SoFi

A deposit account is the kind of account that allows you to store money at a bank or credit union and also withdraw funds. Deposit accounts come in many forms, from checking and savings accounts to money market accounts and certificates of deposit.

Each of these deposit accounts has unique features, and together they can help achieve an array of financial goals. They are typically the hub of your everyday financial life, supporting you as you earn, spend, and save money.

Understanding Deposit Accounts

Deposit accounts are a core offering of banks. Here’s a closer look at the meaning of deposit accounts and look at how they work.

Definition of a Deposit Account

A deposit account, as noted above, is a bank account where you can safely store (i.e., deposit) and withdraw your money. While there are various types of deposit accounts that specify when or how often you can make withdrawals and how much interest your money makes while deposited, they can all help you manage your spending and saving, whether it’s by allowing you everyday access to funds or by helping you save money for larger, longer-term needs.

How Deposit Accounts Work

You can open a deposit account at a bank or credit union. Depending on the financial institution and type of account, you can deposit money into the account in a variety of formats, such as in-person cash deposits, in-person or mobile check deposits, and electronic fund transfers from other sources, such as a bank-to-bank transfer.

When the money is in the account, it is typically insured (meaning you’re protected against loss; more on that below), and it may earn interest. You can likely withdraw funds using a debit or ATM card, electronic transfer, or online payment.

Types of Deposit Accounts

Banks offer four core types of deposit accounts:

•   A checking account is perhaps the most basic type of bank account. It’s a place to store money that you can easily access with a debit card or check, through peer-to-peer money transfer services, and via online payments. Think of it as an easy way to stash and spend money, and it’s safer than carrying cash. It’s also a great place to receive a direct deposit, such as a paycheck, tax refund, or government benefit. However, these accounts typically earn no or low interest.

•   A savings account is designed for money you’ll spend less frequently. Instead, you can store money in a savings account and have it earn interest. Over time, as you add more money and it continues to grow with interest, you could save enough for, say, a vacation, down payment on a house or car, or wedding. You can withdraw money as needed, though some banks may limit the number of withdrawals per statement period.

•   A money market account (MMAs) is like a savings account, though it may earn more interest and/or may have a higher minimum balance threshold. Often, MMAs offer check-writing capabilities, much like a checking account.

•   Certificates of deposit (CDs) are another deposit account geared toward saving, but you must agree to a specific number of months or years (known as the term) during which you won’t access the money. In exchange for keeping your money on deposit, you’ll earn a competitive interest rate. However, if you remove funds before the CD matures, you usually face fees and penalties that could wipe out any interest earned.

Many people have multiple bank accounts. For instance, they might have a checking and savings account, as well as some funds in a CD.

Features of Deposit Accounts

Deposit accounts usually share some of the following core features:

Interest Earnings

When you keep cash in your wallet, stow it in your sock drawer, or hide it under the mattress, it doesn’t grow. In fact, you could argue you’re losing money over time — inflation ensures your dollars won’t go as far in the future.

But when you put it in a deposit account, it often earns some kind of interest. Some checking accounts aren’t interest-bearing or may only earn a nominal interest rate, but other checking accounts, like some online bank accounts, may earn more favorable levels of interest.

But it’s savings accounts (particularly high-yield savings accounts), money market accounts, and certificates of deposit where interest rates may outpace inflation and help your money grow.

FDIC Insurance

Most banks offer $250,000 of insurance on all deposits via the Federal Deposit Insurance Corporation (FDIC). This means, even in the very rare occurrence of a bank failing, your money is protected up to $250,000 per depositor, per account ownership category, per insured institution. (Some banks may offer additional insurance above this level.)

Credit unions don’t offer FDIC insurance; instead, they typically offer similar coverage, with up to $250,000 of insurance on deposits via the National Credit Union Association (NCUA).

Access to Funds

Deposit accounts offer some level of access to your money. Checking accounts are the most liquid type of deposit account; you can withdraw money at any time and for any reason. Savings accounts may limit withdrawals and transfers each statement period, but it’s generally easy to access your money when you need it to cover an emergency or major life purchase.

Money market accounts often come with an ATM card and/or checks that allow you to access your funds. CDs have a maturity date, but you can access your money before then, though you will likely pay a penalty.

Online and Mobile Banking Capabilities

Increasingly, banks have made it easy to monitor your spending and savings online. Before opening an account, it’s a good idea to read reviews of mobile banking apps to see which banks have the best security features and easiest-to-use apps for managing your money online. Many offer features such as dashboards to track your earnings, spending, and savings, as well as other useful tools.

Recommended: Does Switching Bank Accounts Affect Your Credit Score?

Benefits of Deposit Accounts

When you open a bank account, you’ll likely find that deposit accounts offer a number of benefits, including:

Safety and Security of Funds

When you don’t store your money in a bank, you’re exposed to loss or theft. If you can’t find a $100 bill you swear was in your wallet, no one is going to reimburse you.

But if you keep your money in an insured deposit account — and most bank accounts are insured — you know your money has a safety net. Most banks insure your money with the FDIC, as noted above.

Potential for Earning Interest

Storing your cash in a bank where it earns a competitive interest rate is a great way to inflation-proof your money. Particularly look for CDs, MMAs, and/or high-yield savings accounts to maximize interest on what’s in your deposit account.

Just remember you need to keep some money in a checking account, even if it earns less interest, to cover your everyday expenses.

Convenience for Daily Transactions

Deposit accounts make managing your money easy. You can use a checking account’s debt card to make purchases at the grocery store or pay your bills, and it’s also a good spot for receiving your paycheck as a direct deposit.

Savings accounts can be a little less liquid than checking accounts, but they help you save for regular goals, like home improvements and birthday gifts. When you’re ready to spend the funds, access it at a branch or ATM, or simply transfer it over to your checking account. Many MMAs offer check-writing privileges.

CDs are less convenient for daily transactions, but you can choose from a mix of short- and long-term CDs, ranging from several months to several years, to suit your needs.

Choosing the Right Deposit Account

Ready to open a deposit account? Here are some strategies to help:

•   Assess your financial needs: Do you need to write checks and make regular cash deposits at an ATM? A checking account with a wide ATM network may be ideal. Hoping to earn a lot of interest on money you won’t touch for a few years? Consider a CD.

•   Compare account features and fees: When trying to choose which bank is right for you, it can be helpful to compare factors like annual percentage yields (APYs), mobile app reviews, monthly maintenance fees, and overdraft fees. This can guide you to the right deposit account for your needs.

•   Consider online vs. traditional banks: Online banks typically offer higher interest rates and lower (or not) fees on deposit accounts, and their mobile app tech is generally very easy to use. But if you prefer going to a brick-and-mortar bank to cash checks, make deposits, and get help from a teller, you may want to consider a traditional bank, even if it means earning less interest.

Managing Your Deposit Account

Managing a deposit account is generally straightforward, and often, you can do so online, through a mobile app, or (with traditional banks) in person. Here are some things to consider when managing a deposit account:

•   Real-time alerts: It can be wise to set alerts to make sure no one is spending your money (perhaps via stolen debit card) without your permission. Real-time alerts can also notify you of a low balance so you don’t overdraft.

•   Automation: Some banks may offer automated savings features, such as automatically moving money from checking into savings when you get paid or pay with your debit card. Or they might have a rounding-up function for some transactions. Opting into such features can help you grow your savings faster.

•   Patience: The key to savings accounts, MMAs, and especially CDs is to practice patience vs. spending. Leaving the money untouched (or adding to it) for several months or even years ensures it grows so you can reach larger goals down the line.

Recommended: 50/30/20 Budget Calculator

Regulations Governing Deposit Accounts

Several government regulations protect banking consumers and their deposit accounts.

•   Truth in Savings Act: This landmark regulation requires banks to be transparent about fees, interest rates, and other terms impacting deposit accounts such as checking and savings accounts.

•   Electronic Fund Transfer Act: This act, from 1978, protects consumers during electronic fund transfers (ETFs). Nowadays, this offers protection for a variety of transactions, such as ATM, debit card, point of sale, direct deposit, Automated Clearing House (ACH), and other similar electronic transfers. Among consumer protections are error resolution and liability limits for unauthorized transactions.

•   Regulation CC: Reg CC, as it’s often known, implemented the Expedited Funds Availability Act of 1987, which required banks to make deposited funds available within a certain timeline. In 2003, it also allowed Congress to pass Check 21, which made it easier for consumers to mobile-deposit checks. These provisions continue to benefit consumers today.

The Takeaway

Deposit accounts are an essential part of banking and safe money management. You can use these accounts to store your money securely, spend, and help it grow over time with interest. Finding the right deposit account(s) for your needs can involve assessing your needs and comparing offerings to see which bank offers the best combination of competitive interest rates, low fees, and easy-to-use tech features.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

What’s the difference between a checking account and savings account?

While they’re both deposit accounts, checking accounts are designed for spending and savings accounts are for keeping money in the bank and helping it grow. Checking accounts offer easy access to your money via debit cards and checks but usually earn low or no interest. Savings accounts tend to earn more interest but may have withdrawal limits.

Are there limits on withdrawals from deposit accounts?

It depends. Checking accounts typically don’t have withdrawal limits, but some may limit the number of transactions you can make per day. Previously, Regulation D limited withdrawals from savings accounts and MMAs to six per month. This regulation is no longer enforced, but some banks may still cap how many monthly withdrawals you can make. Lastly, CDs are designed so that you don’t make any withdrawals until they mature.

How does FDIC insurance work for deposit accounts?

FDIC insurance typically covers deposit accounts in the very rare event of a bank failure. It insures up to $250,000 per depositor, per account ownership category, per institution. That means account holders would have their funds reimbursed up to that amount. (Some banks may offer programs that insure more than $250,000).

Photo credit: iStock/
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

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

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q424-050

Ever dream of leaving your job to pursue a project you’ve always been passionate about, like starting your own business? Or going back to school without taking out student loans? What about the option to retire at age 50 instead of 65 without having to worry about money?

Any of these opportunities could happen if you’re able to achieve financial freedom — having the money and resources to afford the lifestyle you want.

Intrigued by the idea of being financially free? Read on to find out what financial freedom means and how it works, plus 12 ways to help make it a reality.

What Is Financial Freedom?

Financial freedom is being in a financial position that allows you to afford the lifestyle you want. It’s typically achieved by having enough income, savings, or investments so you can live comfortably without the constant stress of having to earn a certain amount of money.

For instance, you might attain financial freedom by saving and investing in such a way that allows you to build wealth, or by growing your income so you’re able to save more for the future. Eventually, you may become financially independent and live off your savings and investments.

There are a number of different ways to work toward financial freedom so that you can stop living paycheck-to-paycheck, get out of debt, save and invest, and prepare for retirement.

12 Ways to Help You Reach Financial Freedom

The following strategies can help start you on the path to financial freedom.

1. Determine Your Needs

A good first step toward financial freedom is figuring out what kind of lifestyle you want to have once you reach financial independence, and how much it will cost you to sustain it. Think about what will make you happy in your post-work life and then create a budget to help you get there.

As a bonus, living on — and sticking to — a budget now will allow you to meet your current expenses, pay your bills, and save for the future.

2. Reduce Debt

Debt can make it very hard, if not impossible, to become financially free. Debt not only reduces your overall net worth by the amount you’ve got in loans or lines of outstanding credit, but it increases your monthly expenses.

To pay off debt, you may want to focus on the avalanche method, which prioritizes the payment of high-interest debt like credit cards.

You might also try to see if you can get a lower interest rate on some of your debts. For instance, with credit card debt, it may be possible to lower your interest rate by calling your credit card company and negotiating better terms.

And be sure to pay all your other bills on time, including loan payments, to avoid going into even more debt.

3. Set Up an Emergency Fund

Having an emergency fund in place to cover at least three to six months’ worth of expenses when something unexpected happens can help prevent you from taking on more debt.

With an emergency fund, if you lose your job, or your car breaks down and needs expensive repairs, you’ll have the funds on hand to cover it, rather than having to put it on your credit card. That emergency cushion is a type of financial freedom in itself.

4. Seek Higher Wages

If you’re not earning enough to cover your bills, you aren’t going to be able to save enough to retire early and pursue your passions. For many people, figuring out how to make more money in order to increase savings is another crucial step in the journey toward financial freedom.

There are different ways to increase your income. First, think about ways to get paid more for the job that you’re already doing.

For instance, ask for a raise at work, or have a conversation with your manager about establishing a path toward a higher salary. Earning more now can help you save more for your future needs.

5. Consider a Side Gig

Another way to increase your earnings is to take on a side hustle outside of your full-time job. For instance, you could do pet-sitting or tutoring on evenings and weekends to generate supplemental income. You could then save or invest the extra money.

6. Explore New Income Streams

You can get creative and brainstorm opportunities to create new sources of income. One idea: Any property you own, including real estate, cars, and tools, might potentially serve as money-making assets. You may sell these items, or explore opportunities to rent them out.

7. Open a High-Yield Savings Account

A savings account gives you a designated place to put your money so that it can grow as you keep adding to it. And a high-yield savings account typically allows you to earn a lot more in interest than a traditional savings account. Some high-yield savings accounts may offer an 3.00% APY compared to the 0.41% APY of traditional savings accounts.

You can even automate your savings by having your paychecks directly deposited into your account. That makes it even easier to save.

8. Make Contributions to Your 401(k)

At work, contribute to your 401(k) if such a plan is offered. Contribute the maximum amount to this tax-deferred retirement account if you can to help build a nest egg. In 2024, that’s $23,000, and in 2025, that’s $23,500, not including catch-up contributions available to those 50 and above.

If you can’t max out your 401(k), contribute at least enough to get matching funds (if applicable) from your employer. This is essentially “free” or extra money that will go toward your retirement.

9. Consider Other Investments

After contributing to your workplace retirement plan, you may want to consider opening another investment retirement account, such as an IRA, or an investment account like a brokerage account. You might choose to explore different investment asset classes, such as mutual funds, stocks, bonds, or exchange-traded funds.

When you invest, the power of compounding returns may help you grow your money over time. But be aware that there is risk involved with investing.

Although the stock market has generally experienced a high historical rate of return, stocks are notoriously volatile. If you’re thinking about investing, be sure to learn about the stock market first, and do research to find what kind of investments might work best for you.

It’s also extremely important to determine your risk tolerance to help settle on an investment strategy and asset type you’re comfortable with. For instance, you may be more comfortable investing in mutual funds rather than individual stocks.

10. Stay Up to Date on Financial Issues

Practicing “financial literacy,” which means being knowledgeable about financial topics, can help you manage your money. Keep tabs on financial news and changes in the tax laws or requirements that might pertain to you. Reassess your investment portfolio at regular intervals to make sure it continues to be in line with your goals and priorities. And go over your budget and expenses frequently to check that they accurately reflect your current situation.

11. Reduce Your Expenses

Maximize your savings by minimizing your costs. Analyze what you spend monthly and look for things to trim or cut. Bring lunch from home instead of buying it out during the work week. Cancel the gym membership you’re not using. Eat out less frequently. These things won’t impact your quality of life, and they will help you save more.

12. Live Within Your Means

And finally, avoid lifestyle creep: Don’t buy expensive things you don’t need. A luxury car or fancy vacation may sound appealing, but these “wants” can set back your savings goals and lead to new debt if you have to finance them. Borrowing money makes sense when it advances your goals, but if it doesn’t, skip it and save your money instead.

The Takeaway

Financial freedom can allow you to live the kind of life you’ve always wanted without the stress of having to earn a certain amount of money. To help achieve financial freedom, follow strategies like making a budget, paying your bills on time, paying down debt, living within your means, and contributing to your 401(k).

Saving and investing your money are other ways to potentially help build wealth over time. Do your research to find the best types of accounts and investments for your current situation and future aspirations.

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

FAQ

How can I get financial freedom before 30?

Achieving financial freedom before age 30 is an ambitious goal that will require discipline and careful planning. To pursue it, you may want to follow strategies of the FIRE (Financial Independence Retire Early) movement. This approach entails setting a budget, living below your means in order to save a significant portion of your money, and establishing multiple streams of income, such as having a second job in addition to your primary job.

What is the most important first step towards achieving financial freedom?

The most important first step to achieving financial freedom is to figure out what kind of lifestyle you want to have and how much money you will need to sustain it. Once you know what your goals are, you can create a budget to help reach them.

What’s the difference between financial freedom and financial independence?

Financial freedom is being able to live the kind of lifestyle you want without financial strain or stress. Financial independence is having enough income, savings, or investments, to cover your needs without having to rely on a job or paycheck.