Currency-hedged ETFs are exchange-traded funds created to minimize the risks of fluctuating exchange rates in ETFs that have foreign holdings.
Many investment companies offer two versions of the same ETF with one version including a currency hedge. The latter ETF has the same holdings as the former, but it also includes derivatives purchased to protect–or hedge–against currency risk. The protections come at a cost, however, and hedged ETFs may have higher fees than non-hedged ETFs.
Since currency values fluctuate, exchange rates can affect the total return on an asset. While ETFs provide investors with a significant diversification, they don’t offer any protection against the investment risk created by foreign exchange rates. So purchasing an ETF focused on overseas markets creates an additional layer of volatility within the investment.
Currency shifts can boost or diminish returns on international investments — but they almost always make them more uncertain. If the local currency loses value against the ETF’s currency (in this case the dollar), that can offset returns for the dollar-based investor, even if the assets that make up the security’s returns go up in their own currency.
Since many ETF investors are not interested in forex trading, they can minimize their currency risk by purchasing a currency-hedged ETF, which can smooth out volatility related to foreign exchange rates.
Currency-hedged ETFs may have a slightly higher expense ratio than non-hedged ETFs, due to the cost of the futures contracts as well as potential expenses associated with the tools and people who develop the hedged currency strategy.
While a strong dollar may be good when you’re buying assets in a foreign currency, it can hurt returns on assets denominated in a foreign currency. Over the past decade, the strong dollar has meant that hedged portfolios tend to outperform those that weren’t hedged.
Here’s an example: If the dollar-to-foreign-currency conversion rate is 1 to 2, as in one dollar buys you two units of the foreign currency, and you buy 100 shares of a stock at 5 foreign currency units per share, it will cost you $250, or 500 foreign currency units. Now, let’s say those shares double, so that 100 shares are worth 1,000 foreign currency units instead of 500 and your investment is now worth $500, compared to the $250 you spent initially.
But if the dollar strengthened so that the conversion rate went from 2 foreign currency units per dollar to 4 foreign currency units per dollar, those 100 shares are still worth 1,000 foreign currency units but for a US investor, their $250 investment would have shown no gain. While this is an extreme currency fluctuation, it illustrates the reason that some investors might purchase currency-hedged ETFs.
How Does Currency Hedging Work?
Investors use two methods to hedge against currency risk: static hedging and dynamic hedging.
Static Hedging
Static hedging is the most basic kind of hedging. An ETF that uses static hedging has one strategy that it executes, regardless of market conditions. An ETF using this strategy would buy contracts in the future market that lock in a currency’s value relative to the dollar or set parameters around it.
The contract is an agreement to buy a currency at a future price, which has the same effect of cancelling out currency gains or losses if they move from the currency’s current value against the dollar.
Dynamic Hedging
Dynamic hedging may incorporate multiple strategies or change strategies as market conditions change. Dynamic hedging is not always in effect, instead the hedge is “put on” based on the judgment of the ETF manager. Sometimes this judgment reflects an algorithm or series of rules that looks at market conditions for determining when to buy and sell financial instruments that hedge currency exposure.
For example, an ETF might have a rules-based system that looks at the trend of a currency’s value against the dollar, the interest rates in both countries, and the overall value of that currency (namely if it’s more expensive than the dollar). Those data points and, specifically, how they change over time, would determine whether and how much to hedge the ETF at any given time
The Takeaway
Currency-hedged ETFs are one way to get exposure to foreign markets and protection against the currency risks that come with that type of investment, but they may cost more than non-hedged ETFs. It’s important for investors to understand how they work, as they start to build their own investment strategy and learn how to pick ETFs to include (if any) in their portfolio.
If you’re ready to start putting that strategy into action, a great place to start is the SoFi Invest investing platform, which offers personalized investment advice, a range of ETFs, and automated investing.
Start investing today.
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Congratulations! After years of rigorous studying, training, and overall hard work, you’ve graduated from medical school. At this point, you’ve likely made it through Match Day and are ready to start a residency, even closer to becoming a fully fledged doctor.
Though the relief of graduation is certainly well deserved, medical school isn’t going to disappear from your rearview mirror soon. If you’re like most medical students, you likely finished school with a considerable amount of debt.
According to the Association of American Medical Colleges , 84% of medical students in the graduating class of 2020 had education debt (premedical and medical) of $100,000 or more, with 54% of graduates owing $200,000 or more and 20% owing $300,000 or more.
And while doctors can potentially make quite a bit of money—pediatricians earn an average of $232,000 and orthopedic specialists make $511,000, according to Medscape’s 2020 annual compensation report , for example—the average resident does not.
So, what’s a resident to do? Unfortunately, for some, finances may continue to be a challenge in the years immediately after graduating from medical school, so it could be helpful to take steps to lessen the financial anxiety that can accompany such a significant debt load.
The good news is most physicians could be on track to pay off their debt quicker than those in other fields with lower earning potential. But, even once you make the big bucks as a doctor and negotiate a sizable physician signing bonus, you’ll likely look to maintain your financial well-being.
Here, we take a look at some steps that may help you to get the most out of your money post-med school-and manage your student loans.
Making a Post-Med School Budget and Sticking to It
Residency can feel like a time when you’re struggling to make ends meet while working 12-hour shifts on your way to becoming a doctor. Being placed in a city with a high cost of living only increases the challenge.
The average resident salary in 2020 was $63,400, according to Medscape’s 2020 annual report . This may not go as far as it would seem to someone who has been in school earning no money.
Creating a budget that makes sense for your current circumstances and sticking to it will help. This might not include a fancy car (yet), and unless you’ve already signed a medical contract to stay in the same city after your residency, then it may not include buying a house either—even if you might be tempted by a mortgage loan.
Budgeting doesn’t end once you’re done with residency, either. If you can stick to your resident budget for an extra year or two, you may be able to save up money to pay down more on your student loans and start your medical career with some cash.
After all, the rate at which you are able to become debt-free may largely depend on your budget and lifestyle, not just your income.
Having an Emergency Fund and a Retirement Account
Typically, a good financial wellness rule of thumb is to aim to have a few months’ worth of your income saved up for an emergency fund. And yes, this is even applicable for doctors, who, like everyone else, could have something happen that ends up being a huge expense.
Given this, one good idea may be to start stashing away money whenever you can, and putting this emergency money into a separate account from your regular checking account. This way, you can know that it’s there but not be tempted to use it.
Though retirement may seem like a lifetime away—especially after recently finishing up school—saving for retirement as soon as is practical is a common financial goal. It’s also helpful to get into the habit of putting away something regularly. With a solid budget in place, you may be less likely to have to pick between paying down student loans and setting aside for retirement: it’s possible to do both.
Depending on your situation and goals, you may want to invest your money in a 401(k), 403(b), or a traditional or Roth IRA. It may be helpful to keep in mind that one easy way to up your retirement savings is by contributing enough to your employer-sponsored plan to max out on any company match. If your work doesn’t offer a retirement savings plan, consider opening an IRA with SoFi and get access to a broad range of investment options, member services, and a robust suite of planning and investment tools.
Considering an Income-Driven Loan Repayment Plan
You might find yourself feeling tempted to put your medical school student loans (if they’re federal student loans) on hold or into forbearance while you finish residency, but that move could still rack up interest and leave you further in debt.
Instead, you might consider an income-driven repayment plan that establishes monthly payments based on your income and family size.
It may not be as fast as sticking with traditional repayment plans, but if it’s necessary, this method could potentially help you avoid ballooning interest payments while you’re in residency, and typically lowers your monthly payments by lengthening your loan term. (Repayer beware: longer loan terms mean more interest payments, so it’s likely you’ll pay more for your loans overall.)
For med school graduates, there are a few federal income-driven repayment plans you may want to consider: income-based repayment (IBR), income-contingent repayment (ICR), and Pay As You Earn (PAYE).
The eligibility requirements will vary for each type of plan, and you may have to pay more once you sign a medical contract or earn more as a doctor, as income for plans such as PAYE is reviewed on an annual basis. Still, it’s helpful to consider the different options out there and choose what works best for you. And if you choose to practice medicine in underserved communities—as we’ll explain in more detail below—an income-driven repayment plan may be part of that picture.
Checking out Student Loan Forgiveness Programs
Another potential option you may want to look into is going into a public service program. This option allows for a particularly attractive perk for doctors: student loan debt forgiveness.
Public Service Loan Forgiveness (PSLF) is one such program run by the U.S. Department of Education that forgives the remainder of federal loans after participants have met certain eligibility requirements, such as ten years’ worth of on-time, eligible monthly payments and working for a qualifying employer, which typically includes government or certain nonprofit organizations.
The good news is that these programs may tie in nicely with the work you already want to do as a doctor. If you’ve always wanted to go into public service and also find yourself feeling overwhelmed by the prospect of paying off all of your debts, then this may be a great option.
Even if you’re not entirely sure, it may be a good idea to get started with the process now because you will need to ensure your repayment plan is on track in order to qualify later—and that may require one of the income-driven plans mentioned above.
To set yourself up financially for this situation, first you may need to consolidate your federal loans into a Direct Consolidation Loan, but it’s wise to carefully review the PSLF program requirements first.
Additionally, the National Institutes of Health (NIH) and the National Health Service Corps (NHSC) also have med school loan repayment programs for doctors who are interested in doing medical research for a nonprofit organization (through NIH programs) or health care work in a high-need area (via the NHSC program).
Many states also run their own loan forgiveness and repayment programs for doctors, which are worth looking into if you’re interested in this route. Keep in mind, there may be several different options that can help you get your loans forgiven.
Looking into Refinancing Your Student Loans
Dealing with student debt can be one of the most stressful things people experience in their lifetime. After years of hard work, graduating into a world of six-figure debt can sometimes feel anti-climatic, but rest assured that there are options.
Even if the above strategies aren’t a fit for you, there are other ways to move forward. Depending on your exact situation and needs, you may be a good candidate for student loan refinancing, which allows you to consolidate outstanding loans and may reduce your interest rates, as well as your stress levels.
(Keep in mind that refinancing your student loans with a private lender will mean that federal loan benefits, such as PSLF and income-driven repayment, will no longer be available to you.)
Refinancing your loans at a lower interest rate can be a fairly simple way to save money on the lifetime cost of your loan. SoFi has a number of student loan refinance options for medical school graduates, with variable or fixed interest rates and no application fees.
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If your master plan involves climbing the corporate ladder you may be considering heading to grad school to get your MBA. It’s a serious investment—business school doesn’t come cheap.
But an MBA could help you advance your career and increase your income potential by a fairly substantial amount. If you decide to go to business school, part of your search will likely involve finding the most affordable MBA program for you.
The Cost of Getting an MBA
Tuition costs for MBA programs can vary dramatically. At the lower end, tuition starts around $27,864 per year, and at the higher end, it’s closer to $80,000 per year. At Elite schools students can expect tuition costs over $100,000.
On top of tuition costs, there are other fees and expenses associated with attending school: You’ll have to account for housing, or room and board, plus books and other supplies; some clubs, which are important for networking, have fees that you may want to cover; and certain MBA programs offer study-abroad opportunities, also at an additional cost.
For example, at MIT, the estimated cost of tuition, housing, books, and other fees for the 2020-2021 school year was $120,846 .
Affordable MBA Options
Finding an affordable MBA program may require some research, but there are options out there. Here are a few avenues to consider when looking for one of the most affordable business schools.
Affordable Full-Time MBA Programs
Take the time to do a quick search and compare the going rates of MBA programs. Attending a state school where you qualify for in-state tuition could ultimately lower the cost of earning your MBA.
For the 2020-2021 school year, in-state residents at Oklahoma State University Sears School of Business pay a tuition of $18,814.80 per year, while tuition for out-of-state students is $42,069.00. The University of Central Arkansas offers online, on-campus, and hybrid programs with a base tuition rate of $325.00 per credit hour .
Online MBA Programs
There are a variety of universities that offer online-only MBA programs , at relatively low costs. Tuition for some online MBA programs under $10,000. Online programs can also offer flexibility for students who are still working while pursuing their degree.
Depending on the program courses may be offered synchronously, at-set times where lectures take place live, or asynchronously, where lectures are recorded and students may be able to set their own schedules.
However, some online programs (especially ones that are not accredited) aren’t as well regarded by industry professionals as full-time or in-person programs, which may mean less return on investment after you graduate.
Another potential downside to an online-only education is there is limited opportunity to network with other students in the program.
Part-Time MBA Programs
Part-time MBA programs allow students to complete their MBA while still working full- or part-time. This allows students to continue earning an income and supplement what they are learning in their classes with the real-life experience they are getting from their work. Many of these programs can take two to three years to complete.
Depending on the school, the part-time MBA program may also be on the expensive side, so read the details on tuition and fees at the schools you are comparing.
One-Year MBA Programs
While two year, full-time programs are traditional, one-year MBA options are popular in Europe. These are accelerated courses of study where students enroll in an intensive program to earn their degree. The cost of tuition may be less than for a full-time MBA program since students spend just one year taking classes and out of the workforce.
When it comes to applying to an MBA program, the cost of tuition (and books, housing, other fees, etc.) will likely all factor into the equation. It’s also worth reviewing the average salaries of graduates from specific programs you are considering.
Some programs have a fairly low salary-to-debt ratio (highest average salary, with lowest debt incurred), while others leave their student under a mountain of debt with less than ideal income prospects after graduation.
Beyond just the cost of tuition, there are other intangible factors that may come into play, like the network you are (hopefully) building as you make your way through your MBA program plus other transferable skills you’ll hopefully gain.
It can be difficult to place a monetary value on these items, but it’s not a bad idea to consider them when making your decision. For example, if there is a strong alumni network, it could help you find a job after graduation.
How you plan on paying for your MBA should also be factored into your decision-making process. Some companies may offer to cover a portion or all of the program’s tuition.
This can be a great benefit for those able to cash in, but review company policies because there may be some strings attached: You may be required to work for a specified number of years at your current firm, which could be unappealing if you’re interested in exploring a new industry.
Another option is MBA student loans, either private or federal. While federal student loans come with attractive protections, like deferment, forbearance, or income-driven repayment plans, private student loans could be an option as well.
In general, private student loans are borrowed as a last-resort option. Federal student loans, scholarships or grants, and other fellowships are generally preferable to private student loans.
Review the loans you are eligible for, including their terms, student loan repayment plans, interest rates, and any additional fees. Take the time to see how much you could be paying in interest over the life of the loan to get an idea of what your degree could truly be costing you.
When it comes right down to it, to help ensure you’re getting an affordable and valuable degree, do your research. Finding the best program for you may take a little time, but if you’re passionate about advancing your education and pursuing a career in business, the right MBA program can be a great step in the right direction.
The Takeaway
An MBA can be a solid step for those pursuing a career in business. Graduates learn valuable skills for the workplace and could improve their earning potential.
What may be a disadvantage to some considering graduate school is the cost of some MBA programs. There are alternatives that may make getting your MBA a more affordable goal. These options include part-time, online, one-year, or even some full-time in-person MBA programs.
MBA grads with student loans may find themselves in a position where they’re interested in refinancing after entering (or re-entering) the workforce.
Student loan refinancing lenders use criteria like borrower credit history and earning potential (among other financial factors) to determine the new interest rate and terms.
As a newly minted MBA holder, you’re on the path to upward mobility and may benefit from refinancing your student loans. Refinancing any federal student loans will eliminate them from federal benefits, things like income-based repayment plans or Public Service Loan Forgiveness. But, a lower interest rate could mean you’ll pay less money over the life of the loan. To see what your new loan could look like, check out our easy-to-use student loan refinance calculator.
Check out what kind of rates and terms you can get in a few minutes.
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It’s not a secret that attending college can get really pricey really fast. For women students looking for a bit of help in the funding department, there are tons of great grants and scholarships for women available that can help ease the financial burden of pursuing higher education and help lower student loan debt. While there are plenty of college scholarships and grants that women can apply to, the following programs are specifically designed for women applicants.
Women’s Independence Scholarship Program
The Women’s Independence Scholarship Program provides scholarship opportunities to female survivors of intimate partner abuse in order to help them regain their independence and self-sufficiency via higher education and employment.
This organization aims to support women who have been separated from an abusive partner for at least a year. Both full-time and part-time students with financial need may be eligible.
While the average award amount is about $2,000 per school term, there is no set amount for this award.
Women In Need
The Women in Need scholarship is intended for women who are completing their sophomore year of college to earn a Bachelor’s degree in accounting and are also the primary source of support for their family. The award amount is $2,000 per year for two years if renewed.
Financial need is taken into consideration as is evidence that the applicant has a goal of pursuing a degree in accounting in order to prepare for a career as an accounting or finance professional.
Moss Adams Foundation
The Moss Adams Foundation scholarship provides $1,000 graduate scholarships for women who intend to earn a bachelor’s degree in accounting and is available to minority women, women returning to school as current or re-entry juniors or seniors, and women who are pursuing their fifth year requirement through general studies or a graduate program.
Recipients must illustrate commitment to the goal of pursuing a degree in accounting in order to prepare for a career in the field and will need to provide evidence of continued commitment to this goal after they receive the award.
Jeannette Rankin Women’s Scholarship Fund
The Jeannette Rankin Women’s Scholarship Fund has scholarship opportunities and provides support for low-income women who are thirty-five or older so they can build better lives through post-secondary education.
Women who are low-income and pursuing a technical or vocational education, an associate’s degree, or a first bachelor’s degree may qualify for this scholarship.
Society of Women Engineers Scholarship Program
Women admitted to accredited baccalaureate or graduate programs that are preparing them for a career in engineering, engineering technology, or computer science can qualify for the Society of Women Engineers Scholarship Program . In 2018, the program distributed around approximately 238 scholarships that come to more than $830,000 worth of awards.
Applicants have to attend or plan to attend a school with ABET-accredited programs to qualify. Each year, these awards are available for freshmen through graduate students and award amounts from $1,000 to $16,000, some of which are renewable.
Go Girl! Grants
Education grants for women are also an option for some students looking for help paying for higher education. The Go Girl! Grants is one such example. The Girlfriend Factor has supported more than 147 local women in Coachella Valley, CA with over $500,000 in grants to help them pursue four year degrees or occupational certifications.
Applicants must be currently enrolled in school in at least two classes, 25 years of age or older, and live and go to school in Coachella Valley.
P.E.O. International Peace Scholarship Fund
If someone is looking for college scholarships for women that are international students, The Philanthropic Education Organization (P.E.O) hosts the International Peace Scholarship Fund which has been providing scholarships for women from other countries, who are pursuing graduate study in either the United States or Canada, since 1949. This scholarship is based on financial need and the maximum award amount is $12,500.
P.E.O. STAR Scholarship
The Philanthropic Education Organization also offers the P.E.O. STAR Scholarship , which was established in 2009, in order to provide scholarship opportunities to high school senior women who plan to attend an accredited postsecondary educational institution in the United States or Canada in the upcoming academic year.
This scholarship is non-renewable and offers awards of $2,500 that must be used in the academic year that directly follows high school graduation. These funds can be used for expenses like textbooks, tuition, fees, and room and board.
P.E.O. Program for Continuing Education
College grants for women are also available through P.E.O. who offers one-time need based grants to women completing a degree or certification needed to improve or gain skills that lead to employment. Recipients of the P.E.O. Program for Continuing Education must be citizens or legal permanent residents of the United States or Canada and the maximum grant is $3,000.
Soroptimist Live Your Dreams Award
Annually, Soroptimist distributes over $2.8 million in education awards to around 1,700 women from around the world, more than half of which are survivors of domestic violence, trafficking, or sexual assault. Recipients of the Soroptimist Live Your Dreams Award have overcome obstacles such as poverty, teen pregnancy, and drug or alcohol addiction.
The award is intended to help recipients offset costs associated with attaining a higher education. This includes costs like textbooks, childcare, tuition, and transportation.
Patsy Takemoto Mink Education Scholarship for Moms
Moms are in luck! There are specific scholarships for moms available. Mothers can apply for the Patsy Takemoto Mink Education Scholarship for Moms . Scholarship award availability and amounts can vary, but for reference, in 2020 the Patsy Mink Foundation offered five Education Support Awards at amounts of up to $5,000 per recipient in order to assist low-income women with children in pursuing higher education or training.
Managing Student Loan Debt that Scholarships Didn’t Cover
Hopefully there are some appealing gift aid options on this list that can help pay for higher education expenses! But even with the help of scholarships and grants, paying for college in full before graduation day can be challenging. Women with a lot of student loan debt may want to consider their student loan refinancing options to help lighten their load.
When a borrower refinances their student loans, they are taking out a new loan with a new interest rate and/or a new term. Ideally the new interest rate will be lower, making it easier and more affordable to pay off student loan debt.
It’s possible to refinance both federal and private student loans through SoFi student loan refinancing. Refinancing can be a good option for graduates who are struggling to pay down high-interest unsubsidized Direct Loans, Graduate PLUS loans, and/or private loans.
While there are some great benefits associated with refinancing student loans, it is worth noting that when a student refinances a federal loan into a private one, they lose access to certain federal protections such as public service forgiveness and economic hardship programs.
The Takeaway
Scholarships can be supremely helpful for students trying to pay for college. There are a variety of scholarships available specifically for women. In addition to the scholarships listed above, there may be opportunities available for women at a local level or, or at the college or university the student attends. Check the school’s financial aid website.
There are also online databases that can help students find scholarships to apply for.
Sometimes, paying for school entirely with scholarships isn’t possible. Students who borrowed student loans may be interested in refinancing them if they’re able to qualify for a lower interest rate or more competitive terms.
Learn more about potential refinancing rates today.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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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Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.
Since the onset of the COVID-19 pandemic, millions of Americans received stimulus checks from the federal government. As of March 2021, a year into the pandemic, the third round of stimulus checks have been approved with the American Rescue Plan Act.
This package includes one time payments of $1,400 for individuals making $75,000 or less and per person for couples earning $150,000 or less. Additionally, those with dependents would qualify for another $1,400 per child. The IRS sent out “Economic Impact Payments” as checks in the mail or electronically via direct deposit.
The stimulus checks are a measure to provide financial relief to millions of Americans. Many people used the proceeds of the checks to pay for food, utilities, credit card bills and other expenses while others saved the money for future emergencies.
The federal government also provided stimulus checks in 2008. The amount was much lower—individuals received $600 and couples filing jointly received up to $1,200.
These economic impact payments could be used by consumers in several ways, including paying off debt such as credit cards or private student loans, starting an emergency fund, or by investing the money for retirement.
Paying Off Debt
The additional $1,400 can come in handy for people who want to pay off their debt, especially higher interest debt such as credit cards. Consumers could use all or a portion of the stimulus payment to make extra payments on a credit card, loan, or other debt. Additional payments could go towards the principal portion of what is owed, or what the consumer originally borrowed, helping pay down the interest faster; if you want to do this, it’s smart to contact the lender to let them know and ensure those extra payments are applied to the principal balance.
People who still have other credit card debt could look into obtaining a personal loan. Generally, personal loans have lower interest rates than credit card debts. Securing a lower interest rate could potentially help expedite debt repayment, so long as the repayment term is not extended.
For some, student loan debt may be a focus. In March 2020, the CARES Act temporarily paused federal student loan payments, reduced interest rates to 0% on all federal student loans, and temporarily halted collections on federal student loans in default. These protections have now been extended through Aug. 31, 2022. This does not apply to private student loans. The stimulus payment could help a borrower pay down their federal student loans or make extra payments.
Some may consider refinancing their student loans, should they be able to qualify for a lower fixed or variable interest rate, or preferable lending terms. This can make sense for some borrowers, especially those who already hold private student loans, but won’t be right for everyone. Federal loans offer borrower protections that private loans do not, so borrowers with federal student loans may want to consider all of their options carefully. Refinancing federal student loans eliminates them from all federal benefits, including the temporary relief offered by the CARES Act.
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Starting an Emergency Fund
An emergency fund comes in handy to pay rent or a mortgage, auto loan, student loans, or credit cards if you lose your job or your hours are slashed. Finding another full-time or part-time job could take several weeks or months and the additional money could be useful.
Saving for an emergency fund can be difficult after paying your bills each month. The money from the stimulus check could provide a boost to help start a rainy day fund. Having the extra savings can help prevent someone from having to rely on their credit cards and rack up more debt in case there is an emergency, say something like a last minute car repair or a sudden illness.
Having the extra money can also be a relief in the event of a job-loss since it can take several weeks for unemployment funds to arrive.
General recommendations suggest that people save three to six months of expenses in their emergency fund. In some situations, it may make sense to save more than three to six months worth of expenses. For example, freelancers with a fluctuating income may want to have more saved up. If you are not sure how much money you need, look at your monthly bills and determine which ones you can’t ignore if you lost your job for an extended period.
Another way to gauge how much to save in an emergency fund is to factor in things like the deductibles for your car and health insurance in case there is an accident and you need to make repairs to the auto or you get injured.
Starting an emergency fund with the money from your stimulus check is one way to get started. From there, more money can be added to your savings account whenever you get the opportunity. There are many ways to stash more money into your rainy day fund. Clean out your closet and see if there are any items you can sell online such as electronics, clothing, a bike, or musical instrument.
Save the money earned from a part-time job, freelance work, or your annual tax refund. Or review your budget and see if there is anything you can cut such as a streaming service you rarely use.
Those in a comfortable financial position, could transfer some money automatically from your weekly or bi-weekly paycheck into a new savings account. The amount could be small, but even $25 a week adds up over a year.
Investing the Stimulus Check
The extra money from the stimulus check could also be an investment. Depending on individual financial circumstances, the stimulus check could be used to make a contribution to a retirement account like an IRA. Others may be focusing on other goals like a downpayment for a house, a vacation, a wedding, or a home remodel.
Once you open an account and start putting money towards it weekly or even monthly, you may see the balance grow, especially as the investments appreciate in value and interest compounds
The Takeaway
The stimulus checks are intended to provide temporary relief to those struggling due to the unprecedented challenges caused by the coronavirus pandemic. How you use the money will depend on your individual circumstances. Some options include paying down debt, establishing an emergency fund, or investing.
A SoFi checking and savings account could be one place to stash your stimulus check. Getting started is as easy as depositing the stimulus check. From there, SoFi Checking and Savings makes it easy to earn interest and receive cash back on purchases. A SoFi Checking and Savings account allows you to spend, save, and earn money from one place. There are no account fees and your cash balance earns interest. The interest rate and fee structure is subject to change at any time, but SoFi aims to offer competitive interest rates and not charge any account fees.
With SoFi, account holders can create financial vaults within a SoFi Checking and Savings account for different reasons such as an emergency fund or investing account.
Building an emergency fund is a huge accomplishment. Get started with SoFi Checking and Savings.
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