably more money to work with when they reach retirement age.
However, it’s important to note that opening an IRA requires the child to have earned income in a given year. For teens, this can make sense. For a newborn, it is unlikely to be a viable option.
When making contributions to an IRA for a grandchild, note that the amount you deposit is subject to a gift tax exclusion before it becomes taxable. For 2024, this allows up to $18,000 per giftee. Funds given beyond that amount might mean you, the donor, are liable for taxes, though other factors will need to be considered to determine any tax burden.
Choosing the Right Account
Not sure how to choose the right savings account for your grandchildren? Here are some things to consider:
Comparing Interest Rates and Fees
If you’re opening a savings account, compare interest rates — you want an account with a high yield so that the money compounds more quickly over time. For example, currently the average interest rate for standard savings accounts is 0.45%, while the figure for high-yield savings accounts (often from online-only banks) can be several times that number.
For custodial accounts, you’ll want options with low or no fees. It can be wise to shop around and see what options you have from different banks and brokerage firms.
Certain accounts allow your grandchildren to access funds sooner, while others (like IRAs) have strict rules about when they can withdraw funds and what the funds can be used for (as is the case with 529 plans). Think about the specific timeline and use case you envision for your grandchildren. Sometimes, opening more than one type of account makes sense, depending on how many goals you want to enable for your children’s kids.
Tax Implications and Benefits
Some accounts have tax-deductible contributions; others have tax-free withdrawals. For example, withdrawals from a 529 account are not usually taxable, provided they are used for qualified educational expenses. With a Roth IRA, withdrawals made after your child is older than 59 ½ (as hard as that may be to imagine) are not taxable. With a traditional IRA, taxes are paid when the money is withdrawn, usually in retirement, and are taxable.
Speaking with a financial advisor can help you understand the tax implications of each type of account you’re considering to better understand what you might pay — and what your grandchild might pay.
Setting up and Contributing to the Account
Ready to open a savings account for your grandchildren? Here’s how it works:
Opening and Funding the Account
Follow the bank’s or investment firm’s guidelines for opening the account. You will likely need some specific information from the grandchild’s parents to open the account. You’ll also need to deposit money into the account to start the nest egg. Custodial accounts may even let you transfer your own assets into the account.
Automatic Transfers and Recurring Contributions
If you’d like, you may be able to set up recurring transfers into the account. Perhaps you want a recurring transfer every holiday season or on your grandchild’s birthday. Work with the financial institution to set up these contributions — and perhaps find out how other loved ones might be able to contribute as well.
Monitoring and Managing the Account
After opening an account, it’s important to monitor it and see how the funds grow over time. Just as importantly, once your grandchild is a little older, it’s a good idea to sit down and review the account with them:
• If it’s a savings account, walk them through how compound interest works.
• If it’s a custodial account, talk to them about the basics of investing and the importance of saving for retirement.
The Takeaway
It’s never too early to start thinking about your grandchild’s future. Savings accounts, 529 plans, and custodial accounts offer several ways for you to give them money that will help them with college, general expenses, and even retirement.
While saving for grandkids is important, it’s also crucial that you take care of your own finances.
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.
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FAQ
What are the contribution limits for custodial accounts?
There are no contribution limits for UGMA/UTMA custodial accounts, but you can only contribute up to a certain amount to avoid gift-tax implications (this changes each year). Contribution limits apply for custodial IRAs just as they would for regular IRAs.
Can grandparents open a 529 plan for grandchildren?
Yes, grandparents can open a 529 plan for grandchildren. If the grandchild’s parents have already set up a 529 plan, grandparents can also contribute to that plan directly. This will simplify account management and withdrawals for the recipient of the funds.
What happens to the account if the grandchild doesn’t need the funds?
If a grandchild doesn’t need funds from a 529 plan for college, they can still use them for trade or vocational schools or roll them into an IRA. Grandparents can also reassign the 529 plan to another grandchild.
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.
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.
I Bonds are a type of savings bond issued by the U.S. Treasury. They are designed to protect against inflation and are generally considered a safe investment because they are backed by the government.
I Bonds are essentially a loan to an entity (in this case the U.S. government), with the promise to return an investor’s money, typically with interest. These bonds also offer some tax advantages.
If you’re considering buying I Bonds and you’re wondering, how do I Bond work?, here’s what you need to know.
Key Points
• I Bonds are government-backed savings bonds designed to be low-risk.
• The interest rate of I Bonds combines a fixed rate and an inflation rate, adjusted semi-annually, which together provide the bonds’ composite rate.
• Tax benefits include exemption from state and local taxes, and possible deferral of federal taxes.
• Purchase limits of I Bonds are set at $10,000 per individual annually.
• I Bonds must be held for 12 months before redemption. Cashing them in before holding them for five years incurs a penalty of the last three months’ interest.
How Do I Bonds Work?
I Bonds are a type of savings bond offered by the U.S. Treasury and backed by the full faith and credit of the U.S. government. These bonds offer two types of interest payments: a fixed rate and an inflation rate, which together provide the bond’s composite rate (or yield).
The fixed-rate portion is determined when the bond is purchased, and it remains the same for the life of the bond. The variable rate gets adjusted twice a year, based on inflation rates. The composite rate on I Bonds issued as of November 1, 2024 is 3.11%. If you’re wondering how that rate compares to the interest rate on other types of savings vehicles, the rate on a 60-month certificate of deposit (CD) in November 2024 was 4.15% , for example, and the average rate on a high-yield savings account was more than 4%.
Because I Bonds are backed by the U.S. government, they are designed to have a low risk of default. Furthermore, the principal is guaranteed. This is one of the advantages of savings bonds overall. As a result, I Bonds are generally considered low-risk investments.
Individuals who buy I Bonds must hold them for at least 12 months before cashing them in. if they redeem the bonds before the five-year mark, they will lose the last three months of interest. Investors can hold onto I Bonds for up to 30 years, when they reach maturity.
While paper I Bonds used to be available in certain circumstances, starting January 1, 2025, all new I Bonds will be electronic.
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How Do You Calculate I Bond Interest Rate?
If you are interested in buying bonds like I Bonds, you’ll want to know how to figure out the interest rate. To calculate the I Bonds interest rate, you combine the fixed rate and inflation rate to get the composite rate.
For example, if you bought I Bonds in November 2024 when the fixed rate was 1.20% and the inflation rate was 0.95%, to calculate the composite rate you would use this formula:
[0.0120 + (2 x 0.0095) + (0.0120 x 0.0095)] + 0.0311 or 3.11%
Using these numbers, you’ll earn 3.11% interest on the amount you invested in I Bonds for six months, at which time the rate may change again. So if you invested $1,000 in I Bonds, you would earn $15.55 in interest in six months. The earnings would then be added to your original investment, and for the next six months you would earn interest on that new, higher amount of $1,015.55.
One thing to keep in mind is that if you cash in I Bonds before five years, you will lose the last three months worth of interest. So, if possible, you may want to hang onto them for five years to avoid giving up interest you may have earned.
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.
Are I Bonds Still a Good Investment?
Whether I Bonds make sense for you as an investment depends on a number of factors, your financial goals, risk tolerance, overall investment strategy, and timeline.
Benefits of I Bonds
I Bonds have a number of potential advantages. These include:
• Lower risk: I Bonds are designed to be a low-risk investment, backed by the U.S. government. If you have a low risk tolerance, I Bonds may be a good choice for you. Also, if you’re looking for a place to park money that you’ll need in five or so years — for a down payment on a house, say — I Bonds can offer a low-risk option.
• Protection against inflation: I Bonds can help protect your purchasing power in times of high inflation. If inflation rises, the interest rate on I Bonds rises as well. For instance, in May 2022, when inflation was high, I Bonds paid a composite rate of 9.62%. As of November 1, when inflation was much lower, the composite rate on I Bonds issued was 3.11%.
• May offer tax advantages: While there are federal taxes on I Bonds, there are no state and local taxes on them.
Drawbacks of I Bonds
There are some downsides to investing in I Bonds, however, such as the following:
• Time commitment: I Bonds must be held for at least 12 months before they can be redeemed.
• Possible interest penalty: You’ll lose the last three months’ worth of interest if you sell I Bonds before the five-year mark.
• Purchase limit: Individuals can purchase no more than $10,000 worth of electronic I Bonds each year through the U.S. Treasury’s Treasury Direct.
• Lower interest rate: The interest rate may be lower for I Bonds than for some other investments.
• Hard to predict return over time: To maximize your return on investment when purchasing I Bonds, it’s important to understand how the two interest rate components of the bond can play out over time. As mentioned, the fixed interest rate remains the same for the life of the bond. But the inflation rate of the bond adjusts with changes in inflation rates twice per year. If inflation goes up, so does the bond’s inflation rate. If inflation goes down, the bond’s inflation rate would likewise decrease as well.
I Bonds vs EE Bonds
Investors considering buying savings bonds may want to compare I Bonds and EE Bonds. The two types of bonds have many similarities but also a few key differences.
Similarities
You can buy both EE Bonds and I Bonds from Treasury Direct. Both types of bonds are backed by the full faith and credit of the U.S. government, and they are each designed to be a low-risk investment. They both mature in 30 years.
I Bonds and EE Bonds each have a purchase limit of $10,000 per individual per year.
Differences
One of the main differences between EE Bonds and I Bonds is that EE bonds issued after May 2005 have a fixed interest rate that doesn’t change for at least the first 20 of its 30 years, while I Bonds have a composite rate that combines a fixed rate and an inflation rate, which changes every six months. The interest rate for EE Bonds bought as of November 1 is 2.60%.
One unique feature of EE Bonds is that, over a 20-year period, these bonds are guaranteed to double in value. While I Bonds don’t offer the same guarantee, your principal is guaranteed and the bonds are designed to keep pace with inflation.
Do You Pay Taxes on I Bonds?
Tax-efficient investors may want to consider certain I Bond features. For instance, I Bonds are exempt from local and state taxes. While federal taxes usually apply, they could be deferred until the bond is ultimately sold or matures; whichever happens first.
Additionally, I Bond investors may use the interest payments for qualified higher education expenses and receive a 100% deduction. Some restrictions apply, including:
• You must cash out your I Bonds the year that you want to claim the exclusion.
• Your modified adjusted gross income must be less than the cut-off amount the IRS sets for the year.
• You must use the interest paid to cover qualified higher education expenses for you, your spouse, or your dependent children the same year.
• You cannot be married, filing separately.
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How Do You Buy I Bonds?
You need to meet certain criteria to purchase I Bonds. To be eligible to buy I Bonds you must be:
• A United States citizen, no matter where you live
• A United States resident, or
• A civilian employee of the United States, no matter where you live
If you are eligible to purchase them, buying I Bonds is easy. As previously mentioned, individuals can purchase electronic I Bonds online through Treasury Direct, after setting up a Treasury Direct account. They can be bought in denominations starting at $25. The maximum amount of electronic I Bonds someone can purchase is $10,000 per calendar year.
The Takeaway
If you’re looking for an investment that’s designed to be safe, I Bonds may be worth considering. They are backed by the U.S. government and offer protection from inflation, certain tax advantages, and other benefits that may make them a low-risk choice for your savings goals. However, because I Bonds come with a composite rate of return, it’s hard to predict how much your money will actually earn over time.
If you’re interested in different savings vehicles, there are alternatives to I Bonds, including CDs and high-yield savings accounts. By exploring your options, you can determine the best choice — or choices — for you and 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.
FAQ
How Long Do I Bonds Take to Mature?
I Bonds reach maturity in 30 years. You can redeem I Bonds after holding them for 12 months, but if you cash in I Bonds in less than five years, you’ll lose the last three months of interest.
How Often Can You Buy I Bonds?
In one calendar year, an individual can buy up to $10,000 worth of I Bonds. The limit is counted by the Social Security number of the first person listed on the bond, according to Treasury Direct. If you are a co-owner of I Bonds and the second person named on the bonds, those bonds will not count toward your limit.
In addition, if you give I Bonds as a gift, those bonds count toward the limit of the recipient, not you as the giver.
4.00% APY 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.
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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
1SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by banks in the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at SoFi.com/banking/fdic/terms. See list of participating banks at SoFi.com/banking/fdic/receivingbanks.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Workplaces typically pay employees just twice a month. But sometimes, you want to get your hands on cash more quickly. Fortunately, it’s possible to find jobs that pay daily, from babysitting to blogging to mowing lawns.
Some of these are true jobs that pay every day, while others are freelance gigs (commonly referred to as side hustles) that may pay invoices as you submit them. If you manage enough side hustles or have enough clients for a single side gig, you can stagger invoices so that payments are coming in every day — or at least multiple times a week.
Here, take a closer look at these gigs that can pay daily to keep cash flowing your way.
Key Points
• There are various side hustles, including babysitting, blogging, and lawn mowing, that can offer daily pay.
• Flexibility in scheduling can mean working from home or convenient locations.
• Taking on multiple gigs can bring in steady income and help build financial stability.
• Organizational skills are needed for managing clients and tasks efficiently.
• Popular jobs that pay daily can be driving a rideshare, delivering food, creating content, and pet sitting.
20 Daily Paying Jobs
Are you looking for a daily flow of cash into your checking account? Here are 20 jobs that pay daily:
1. Waiting on Tables
Servers are tipped employees who earn a reduced minimum wage. When you work this way, you may still earn a regular paycheck with your hourly wage and any tips paid by debit or credit card. However, you are often able to pocket cash tips at the end of each shift. Other tipped workers, like hairdressers, manicurists, and bellhops, may also bring home money every day.
Typical Pay: Currently $15.80 per hour
2. Collecting and Recycling Metal
If you have a truck or van, you can spend the day collecting scrap metal from construction sites, local businesses, and dump sites. You might be able to use resources like Craigslist or even social media to find scrap metal ready to be picked up.
Once you’ve gathered enough scrap metal, you can take it to a local recycler, who will typically pay you by the pound for quality materials.
Another angle on this is collecting recyclable bottles and cans and exchanging them for cash. This may be as simple as taking them to your local supermarket.
Typical Pay: Currently $21 per hour
3. Babysitting
As a babysitter, you can set your own rates and hours and typically get paid at the end of a shift. You don’t need any special equipment, which can make it a good low-cost side hustle for many people.
While word of mouth is still a good strategy for finding clients, many people now use find babysitters digitally, like through Care.com, UrbanSitter, and Bambino; it’s a good idea to get vetted and have a profile on such platforms.
Bonus points if you are CPR- and first aid certified!
Typical Pay: Currently $23.61 per hour (though neighborhood, word-of-mouth jobs may be less)
4. Pet Sitting
Pet parents need a break too. Whether through word of mouth or through apps like Rover, you can find people who need help with their pets while on vacation or even just during their days in the office.
In addition to pet sitting, you may be able to find clients who just want someone to walk their dogs during the day. With good word of mouth and some marketing, you may achieve an array of jobs that pay everyday.
Typical Pay: Currently $15-25 per hour, with overnights ranging from $45 to $75
5. Selling Your Photos
If you like to take photos, whether while traveling or just of everyday life, you might be able to make money from them. Uploading photos to a stock photography site means you’ll make money every time a person pays to use your photo.
If you’re a skilled photographer with professional equipment, you can make money on the side by taking family portraits or even photographing weddings.
Typical Pay: This varies from selling a photo print for a few dollars online to making $700 from a stock house for an image. The average wedding photographer makes $48 per hour.
6. Reselling
Another way to potentially be paid every day is by getting into reselling on sites like Amazon and eBay. But what is a reseller? As a reseller, you will buy products (ideally greatly discounted and in bulk), then list them for sale at a higher price online.
Becoming a successful reseller can require patience, hard work, and a lot of time at the post office. But once you have a process nailed down, it can be an easy way to get paid regularly.
Typical Pay: Currently $33 per hour
7. Crafting
Opening a shop on Etsy is a great way for hobbyists to make supplemental income from their crafts. Here, artisans can showcase and sell their work, from custom jewelry to knitted blankets to hand–carved signs. If your items are popular enough — and you can keep up with demand — it’s possible to make sales every day.
Typical Pay: This varies widely depending on how time-consuming a craft is and how much it sells for, but one current estimate is $25 per hour
8. Renting Out Your Space
Have an extra bedroom in a location that tourists often visit? You might be able to list your space on Airbnb and VRBO. If you can attract guests every night, you could potentially get a payout every day.
Typical Pay: Your earnings will vary depending on location, specifics of the space you are renting out, and how much demand your area experiences.
9. Mowing Lawns
Offering to mow multiple neighbors’ lawns each week — and then staggering when you mow them — is a simple way to get paid every day of the week. While this can be an easy evening side gig after a full-time job, it also has the makings of a full-time hustle itself. If you have the right equipment and transportation, plus enough clients, you could launch your own lawn mowing company.
Typical Pay: Currently $18.94 per hour
10. Driving a Rideshare
If you’re a safe driver with a decent car, you might have a future as a rideshare driver. While Lyft typically pays out each week (on Tuesdays), Uber allows drivers to opt in to Instant Pay — with up to six payments a day!
Typical Pay: Currently $18-20 per hour
11. Delivering Food
If you’d rather drive food than people, you’re in luck. Delivery drivers for services like Uber Eats and DoorDash can all opt in to instant payouts. Getting paid instantly (as opposed to the services’ traditional payment timelines) may come with a fee, however. That can mean less cash to put in your checking or savings account.
Typical Pay: $17.06 per hour
12. Shop for Others
Being a shopper for, say, Instacart means heading to a supermarket, drugstore, or other retailer and shopping for a customer and then delivering the goods. If you have the time free to do this and like to keep busy, it can be a good way to bring in some extra cash when you have the hours free to fill.
You can make money while sitting on the couch listening to music, simply by taking surveys. Popular paying survey sites include Swagbucks, InboxDollars, and LifePoints. Each survey may take several days to pay out, and you’re likely to just earn a few dollars a day. Still, every bit counts, and you can eventually get deposits each day by making surveys a daily habit.
Typical Pay: Surveys can pay 50 cents to $5 each. Pay will depend on how many you qualify for and complete and the pay rate.
14. Participating in a Focus Group
Online surveys are an easy way to make money from home, but their payouts are low. You might be able to make more by participating in focus groups. Studies usually pay $50 to $200, but some might pay more than $1,000.
Typical Pay: The amount you can earn will depend on which focus groups you can find and qualify for and how much they pay.
15. Being a Virtual Assistant
As a virtual assistant, you support businesses, typically working remotely rather than on-premises. You can work for multiple companies that need help with basic tasks, like scheduling, data entry, travel arrangement, and bookkeeping. Some companies may have more specific tasks, like managing their social media. The more skills you can offer, the more likely you are to land clients.
Sites like Indeed, LinkedIn, and Upwork are helpful for landing virtual assistant jobs. It’s a good idea to have an up-to-date LinkedIn profile and resume showcasing relevant experience.
Typical Pay: Currently $24.96 per hour
16. Tutoring
Teaching online or in person is an easy way to earn money every day if you have deep knowledge on a topic and a knack for making things clear to others. Students may be looking for tutors for standardized tests or learning a musical instrument. Sometimes parents might just want a tutor to help a child improve in a certain school subject.
If you have a background in multiple subjects and a website or profile showcasing relevant certifications, you could potentially get enough students to earn money each day.
Typical Pay: Currently $20 per hour on average, but some topics can pay significantly higher such as $75 per hour for Mandarin or chemistry
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.
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17. Proofreading and Copy Editing
Having eagle eyes (and a degree in English) can qualify you to be a proofreader. Brushing up with well-known reference resources, like the Chicago Manual of Style or the Associated Press Stylebook, can help hone your skills.
You can find individual job postings online for one-off projects (like proofreading a novel) or recurring work with clients. Indeed, Fiverr, FlexJobs, and Upwork are good places to start. If you can get a few projects going, you may be able to get jobs that pay every day.
Typical Pay: Currently $25-30 per hour
18. Creating Content
If you are a strong writer, you might be able to find work as a freelance writer for news sites, blogs, or marketing clients. Having a portfolio that showcases existing work is usually the best way to get your foot in the door. Freelance writers are usually paid per word or per piece.
Another route to getting paid every day with your content: You can create your own personal blog and run ads on the site. You’ll earn money for pageviews, so getting traffic to your website is crucial. But don’t forget: There are also costs to run a blog.
Creating content means more than writing; it also means videos and podcasts. Many people make money off ads on their YouTube videos. And if you have enough followers on sites like Instagram or TikTok, brands may pay you to advertise their products.
Typical Pay: Currently $15-$25 per hour for an entry-level gig; you may be able to command more as your expertise and reach grow
Ads on your blog are a great way to make money off your writing, but you can also add in affiliate links to certain products that you review and recommend. If someone clicks on the link for a product you’re talking about and then buys that product, you can earn a commission.
Podcasters, vloggers, and social media influencers can also participate in affiliate marketing, often by giving fans a promo code. If you get traction with this, you could be getting paid daily.
Typical Pay: Currently $23 per hour
20. Transcribing
Transcription jobs are an easy way to make money from home. If you have enough clients, you might be able to have money flowing in every day. Companies such as GoTranscript and Rev are helpful when you’re just starting out.
Typical Pay: Currently $21 per hour
Benefits of Being Paid Daily
Having a daily stream of income isn’t always easy. Here are some ways to achieve your goal of getting paid everyday:
• Flexibility: Many of the daily paying jobs on this list allow you to make your own schedule. You can work longer hours if you want, but you also don’t have to worry about getting approved to take time off to go to the doctor or embark on a low-cost road trip with friends.
• Faster Payment: Some of the jobs that pay everyday listed are gigs that pay daily, meaning when you kick off your shoes at the end of the day, you’ll have more money in your wallet or checking account than when you started. Some of the other jobs involve invoicing when the work is done. If you have enough invoices being paid out from different clients for different work, you should have a steady stream of income flowing into your bank account regularly.
• Work Remotely: A lot of the daily paying jobs on this list allow you to work right from the comfort of your couch or a nearby cafe. Getting paid while wearing sweatpants and having your dog by your side can be a pretty sweet gig. It can also cut out transportation costs and make household chores like cooking and cleaning easier to manage.
Tips for Finding Jobs That Pay Daily
Having a daily stream of income isn’t always easy. Here are some ways to achieve your goal of getting paid everyday:
• Know where to look: Beyond the obvious options (DoorDash, Uber) and the companies mentioned above, you can also find side hustles that pay daily on job boards. Search for such keywords as “daily pay” and “dailypay jobs” on such platforms as Ziprecruiter, SimplyHired, Glassdoor, and Veryable (an app), and others.
• Take on multiple gigs: Wearing many hats means more opportunity for earning income. You might be a rideshare driver on weekends, take online surveys while binge watching Netflix in the evenings, transcribe during the workday, and write ad-supported blogs in your free time.
• Stay organized: If you have multiple purchase orders, invoices, and clients to juggle, it’s a good idea to find an organizational method that works for you. Planners, spreadsheets, dry-erase boards, and sticky notes can all be effective ways to keep organized.
Also consider opening separate accounts (perhaps multiple online bank accounts) if you want to keep your income streams separate.
That could also help you if you are trying to figure out your tax deductions as a freelancer and need to keep various gigs distinct.
• Persevere: You likely won’t immediately achieve a daily paycheck when starting your freelance lifestyle. Often, success means taking on whatever work you can, being proactive to find new gigs, and being willing to accept that you might not always get a paycheck at the end of each day — at least not at first!
If you’re looking to get paid quickly, you have many options. Jobs that pay daily are often side hustles or freelance gigs by nature. If you are willing to wear many hats and learn new skills, you may find great success working several jobs that pay you daily. Options range from driving a rideshare to mowing lawns to creating content.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
Is it better to be paid daily or biweekly?
Being paid daily means more immediate access to your funds, but it can sometimes be less predictable and involve smaller amounts of cash. If you prefer more predictable income for easier budgeting, you might prefer a biweekly paycheck.
Are daily paying jobs full-time?
Most daily paying jobs are a form of freelance work or a side hustle. However, many people are able to turn their freelance side gigs into full-time careers — for example as writers, photographers, marketers, and contractors.
Can I work multiple jobs that pay daily?
Many people with jobs that pay daily work multiple gigs. Because some jobs may not actually pay every day, some workers will juggle multiple side hustles (like rideshare driving and tutoring) to ensure a steady flow of funds.
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.
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