Aug
07
2023
How and Where to Get a Cashier’s Check Without a Bank Account

How to Get a Cashier’s Check Without a Bank Account

By | Budgeting & Goals, Financial Independence, money | Comments Off on How to Get a Cashier’s Check Without a Bank Account

When the recipient of a payment wants reassurance that a check is valid and will not bounce — especially in large transactions like a car purchase or a down payment on a house — a cashier’s check can be a good solution. In fact, in some financial transactions, a cashier’s check is required.

If you need a cashier’s check but don’t have a bank account, you will likely have to put some time and effort into getting the form of payment you need. You might open an account ASAP, find a financial institution that will issue a cashier’s check to those who aren’t account holders, or else consider using a money order.

The reason why cashier’s checks can be so restrictive and desirable is that they are a very secure form of payment, issued against a financial institution’s own funds. That is why they are not given out casually.

If you don’t have a bank account but need a cashier’s check, this guide will walk you through your options.

Key Points

•   A cashier’s check is a form of payment that is issued by a bank from its own account and signed by a representative of the financial institution.

•   It can be challenging to get a cashier’s check without an account, but local banks and credit unions may be willing to accommodate this request.

•   If a financial institution does issue a cashier’s check to someone without an account, they will likely have to pay in cash.

•   Money orders are an alternative to a cashier’s check and typically have a maximum of $1,000.

•   Other options include using a P2P app to transfer funds, such as PayPal or Venmo.

What Is a Cashier’s Check and How Does It Work?

A cashier’s check is a type of check that is issued by a bank from its own account and signed by a representative of the financial institution. Because the funds are guaranteed by the bank as opposed to the check writer, recipients of a cashier’s check can be assured of its security. They can feel confident that it won’t bounce.

(This is assuming, of course, that it’s not a fake or forged document — not even cashier’s checks are immune to fraud, which is why it’s important to verify a check.)

When a consumer buys a cashier’s check, the bank will typically withdraw funds from that person’s checking or savings account and then deposit them into its own account. From there, the bank will write the cashier’s check from its own account.

You may wonder what the difference is between a cashier’s vs. a certified check. With a certified check, the money is withdrawn from an account holder’s check and then certified by the bank. This certification indicates that there are enough funds in the account to cover the check and verifies that the account’s owner’s identity was confirmed by the bank. However, the money is not placed into the bank’s own account as an interim step.

Procedures involving checks, like ordering checks or having a cashier’s check prepared, often involve a fee. For cashier’s checks, this could be a flat fee of $10 or $15 or sometimes a percentage of the check’s amount. The fee may be waived for clients who have premium accounts.

💡 Quick Money Tip: Want a new checking account that offers more access to your money? With 55,000+ ATMs in the Allpoint network, you can get cash when and where you choose.

Can You Get a Cashier’s Check Without a Bank Account?

Bank policies can vary, but it can be more challenging to get a cashier’s check without an account. Credit unions may be more willing to offer this service than banks, but it’s important to check with an individual institution to find out whether they’ll offer a cashier’s check without an account.

Keep in mind that you can only get a cashier’s check through a financial institution like a bank or credit union. You cannot purchase one at, say, the post office or Western Union.

If you do find a financial institution that will issue a cashier’s check to non-customers, the rest of the process will be largely the same as it is for customers — except that you will need to pay in cash because the funds can’t be withdrawn from an account.

The steps will likely involve:

•   Providing proper identification

•   Giving the financial institution the cash to deposit into its account

•   Letting the bank employee know the amount of the check you’ll need

•   Supplying the correct spelling of the recipient’s (payee’s) name

•   The bank prints all of the information; this means you can’t make any changes or handwritten corrections

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

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Where to Get a Cashier’s Check Without a Bank Account

As far as where to get a cashier’s check without a bank account, most financial institutions won’t accommodate this request. You will likely have to do a bit of research to find one that does. You might try smaller local banks and credit unions in your area to see if they will accommodate this request.

Here is another work-around:

Opening and Closing an Account

If you know you’ll need to have a cashier’s check in the near future, opening a checking account now can position you for this financial transaction. To do so, you will typically need to provide information confirming your identity and choose which type of account you wish to open. From there, you can fill out an application and make an opening deposit, if required.

Then, once the account is up and running, you can request a cashier’s check. Make sure not to get one too far in advance of when it’s needed, because how long a check is good for is typically six months.

When you’re ready to close the account, be sure to transfer funds and move automatic transactions over to a new one, if that’s your plan, or to find other ways to handle these matters.

Can You Get a Cashier’s Check at Any Bank?

Virtually all financial institutions (traditional and online banks, credit unions) will issue cashier’s checks. The challenge can be that they typically only create these financial instruments for account holders.

If you just walk into or contact a bank where you do not have an account, they may not be willing to issue a cashier’s check for you. That’s true even if you have enough cash on you to cover the amount of the check you’re seeking.

Is There a Maximum Amount for a Cashier’s Check?

There is typically no upper limit for cashier’s checks, though policies may vary from one financial institution to the next.

The fact that there isn’t usually a maximum amount for cashier’s checks makes them particularly useful for larger purchases. For example, when undertaking a real estate transaction or buying a car, a cashier’s check may be a preferred form of payment for both parties involved.

Money Order: An Alternative to a Cashier’s Check

If you’re struggling to get a cashier’s check without a bank account or are simply curious what alternatives there may be, you may consider a money order. A money order is a type of paper check that can’t bounce because it’s been prepaid by the sender. Typically, there’s a limit to these, a maximum of $1,000. One big advantage of them is that you don’t need a bank account to get one. This can make it an important option for unbanked people.

For instance, you can go to the post office and do the following:

•   Purchase money orders using cash, a traveler’s check, or a debit card (though not a credit card)

•   Pay the face value of the money order, plus a fee of a couple of dollars (for a domestic money order)

•   Fill out the money order to the payee and complete the transaction

Many banks and credit unions also sell money orders for a small fee of $50 or $10, which may be waived for certain customers.

Money orders are also available at some retail locations, such as pharmacies, convenience stores, Western Union, Moneygram, and more. While fees may vary from location to location, they are usually no more than a few dollars.

Another Options to a Cashier’s Check

If a money order isn’t the right vehicle for you, there may be another way to move money if you cannot access a cashier’s check. You might be able to use a P2P app to transfer funds, such as PayPal or Venmo. These services can have transaction limits and fees, so do your research first.

The Takeaway

A cashier’s check is a form of payment that must be issued by a financial institution. Typically, funds are taken out of a customer’s savings or checking account and deposited into the bank’s account. Then the check is issued from the bank’s account, which provides a significant amount of security.

As far as the answer to this question, “Where can I get a cashier’s check without an account?,” some banks or credit unions may allow you to buy a cashier’s check even if you are not a customer, but you may need to call around to determine where this is available. Money orders, meanwhile, can be purchased at the post office and some retail and convenience stores.

Still, the easiest way to get a cashier’s check is to open a bank account. If you’re looking to open an online bank account, see what SoFi Banking has to offer. Our checking and savings account offers a competitive annual percentage yield (APY) and charges you absolutely no account fees. Those two features can help your money grow faster. Plus, you’ll enjoy the convenience of spending and saving in one place, and qualifying accounts can get paycheck access up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

Can you get a cashier’s check without a bank account?

Many financial institutions do require a bank account to issue a cashier’s check. You may be able to get one without an account, perhaps through a credit union. It’s likely easier to buy a money order if that form of payment is acceptable to the recipient. This type of check is more widely available, including at the post office and some retail and convenience stores.

Can I get a cashier’s check somewhere other than a bank?

No. By definition, a cashier’s check comes directly from a bank’s account. You can, however, get a money order from a variety of establishments, including the post office and some stores.

Can I use a money order instead of a cashier’s check?

That depends upon the recipient. Both forms of payment are considered safer than a personal check, but you’ll need to verify that your payee will accept a money order instead of a cashier’s check if that’s what they requested.

Can you get a cashier’s check at the post office?

Only a financial institution can issue a cashier’s check because it comes directly from the bank’s or credit union’s own account. Thus, you cannot get a money order at the post office. The post office does issue money orders, however. If your recipient will accept a money order, you can buy that at a post office location.

Photo credit: iStock/pixdeluxe

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.20% 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 4.20% 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 4.20% 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 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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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Aug
07
2023
How Old Do You Have to Be to Open a Bank Account?

How Old Do You Have to Be to Open a Bank Account?

By | Budgeting & Goals, Financial Independence, money | Comments Off on How Old Do You Have to Be to Open a Bank Account?

Helping kids gain hands-on money skills can start with learning how a bank account works. After all, bank accounts can provide a hub for most people’s daily financial life. You may be surprised to know that there are many options if you want to open a bank account for a child. While a person typically has to be 18 to open their own account, a child can generally open a bank account at any age — as long as a parent or a guardian serves as a joint account holder.

Key Points

•   While SoFi requires bank account applicants to be 18 years old, some banks allow minors to open an account, as long as a parent or guardian serves as a joint account holder.

•   Custodial accounts are controlled by an adult until the minor reaches the age of majority.

•   Joint accounts list both a minor’s name and an adult’s name as co-owners, with equal control of the account.

•   Withdrawing money from a bank account depends on whether it is a custodial or joint account.

•   To open a bank account, you need government-issued photo identification, contact information, proof of address, and possibly a Social Security card, birth certificate, passport, or school photo ID.

What Age Can You Open a Bank Account?

How old do you have to be to open a bank account? Usually, a person has to be 18 to open their own account. However, there isn’t a federal law that sets a minimum age at which you can have a bank account. Each state can have its own regulations regarding accounts for young savers and, depending on the state, financial institutions also may have the ability to set their own rules.

If you’re interested in opening an account and are unsure of age requirements, you may want to contact a few different financial institutions to ask if they have an account that suits your needs.

🛈 Currently, SoFi only offers bank accounts to members 18 years old and above.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.20% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Can a Minor Open a Bank Account?

Usually, you must be 18, or the age of majority in your state, to open a bank account without a parent or guardian. But there are ways in which a minor can open a bank account and have his or her name on it. Some popular options include:

Custodial Accounts

A custodial account is an account an adult opens on behalf of a minor. The money held in the account belongs to the minor but is controlled by the custodian — usually a parent — until the minor reaches the age of majority (typically 18 to 21, but it may vary by state). There are a few different types of custodial accounts, including savings, educational savings, and investment accounts.

With this type of account, the minor won’t be able to access funds on their own, and they won’t be issued an ATM card. Generally, a custodial account changes over to an individual account when the child reaches adulthood.

Joint Accounts

A joint account lists both a minor’s name and an adult’s name as co-owners, and they have equal control of the account. If the goal of the account is to help a minor learn financial responsibility or to give them control over their own money — but with an adult’s guidance — this might be the right choice. These accounts usually offer the parent the ability to monitor and control the account to some degree. For instance, the parent might set spending limits and get notified of transactions.

Depending on the child’s age, you may want to start with a joint savings account. Or, you might decide to look into the perks of a teen or student checking account that offers youth-friendly benefits (like low minimums and fees), and a debit card and/or checks for purchases and withdrawals.

When minors reach the age of majority, they may choose to keep a joint account, but they also may want to transfer the account to just their name. As another option, they can open a new, individual account that better suits their current needs.

Recommended: Tips to Improve Your Money Mindset

Can a Minor Withdraw Money from a Bank Account?

If you’re wondering if a minor can withdraw money from a bank account, the answer is: It depends. With a custodial account, it is likely that the child cannot touch the money. The adult likely maintains control until the child reaches majority and becomes the account owner.

However, with a joint account, the child may be able to deposit and withdraw funds, just as the adult on the account can. That said, parental monitoring and controls can often be set up.

What Age Can You Get a Debit Card?

Typically, checking accounts for kids and teens offer debit cards. The age at which a minor can get a debit card will be determined by the bank offering the account. This feature may only be available to teens, but some banks (such as Chase) allow six-year-olds and up to get debit cards.

There are also options like prepaid or secured debit cards that can be used by kids. GoHenry offers them to children as young as age 6 to help them learn money management skills, while Greenlight says there is no minimum age for its debit card. It is likely, however, that you will find plenty of parental monitoring and controls in place, so it’s not as if the child can spend all their money on a whim.

🛈 Currently, SoFi only offers bank accounts to members 18 years old and above.

What Will I Need to Open a Bank Account?

Whether you plan to open a bank account online or in person, you can expect to be asked for identification and certain types of documentation. Most account applications are straightforward and easy to complete; still, you may save some time by confirming that you meet all the criteria for a particular type of account before you get started.

You may have to provide the following information and documents when you set up a bank account:

•   Government-issued photo identification, such as a valid driver’s license or passport

•   Social Security number or individual taxpayer identification number

•   Contact information, including your full name, address and phone number

•   Proof of address, such as a utility bill or some other type of official document with your current address (you can print an online statement if you’ve gone paperless)

•   Student bank accounts may require proof of school enrollment, such as a student ID or acceptance letter

•   Joint account holders should be ready to provide required documents for all parties named on the account

This can mean that you may need one or more of the following forms of ID for the child who will be on the account:

•   Social Security card

•   Birth certificate

•   Passport

•   School photo ID

•   Immunization record

In addition to the above items, a minimum deposit to open an account may be required as well.

Recommended: How to Open a Bank Account

What to Consider When Choosing a Bank Account

Your goals for the account and how much participation you want the child to have can help you decide between a savings account vs. a checking account and between a custodial account or joint account.

Some other things to keep in mind as you compare accounts include:

Access

If you and/or your child expect to make frequent deposits and withdrawals, you may want to be sure the account comes with access to a large ATM network, easy online banking, or a convenient branch location.

Account Minimums

Many banks and credit unions have minimum balance requirements for savings and checking accounts. If you and your child would struggle to meet that threshold, you may want to look for an account that has a low or no minimum balance requirement.

APY

Earning interest isn’t necessarily a top priority with a bank account, but every little bit helps. Learning how an annual percentage yield (APY) works and how interest is calculated can be a good teachable moment for kids. What’s more, watching their money grow can be educational and motivational for young savers.

Customer Support

Does the financial institution have a reputation for reliable and helpful customer service? This could be important if you have questions or need help with disputing a transaction.

Fees

Fees can quickly eat away at a teen’s hard-earned money, especially if they’re using a non-network ATM to make withdrawals. You may want to find accounts that offer no or low monthly fees, ATM fees, overdraft fees and non-sufficient funds (NSF) fees.

Online/Mobile Experience

Whether you prefer online vs. traditional banking, be sure to check out the financial institution’s web and mobile platforms. It’s likely both parent and child will be using these tools on a regular basis.

Parental Protections

Though having a checking or cash management account can be a big step toward financial independence, it can be wise to put some parental controls on a minor’s account. Many accounts allow parents to monitor their child’s transactions so they can offer timely guidance.

Security

Will the money in the account be insured by the FDIC or NCUA? Will your personal and financial information be protected from unauthorized access with two-factor or multi-factor authentication? If one of your reasons for using a bank account is to keep your money safe, these can be important questions to ask.

Recommended: Investing in Quality of Life

Opening a Checking Account vs Savings Account for a Minor

As you consider options for opening a bank account for a minor, you may be faced with the decision of whether to go with a checking or a savings account. Here are some key differences to be away of; they can help you find the right fit:

Checking Account for Minors

 Savings Account for Minors
Typically not interest-bearing Interest-bearing
Intended for daily spending Intended to accrue funds towards a goal
Comes with a debit card Usually doesn’t come with a debit card
Unlimited withdrawals Withdrawals may be only 6x per month
Has ATM access May not have ATM access
May involve fees May involve fees
Likely to be FDIC-insured Likely to be FDIC-insured

The Takeaway

Though there is likely a minimum age to open a bank account on your own (typically 18), minors can generally share a joint account with a parent or guardian until then. There are several types of accounts that kids and their parents might consider depending on their needs and goals, so it’s important to do a little research before choosing an account.

For example, you might want to prioritize the account’s APY if you hope to grow the money on deposit. But if the account is for daily spending, you might want to focus on low fees and easy access to a wide network of ATMs.

If you’re searching for a banking partner that offers all of those features, see what SoFi offers. Our Checking and Savings Account pays a competitive APY, charges no account fees, and provides access to a network of 55,000+ fee-free ATMs within the Allpoint Network.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

🛈 Currently, SoFi only offers bank accounts to members 18 years old and above.

FAQ

What is the youngest age to open a bank account?

In terms of at what age you can open a bank account, there’s no single rule. Typically, though, you must be age 18 or the age of majority in your state to have your own account. But, via joint accounts and custodial accounts, even younger individuals can have some banking privileges.

How do I open a bank account for a minor?

To open a bank account for a minor, you typically need various forms of identification, proof of residence, and an opening deposit. If the minor will share the account, they will need to provide identification as well.

Can a child get a debit card?

A child can get a debit card. On many of the joint accounts for minors, a debit card is part of the offering. You may find them for kids as young as age six. There are also some secured or prepaid debit cards for minors, some with no minimum age available.

Photo credit: iStock/Chaay_Tee

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.20% 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 4.20% 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 4.20% 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 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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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2023
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What Is a Pattern Day Trader?

By | Financial Independence, invest, Investing | Comments Off on What Is a Pattern Day Trader?

A pattern day trader is actually a designation created by the Financial Industry Regulatory Authority (FINRA), and it refers to traders who day trade a security four or more times within a five-day period.

Because of their status, there are certain rules and stipulations that apply only to pattern day traders, which brokerages and investing firms must adhere to.

Read on to learn more about pattern day traders, what rules apply to them, and how they’re different from regular day traders.

Pattern Day Trader, Definition

The FINRA definition of a pattern day trader is clear: A brokerage or investing platform must classify investors as pattern day traders if they day trade a security four or more times in five business days, and the number of day trades accounts for more than 6% of their total trading activity for that same five-day period in a margin account.

When investors are identified as pattern day traders, they must have at least $25,000 in their trading account. Otherwise, the account could get restricted per FINRA’s day-trading margin requirement rules.

How Does Pattern Day Trading Work?

Pattern day trading works as the rules stipulate: An investor or trader trades a single security at least four times within a five business day window, and those moves amount to more than 6% of their overall trading activity.

Effectively, this may not look like much more than engaging in typical day trading strategies for the investor. The important elements at play are that the investor is engaging in a flurry of activity, often trading a single security, and using a margin account to do so.

Remember: A margin account allows the trader to borrow money to buy investments, so the brokerage that’s lending the trader money has an interest in making sure they can repay what they owe.

Example of Pattern Day Trading

Here is how pattern day trading might look in practice:

On Monday, you purchase 10 shares of Stock A using a margin account. Later that day, you sell the 10 shares of Stock A. This is a day trade.

On Tuesday, you purchase 15 shares of stock A in the morning and then sell the 15 shares soon after lunch. Subsequently, you purchase 5 shares of stock A, which you hold only briefly before selling prior to the market close. You have completed two day trades during the day, bringing your running total — including Monday’s trades — to three.

On Thursday, you purchase 10 shares of stock A and 5 shares of stock B in the morning. That same afternoon, you sell the 10 shares of stock A and the 5 shares of stock B. This also constitutes two day trades, bringing your total day trades to five during the running four-day period. Because you have executed four or more day trades in a rolling five business day period, you may now be flagged as a pattern day trader.

Note: Depending on whether your firm uses an alternative method of calculating day trades, multiple trades where there is no change in direction might only count as one day trade. For example:

•   Buy 20 shares of stock A

•   Sell 15 shares of stock A

•   Sell 5 shares of stock A

If done within a single day, this could still only count as one day trade.

Do Pattern Day Traders Make Money?

Yes, pattern day traders can and do make money — if they didn’t, nobody would engage in it, after all. But pattern day trading incurs much of the same risks of day trading. Day traders run the risk of getting in over their heads when using margin accounts, and finding themselves in debt.

This is why it’s important for aspiring day traders to make sure they have a clear and deep understanding of both margin and the use of leverage before they give serious thought to trading at a high level.

It’s the risks associated with it, too, that led to the development and implementation of the Pattern Day Trader Rule, which can have implications for investors.

What Is the Pattern Day Trader Rule?

The Pattern Day Trader Rule established by FINRA requires that an investor have at least $25,000 cash and other eligible securities in their margin account in order to conduct four or more day trades within five days. If the account dips below $25,000, the investor will need to bring the balance back up in order to day trade again.

Essentially, this is to help make sure that the trader actually has the funds to cover their trading activity if they were to experience losses.

Note that, according to FINRA, a day trade occurs when a security is bought and then sold within a single day. However, simply purchasing shares of a security would not be considered a day trade, as long as that security is not sold later on that same day, per FINRA rules. This also applies to shorting a stock and options trading.

The PDT Rule established by FINRA requires that an investor have at least $25,000 in their margin account in order to conduct four or more day trades within five days.

But merely day trading isn’t enough to trigger the PDT Rule.

All brokerage and investing platforms are required by FINRA, a nongovernmental regulatory organization, to follow this rule. Most firms provide warnings to their clients if they are close to breaking the PDT rule or have already violated it. Breaking the rule may result in a trading platform placing a 90-day trading freeze on the client’s account. Brokers can allow for the $25,000 to be made up with cash, as well as eligible securities.

Some brokerages may have a broader definition for who is considered a “pattern day trader.” This means they could be stricter about which investors are classified as such, and they could place trading restrictions on those investors.

A broker can designate an investor a pattern day trader as long as the firm has a “reasonable basis” to do so, according to FINRA guidelines.

Why Did FINRA Create the Pattern Day Trader Rule?

FINRA and the Securities and Exchange Commission (SEC) created the PDT margin rule during the height of the dot-com bubble in the late 1990s and early 2000s in order to curb excessive risk-taking among individual traders.

FINRA and the Securities and Exchange Commission (SEC) created the PDT margin rule amidst the heyday of the dot-com bubble in order to curb excessive risk taking among individual traders.

FINRA set the minimum account requirement for pattern day traders at $25,000 after gathering input from a number of brokerage firms. The majority of these firms felt that a $25,000 “cushion” would alleviate the extra risks from day trading. Many firms felt that the $2,000 for regular margin accounts was insufficient as this minimum was set in 1974, before technology allowed for the electronic day trading that is popular today.

Investing platforms offering brokerage accounts are actually free to impose a higher minimum account requirement. Some investing platforms impose the $25,000 minimum balance requirement even on accounts that aren’t margin accounts.

Pattern Day Trader vs Day Trader

As discussed, there is a difference between a pattern day trader and a plain old day trader. The difference has to do with the details of their trading: Pattern day traders are more active and assume more risk than typical day traders, which is what catches the attention of their brokerages.

Essentially, a pattern day trader is someone who makes a habit of day trading. Any investor can engage in day trading — but it’s the repeated engagement of day trading that presents an identifiable pattern. That’s what present more of a risk to a brokerage, especially if the trader is trading on margin, and which may earn the trader the PDT label, and subject them to stricter rules.

Does the Pattern Day Trader Rule Apply to Margin Accounts?

As a refresher: Margin trading is when investors are allowed to make trades with some of their own money and some money that is borrowed from their broker. It’s a way for investors to boost their purchasing power. However, the big risk is that investors end up losing more money than their initial investment.

Investors trading on margin are required to keep a certain cash minimum. That balance is used as collateral by the brokerage firm for the loan that was provided. The initial minimum for a regular margin account is $2,000 (or 50% of the initial margin purchase, whichever is greater). Again, that minimum moves up to $25,000 if the investor is classified as a “pattern day trader.”

FINRA rules allow pattern day traders to get a boost in their buying power to four times the maintenance margin excess — any extra money besides the minimum required in a margin account. However, most brokerages don’t provide 4:1 leverage for positions held overnight, meaning investors may have to close positions before the trading day ends or face borrowing costs.

If an investor exceeds their buying power limitation, they can receive a margin call from their broker. The investor would have five days to meet this margin call, during which their buying power will be restricted to two times their maintenance margin. If the investor doesn’t meet the margin call in five days, their trading account can be restricted for 90 days.

Does the Pattern Day Trader Rule Apply to Cash Accounts?

Whether the Pattern Day Trader Rule applies to other types of investing accounts, like cash accounts, is up to the specific brokerage or investing firm. The primary difference between a cash account vs. a margin account is that with cash accounts, all trades are done with money investors have on hand. Some trading platforms only apply the PDT rule to margin accounts and don’t apply it to cash accounts.

However, some platforms may adhere to FINRA rules that govern margin accounts even if they don’t offer margin trading. This means that a $25,000 minimum balance of cash and other securities must be kept in order for an investor to do more than four day trades in a five-business-day window.

Investors with cash accounts also need to be careful of free riding violations. This is when an investor buys securities and then pays for the purchase by using proceeds from a sale of the same securities. Such a practice would be in violation of the Federal Reserve Board’s Regulation T and result in a 90-day trading freeze.

Pros of Being a Pattern Day Trader

The pros to being a pattern day trader are somewhat obvious: High-risk trading goes along with the potential for bigger rewards and higher profits. Traders also have a short-term time horizon, and aren’t necessarily locking up their resources in longer-term investments, either, which can be a positive for some investors.

Also, the use of leverage and margin allows them to potentially earn bigger returns while using a smaller amount of capital.

Cons of Being a Pattern Day Trader

The biggest and most obvious downside to being a pattern day trader is that you’re contending with a significant amount of risk. Using leverage and margin to trade compounds that risk, too, so day trading does require thick skin and the ability to handle a lot of risk. (Make sure to consider your risk tolerance and investment objectives before engaging in day trading.) Given the intricacies of day trading, it can also be more time and research intensive.

Tips to Avoid Becoming a Pattern Day Trader

Here are some steps investors can take to avoid getting a PDT designation:

1.    Investors can call their brokerage or trading platform or carefully read the official rules on what kind of trading leads to a “Pattern Day Trader” designation, what restrictions can potentially be placed, and what types of accounts are affected.

2.    Investors can keep a close count of how many day trades they do in a rolling five-day period. It’s important to note that buying and selling during premarket and after-market trading hours can cause a trade to be considered a day trade. In addition, a large order that a broker could only execute by breaking up into many smaller orders may constitute multiple day trades.

3.    Investors can consider holding onto securities overnight. This will help them avoid making a trade count as a day trade, although with margin accounts, they may not have the 4:1 leverage afforded to them overnight.

4.    If an investor wants to make their fourth day trade in a five-day window, they can make sure they have $25,000 in cash and other securities in their brokerage account the night before to prevent the account from being frozen.

5.    Investors can open a brokerage account with another firm if they’ve already hit three day trades over five days with one trading platform. However, it’s good to keep in mind that the PDT rule is meant to protect investors from excessive risk taking.

It’s also important to know that taking time to make wise or careful investment decisions could be in the investor’s favor.

The Takeaway

Pattern day traders, as spelled out by FINRA guidelines, are traders who trade a security four or more times within five business days, and their day trades amount to more than 6% of their total trading activity using a margin account.

Being labeled a pattern day trader by a brokerage can trigger the PDT Rule, which means that the trader needs to keep at least $25,000 in their margin account.

While day trading can reap big rewards, it also has big risks — and that’s something that brokerages are keenly aware of, and why they may choose to have stricter requirements for pattern day traders.

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.


Get one of the most competitive margin loan rates with SoFi, 12%*

FAQ

What happens if you get flagged as a pattern day trader?

If you’re labeled as a pattern day trader, your brokerage may require you to keep at least $25,000 in cash or other assets in your margin account as a sort of collateral.

Do pattern day traders make money?

Yes, some pattern day traders make money, which is why some people choose to do it professionally. But many, perhaps most, lose money, as there is a significant amount of risk that goes along with day trading.

What is the pattern day trader rule?

The Pattern Day Trader Rule was established by FINRA, and requires traders to have at least $25,000 in their margin account in order to conduct four or more day trades within five days. If the account dips below $25,000 the trader needs to deposit additional funds.

*Borrow at 12%. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.
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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.
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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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2023
Is $100,000 a Year Salary Good?

Is a $100,000 Salary Good?

By | Building Your Career, Life & Career, money | Comments Off on Is a $100,000 Salary Good?

In most parts of the country, a $100,000 salary is considered good; maybe even very, very good. It can be more than enough for an individual or even a small family to live comfortably. With $100,000 a year, a person could cover typical expenses, pay down debt, build their savings, contribute toward retirement, invest, and still have enough money for entertainment, hobbies, and vacations.

But there can certainly be exceptions to whether $100K a year is good, as well as ways to make that salary go even farther than it might otherwise.

Key Points

•   A $100,000 salary is considered good in most parts of the country, and can cover typical expenses, pay down debt, build savings, and allow for entertainment and hobbies.

•   According to the U.S. Census, only 15.3% of American households make more than $100,000 annually.

•   A $100,000 salary can yield a monthly income of $8,333.33, a biweekly paycheck of $3,846.15, a weekly income of $1,923.08, and a daily income of $384.62 based on 260 working days per year.

•   The five cheapest cities to live in 2022 are Hickory, North Carolina; Green Bay, Wisconsin; Huntsville, Alabama; Quad Cities (Davenport-Bettendorf, Iowa and Moline-Rock Island, Illinois); and Fort Wayne, Indiana.

•   Tips for living off a $100,000 budget include getting on a budget, saving your money, getting out of debt, and creating a retirement plan.

Factors to Determine if a $100,000 Salary Is Good

Is $100K a good salary? In almost every case, yes. It’s well above the poverty line as well as the American median income for both individuals and smaller families. Even in the face of rising inflation, a $100,000 annual income can typically afford a comfortable lifestyle and financial stability.

Here are some factors to determine if $100,000 is a good salary:

•   Location: While $100K can cover expenses in most places across the U.S., it won’t stretch as far in places with a higher cost of living. In some of the most expensive cities in the U.S., a $100K salary might mean spending a significantly higher percentage of your income on housing. For instance, in the summer of 2022, the average rent in Manhattan hit $5,000 a month.

•   Taxes: As an individual, $100K a year puts you in the 24% federal income tax bracket. That means that you’d only bring home $76,000 after federal taxes — even less depending on state, city, and school district taxes. Married individuals bringing in $100,000 total are taxed slightly lower (22%), meaning $78,000 after Uncle Sam’s cut at the federal level.

•   Family size: A $100K a year salary can yield comfortable living for most individuals, but the larger a family becomes, the harder it is to make that money stretch. Additional children or other dependents may result in higher grocery bills, utility usage, school costs, and doctor visits.

How Does a $100,000 Salary Compare to the American Median Income?

The American median household income is roughly $67,500, per the latest published U.S. Census results. More recently, the Bureau of Labor Statistics reported that the median weekly income for a full-time worker is $1,037, which translates to a $54,000 median annual salary.

Either way, a $100,000 salary is almost double the American median income. If you live in what’s known as a DINK household (dual income, no kids) and your domestic partner also brings home a sizable paycheck, you are sitting even higher above that median household income.

Recommended: Typical Bills for One Person Per Month

What Percentage of Americans Make Over $100,000 Annually?

According to the U.S. Census Bureau, only 15.3% of American households pull in more than $100,000 annually. However, a “household” might consist of two or more salaries totaling $100,000.

$100,000 Salary Breakdown

So is making $100K a year good? It’s almost surely easier than living on $20K a year. Let’s look at how it breaks down into monthly, weekly, and even daily pay:

•   Monthly income: $8,333.33

•   Biweekly paycheck: $3,846.15

•   Weekly income: $1,923.08

•   Daily income: $384.62 based on 260 working days per year.

Keep in mind that this salary breakdown uses pre-tax income. Actual paychecks will likely be lower after taxes and any health insurance premiums and retirement contributions are deducted.

Can You Live Individually on a $100,000 Income?

It is indeed possible to live individually on a $100,000 income. At that salary, many individuals will be able to cover not only basic living expenses but also discretionary expenses, like dining out and traveling.

Individuals making $100K annually often have enough disposable income to pay down debt, contribute to retirement, work toward multiple savings goals (like home ownership and vacations), and even invest.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

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Up to 2-day-early paycheck.

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How Much Rent Can You Afford Living on a $100,000 Income?

The conventional advice on how much of your income to spend on housing is no more than 30%. While economists may need to reevaluate that number given current inflation and soaring housing prices, that would mean an individual could afford $30,000 in rent costs each year, or roughly $2,500 a month, on $100K a year.

However, at $100,000 a year, an individual could consider buying a home instead. A $100K salary might make it easier to save for a down payment and keep up with maintenance expenses, property taxes, and homeowners insurance.

Best Places to Live on a $100,000 Salary

At $100,000 a year, an individual or small family can likely live in most locations. In fact, $100,000 is higher than the annual median income ($65,290) of America’s most expensive city, Los Angeles.

That said, if you want to make your dollars stretch as far as possible, consider what U.S. News has deemed the five cheapest cities to live in 2022:

•   Hickory, North Carolina

•   Green Bay, Wisconsin

•   Huntsville, Alabama

•   Quad Cities (Davenport-Bettendorf, Iowa and Moline-Rock Island, Illinois)

•   Fort Wayne, Indiana

Recommended: Cost of Living by State

Worst Places to Live on a $100,000 Salary

A $100,000 salary can typically afford at least basic living expenses even in America’s most expensive cities. However, living in such places can make it harder to build your savings and invest toward your future.

If you want to live comfortably on $100,000 a year, it may be wise to avoid what have been deemed America’s most expensive cities in 2022:

•   Los Angeles, California

•   Miami, Florida

•   San Diego, California

•   Salinas, California

•   Santa Barbara, California

Is a $100,000 Salary Considered Rich?

Many people may consider a $100,000 salary to be rich. However, “rich” is a relative term with a vague definition, meaning an abundance of wealth and assets. Much of it depends on where you live and how you use the income (spending vs. saving vs. investing).

Also, consider how personal circumstances can differ. If you earn $100K a year and your spouse doesn’t work outside the home and you are supporting three children as well as a relative with medical needs, that high salary may not stretch as far. Add some student loans, a jumbo mortgage, and car payments to the picture, and you realize a person earning $100,000 a year might not qualify as rich in most people’s estimation. They may be barely making ends meet.

Tips for Living off a $100,000 Budget

How can you make the most of a $100,000 salary? Here are a few tips for living off a $100,000 budget:

Getting on a Budget

No matter your salary, it’s a good idea to design a monthly budget. At a minimum, keep track of your monthly expenses vs. your monthly income. After you have accounted for all your mandatory expenses, like your mortgage and your groceries, you can calculate what you have left for discretionary expenses (the “wants” in life), savings, debt repayment, and investments.

Saving Your Money

It’s a good idea to have emergency savings at the very least; being able to cover three to six months’ of expenses without any income flowing in is ideal.

Beyond an emergency savings, you may want to allocate money in your budget each month to other savings goals, including a house or car down payment, wedding, vacation, or home renovations. Having a high-interest savings account with automatic savings features can help you get to your goal faster.

Recommended: How to Save Money From Your Salary

Getting Out of Debt

Paying down debt can be a good use of funds when you have room in your budget, especially if you have particularly high-interest credit card debt. You can weigh options like the debt avalanche vs. debt snowball method when you have multiple sources of debt or even consider a credit card debt consolidation loan.

Creating a Retirement Plan

If you’re wondering “When should I start saving for retirement?” many financial experts would likely say the answer is “yesterday.” The sooner you start saving, the sooner your money can grow via compound interest.

If your employer offers a 401(k) match and you can afford to funnel a percentage of your paycheck into a retirement account, it’s often a wise idea to opt in. But employer-sponsored 401(k) accounts aren’t your only retirement option. Depending on your situation, it may be a good idea to take advantage of a rollover or traditional IRA and other retirement strategies.

Investing Your Money

Investing isn’t only for retirement. If you are earning $100K a year and have extra money after having built up emergency savings and wiped out your debt, you might benefit from investing in the stock market or even real estate.

Learning how to invest can be intimidating; if you’re not sure where to start, it can be a good idea to work with a trusted investment broker.

The Takeaway

For most individuals and small families, the answer to “Is $100,000 a good salary?” is a resounding “yes.” Cost of living and family size can affect how far $100,000 will go, but generally speaking, you can live comfortably on $100,000 a year.

Are you hoping to make the most of your salary? Consider a bank account from SoFi Banking. When opened with direct deposit, you’ll earn a competitive APY and pay no monthly account fees, which can help your money grow faster. Plus, eligible SoFi accounts provide paycheck access up to two days early. You enjoy other rewards, like cash back on local purchases and no-fee overdraft coverage.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

What jobs pay over $100,000?

Many jobs pay over $100,000 a year in various fields. These jobs include doctors, lawyers, software engineers, business leaders, pharmacists, psychologists, IT managers, finance managers, and many others. Those in creative fields, from writers to hair stylists, can earn that salary, too.

Is making $100,000 a year common?

Making $100,000 a year is not common in the U.S. According to the U.S. Census Bureau, only 15.3% of American households make more than $100,000.

Can you live comfortably on $100K a year?

Most people can live comfortably on $100K a year. If you live in an area with a high cost of living and/or have a large family or very high expenses and/or debt, it may be more difficult to live comfortably on $100K a year. In either case, it is usually not challenging to afford basic living expenses.

What is considered wealthy in the U.S.?

Americans said in one survey that they believe it takes a net worth of $2.2 million to be considered “wealthy.” When calculating net worth, you’ll factor in more than just income; it also includes assets (like a house and retirement account), less any debts and liabilities.

Photo credit: iStock/Inside Creative House

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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The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% 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 4.20% 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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2023

Guide to Financial Security and Achieving It

By | Budgeting & Goals, Financial Independence, money | Comments Off on Guide to Financial Security and Achieving It

Most of us have some dreams for our financial future, whether that means buying a home, starting a business, sending a kid to college with a minimum of student loans, or retiring by age 50, or perhaps even all of the above.

Your vision of your future is undoubtedly unique, but one thing all these dreams have in common: They usually are free, and they don’t unfold without planning and effort.

Whether you’re dreaming big of owning multiple homes and taking luxurious vacations or are more focused on simply getting out of credit card debt, achieving financial security can be one way to make it a reality.

What is the definition of financial security? It means you can meet your financial obligations, feel secure about your financial future, and you are able to enjoy life rather than dealing with a major dose of money stress.

Here, you’ll learn more about financial security and some simple steps that can help get you on the path to achieving it.

What Is Financial Security?

One definition of financial security is being able to pay the bills (without having to check account balances first) and not being worried that you’ll run out of money down the road. It’s also a sense of knowledge and control when it comes to your personal finances.

This can include a huge range of lifestyles and aspirations. For some people, it’s all about the numbers — how much they own, the size of their portfolio, or their net worth. But for others, it could mean accumulating a nest egg so they can travel the planet with all their earthly possessions in a backpack and work odd jobs wherever they land until they make enough money for a ticket to their next destination.

Why Financial Security Matters

Financial security matters for several reasons. One, these can be uncertain times. Think about how much life changed during the pandemic and how thin some people were stretched financially. Consider how health emergencies and job layoffs can crop up unexpectedly. When you have financial security, you are likely better able to deal with the ups and downs of life.

Also, having financial security means you have a plan and are preparing for what’s ahead. That’s a valuable thing in and of itself. It means you are paying attention to your earnings, spending, and saving. You’re in the driver’s seat and can course-correct when needed.


💡 Quick Tip: Make money easy. Open a bank account online so you can manage bills, deposits, transfers — all from one convenient app.

7 Ways to Achieve Financial Security

For those who haven’t received a huge inheritance or won the lottery, achieving financial security is likely to involve lots of hard work, determination, and a DIY attitude.

Why? One reason is because the safety nets intended to protect Americans in retirement are starting to unravel. The Social Security trust fund is on the way toward depletion sometime after 2034, and recipients might only receive a portion of the benefits they were expecting. That’s only a decade or so away.

The good news is, it’s never too late to get in the game. And achieving financial security may even help achieve emotional wellness at the same time. Win-win!

Here are a few smart strategies that could help with laying out a financial security plan.

1. Setting Goals

Financial goal-setting can be like jumping ahead to the last chapter of a book. It starts with the endgame, such as paying for kids’ college, traveling, or upgrading a home or vehicle.

From there, “reading” goes backward by breaking those goals into bite-size steps until the arrival at Chapter 1 — an overview of the current situation and a plan to meet those long-term goals.

Short-term financial goals could include things like paying off high-interest debt, eliminating student loans, optimizing a credit score, or growing an emergency fund.

Once those are achieved, money could be shifted into longer-term planning, such as retirement (perhaps even retiring early), buying or upgrading a home, paying off a mortgage, or investing.

No matter how long it takes, checking something off a goal list can be a huge feeling of accomplishment, as well as motivation to start the next chapter.

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2. Creating a Goals-Based Budget

As a good witch from the North once said, “It’s always best to start at the beginning.” And when outlining a plan for financial security, that can mean taking a refresher course on personal finance basics.

Getting reacquainted with simple concepts like avoiding credit cards, paying bills on time, and creating a budget could be a good way to help focus on a plan that’s all about individual goals.

It could also help kickstart a habit of tracking cash flow, because creating a budget that curbs spending or pumps up savings isn’t likely to work if where the money is going remains a mystery.

And remember that joy of checking off boxes? Every time money that used to be spent instead goes toward a savings goal, it could trigger that same feeling of accomplishment.

3. Keeping Your Money Safe

How else to achieve financial security? Keep your money safe. This strategy isn’t about stashing cash under the mattress. In 21st-century terms, keeping money safe is more about making decisions that will protect an investment.

•   You’ll likely want to keep your money at a financial institution that’s insured by either the Federal Deposit Insurance Corporation (FDIC) or NCUA, the National Credit Union Administration.

•   Tactics like diversifying a portfolio to include some low-risk investments, cash-based savings investments, or even commodities, can help keep that portfolio steady if the market has a bad day.

•   Keeping your money safe could also involve keeping finances organized so it’s obvious what money is where, knowing the penalties and late fees on each account, when bills are due, and how much interest is being earned.

•   Since much of today’s money management is done online, keeping money safe can also mean protecting identity, passwords, and offline financial documents.

4. Getting Out of Debt

If those monthly high-interest credit-card payments didn’t exist, where would that money go instead? Paying off debt could free up a potentially big chunk of money to put toward those big dreams.

Creating a debt-payoff strategy can take just as much time and effort as creating a financial wellness plan, but if one is dependent on the other, it’s an essential step.

Two popular methods include:

•   The debt snowball, which calls for paying off the lowest balance first and then applying that entire amount to the next-lowest balance (on top of the minimum).

•   The debt avalanche, which is similar but focuses on the highest-interest debt first.

Other solutions for dealing with debt include looking into zero- or low-interest balance transfer offers for credit cards, which can give your breathing room (often 18 months) to pay off what you owe without those steep interest charges. Or you might look into debt consolidation with a personal loan, which could give you a lower monthly payment, or you might meet with a low- or no-cost debt counselor for guidance.

Recommended: Steps to Financial Freedom

5. Saving

Having money in the bank, whether for short- or long-term goals, is an important part of financial security. Some pointers:

•   Keeping money in a high-interest savings account for short-term use can be a good way to put your cash to work earning you some money. Typically, online banks vs. traditional ones offer the best rates.

•   Aim to build an emergency fund equal to three to six months’ salary, which would tide you over if you had a major medical bill or car repair or got laid off. You might decide that a high-interest savings account is the safest place to keep the funds. (It can also provide the easiest access to money in a pinch.)

•   Consider automating your finances and paying yourself first. This can mean setting up recurring transfers from checking right after you are paid into your savings account. You don’t see the money in checking, so you’re not tempted to spend it, and your savings account can grow.


💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our savings account can help you make meaningful progress towards your financial goals.

6. Investing

To achieve financial security by saving for the longer term, there’s goals-based investing. This is different from traditional portfolio investing in that, instead of focusing on which assets will give the best returns over a period of time, the strategy is adapted to meet individual needs.

An investment strategy to save for a down payment, for example, is different both financially and psychologically from saving for retirement in 15 years or more.

You can also determine your risk tolerance based on the timeline of your goal as well as other factors.

7. Managing Your Expenses

A key aspect of how to achieve financial security can be understanding where your money goes and keeping close tabs on it. Your budget will help with that.

However, to really ensure that you meet future goals, you may want to avoid these two scenarios:

•   One is lifestyle creep. This means that as you earn more, you spend more, so your future goals don’t get well funded. For instance, if you change jobs and get a $10,000 raise (congratulations!) and promptly move to a pricier new home and lease a luxury car, you could wind up spending more than you actually receive after taxes. So you want to carefully balance rewarding yourself for a job well done and achieving the aspirations that represent financial security to you.

•   Another issue can be FOMO, or Fear of Missing Out. This is when we succumb to social pressure. In the case of finances, it could be that all your friends have every streaming service known to humankind, and you feel compelled to sign up too. Who wants to miss out on discussions about the latest hit? Or you might see that all your coworkers are traveling to Europe, and you decide to book an expensive trip too. Doing so could throw your savings plan off for a long time to come.

Holding your ground, managing your budget, and remembering your most important goals can keep you on track to achieve financial security.

Opening a SoFi Savings Account

The “How to Achieve Financial Security” list can be long and varied, but as the old saying goes, there are two ways to make money: You work for it or make it work for you. If you’re ready to make your money work harder, it may be time to review your banking partner.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.

FAQ

What is an example of financial security?

Financial security means being able to afford your lifestyle, not carry too much (bad) debt, and being able to save for your future.

How do you start financial security?

There are several important steps towards financial security. These can include goal setting, budgeting, starting a savings plan, and investing for long-term growth.

What are financial security issues?

Issues that can hinder your pursuit of financial security include not setting goals (or not doing so soon enough), not managing debt well, and not saving for short-term and long-term goals. One example would be not saving for retirement.

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% 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 4.20% 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.

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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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