Aug
07
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.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
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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 4.00% 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.

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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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Aug
07
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.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
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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 4.00% 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.

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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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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Aug
06
2023
What Are Traveler's Checks and How Do They Work?

Guide to Traveler’s Checks

By | Financial Independence, money, Terminology | Comments Off on Guide to Traveler’s Checks

Once upon a time, traveler’s checks were considered vital for keeping your money secure and helping you spend when traveling internationally. But as digital payment options have emerged and ATMs have popped up on street corners around the world, traveler’s checks have become less popular.

However, while perhaps not your primary source of funding while overseas, traveler’s checks may still have a place when you take a trip.

A key benefit of traveler’s checks is that they are very much like using cash. Many businesses will accept traveler’s checks, whether you are paying for a spa treatment or a pair of sandals. But, unlike cash, if your checks were to get lost or stolen, you can (phew!) get your money back.

Read on to learn why you might want to take some of these checks on your next trip, including:

•  What are travelers checks

•  How do traveler’s checks work

•  Where to buy traveler’s checks

•  Pros and cons of traveler’s checks

•  Alternatives to traveler’s checks.

What Is a Traveler’s Check?

Traveler’s checks are paper documents that can be used as a traditional paper check and also like cash. They are intended to aid tourists and are typically used by people on vacation in foreign countries.

Issuers print checks in varying denominations, such as $10, $20, or $50, and they are available in a range of currencies. There may be a fee to purchase these checks and/or exchange them when you are traveling; this varies with the issuer.

Here’s a bit more about how to use them:

•  You can use these checks just like cash to pay merchants for goods and services, as long as they accept traveler’s checks. Typically any change due back to you will be given in local currency.

•  You can also get the checks converted into cash in the local currency at many banks, hotels, and foreign exchange offices, which can be a major convenience when you want some spending money (say, when hitting an outdoor market).

•  If traveler’s checks get lost or stolen, the issuer will replace the checks or give you a refund.


💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do Traveler’s Checks Work?

Traveler’s checks are issued by a bank or other financial institution. Right after you purchase your checks, you sign each one. When you are ready to use the check, you fill in the payee and date, and then sign the check again.

For the second signature, the person or business you’re paying must be present to watch you sign. The two signatures should match. This is a deterrent to would-be criminals who for that reason may think twice about stealing them.

Though traveler’s checks function like cash, they also are similar to paper checks in that each check has a unique check number. If that check is lost or stolen, the issuer cancels it and issues you a new one.

Recommended: Where to Cash a Check Without Paying a Fee

Where Can I Get a Traveler’s Check?

You can still buy traveler’s checks in the U.S. and other countries. In the U.S, companies that still issue travel checks include American Express and Visa.

You can also purchase traveler’s checks online from the American Express website, but you will need to be registered with an account. In addition, Visa offers traveler’s checks at many Chase and Citibank locations nationwide, as well as at several other banks.

You may also be able to get traveler’s checks from your local bank. If your bank offers them, you may be able to get them for free. If you are buying them elsewhere, you will likely pay a 1% to 3% purchase fee, which could exceed the cost of using an ATM while traveling.


💡 Quick Tip: The myth about online accounts is that it’s hard to access your cash. Not so! When you open the right online checking account, you’ll have ATM access at thousands of locations.

Pros and Cons of Traveler’s Checks

Traveler’s checks are handy for tourists who do not want to risk losing their cash or having it stolen while abroad. But they come with a few disadvantages as well. Here’s a look at the pros and cons.

Pros of Traveler’s Checks

They keep your money safe. If something should happen to your traveler’s checks, they can be quickly replaced, typically within 24 hours.

They don’t expire. If you bought them and end up not taking your trip, you can use them, or redeem them, at any time in the future.

They protect your identity. Traveler’s checks are not linked to your bank account or line of credit and do not contain personally identifiable information, thus eliminating risk of identity theft.

Cons of Traveler’s Checks

They aren’t as widely accepted as they once were. You could find yourself not able to spend them as freely as you like. Outside of major tourist regions, you may find that few shops or hotels accept traveler’s checks as payment.

They can be hard to get. There are a limited number of issuers today, and the paperwork involved in obtaining them can be time-consuming.

You may have to pay a fee. Unless you’re getting them from the financial institution where you have an account, you’ll likely have to pay a fee to purchase a traveler’s check.

Here’s this intel in chart form:

Pros of Traveler’s Checks

Cons of Traveler’s Checks

SecureNot as widely accepted anymore
No expirationCan be hard to obtain
Protect your identityMay charge a fee

Do I Need Traveler’s Checks When Going Abroad?

You certainly don’t need them, but they may come in handy–depending on where you’re traveling.

Before purchasing traveler’s checks, it can be a good idea to research how widely this form of payment is accepted in the city or region you are planning to visit. You can simply Google something like, “Where can I spend traveler’s checks in Paris” to get this information.

As an alternative, you might consider:

•  Using a prepaid travel card, which is the modern-day version of a traveler’s check. You can load the card with money from your bank account and then use it like a debit card at an ATM (to get local currency), or a credit card at stores and restaurants.

Like traveler’s checks, prepaid cards are not linked to your bank account, which prevents anybody from draining your checking account if the card gets lost or stolen — and you can’t go into debt.

•  Another alternative to traveler’s checks is your debit card, which you can use to get local currency at ATMs and also to make purchases.

However, when using a debit card in another country, you may want to watch out for fees, which may include both an out-of-network ATM fee, as well as an international ATM fee, for every withdrawal you make.

•  Your credit card is another option. These cards can offer you fraud protection and possibly rewards, such as miles vs. cash back. However, there may be fees involved with using your card overseas, called foreign transaction fees.

And, unless it’s an emergency, you’ll likely want to avoid using your credit card for getting cash at an ATM. When you perform a cash advance from a credit card, you can get hit with a fee (around 5% or more), as well as interest, which can run around 25%. You may also pay an ATM fee of several dollars.

Recommended: Ways to Be a Frugal Traveler

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What Can I Do With Old Traveler’s Checks?

Because traveler’s checks don’t expire, those that you have tucked away in a drawer can be used for your next adventure.

You can also redeem traveler’s checks, no matter how old. Some banks allow account holders to deposit their traveler’s checks (including foreign currency traveler’s checks) into their bank account. It’s a good idea to check with your bank first, and also find out if they will charge a fee for clearing the checks.

You can redeem your unused American Express Travelers Cheques online at the company’s website.

Recommended: Here’s What You Can Do with Leftover Foreign Currency

History of Traveler’s Checks

Travelers checks have a long history. They were first issued in England in 1772 (yes, that’s over 250 years ago). They were popularized over the centuries by the Thomas Cook company in 1874 and by American Express, whose president in 1890 found it difficult to cash checks while in Europe.

They became a popular travel mainstay for Americans for years, before technological advances made other payment techniques possible.

4 Modern Alternatives to Traveler’s Checks

Do people still use traveler’s checks? Today, traveler’s checks are less popular as there are other ways to pay when traveling to another country. Here are some alternatives.

Credit Card

You can likely whip out your plastic to pay when traveling. However, keep in mind that you are basically borrowing money, will pay an interest rate, and there may be foreign transaction fees involved. Credit cards do typically provide good fraud protection.

Debit Card

Your debit card may be accepted at many places when you travel. It will pull funds out of your checking account to pay for goods and services.

Prepaid Debit Card

As you travel, you may be able to pay with a prepaid debit card. You load money onto the card when you purchase it, and then you draw down those funds as you spend.

Mobile Wallet

This digital edition of your wallet may enable your spending as you travel. It can electronically hold your credit card, debit card, and other financial information to allow you to scan and spend while on vacation.

The Takeaway

Traveler’s checks are a form of payment issued by financial institutions such as American Express. These checks function like cash but are more secure since you can get your money back if the checks are lost or stolen.

While traveler’s checks can be handy for tourists who do not want to risk losing their cash or having it stolen while abroad, they are not as widely issued or accepted as they used to be.

Today’s travelers may prefer to use a prepaid debit card, which functions in a similar way to a traveler’s check, and/or their credit cards to pay for expenses while traveling overseas.

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


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

FAQ

How does a traveler’s check work?

A traveler’s check works by purchasing a check in the denomination you want (a fee may be charged) and signing the checks. Then, when you want to pay with the checks while traveling, you would sign them again. This double signature is one way that these checks present a secure way to spend when you’re on a trip.

Why are traveler’s checks not used anymore?

As technology has advanced, other methods of payment while traveling may be simpler. For instance, you might just swipe or tap your credit or debit card versus making a special trip to buy traveler’s checks before you head to another country.

Can you cash traveler’s checks?

Yes, you can cash traveler’s checks when traveling, but there may be a fee involved. When you return, you may also cash or deposit any unused checks.

Photo credit: iStock/AndreyPopov

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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

SOBK0423029

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Jul
26
2023
Different Ways to Earn More Interest on Your Money

How to Make Money With Interest 7 Ways

By | Growing Wealth, Investing, money | No Comments

No one wants to see their hard-earned cash sitting in the bank and earning a miniscule amount of interest. Instead, most people want their money to work hard and churn out even more moolah at a healthy rate.

Achieving that may be as simple as switching banks or even just swapping account types. Or trying a couple of other smart financial moves that can help your wealth grow.

Read on to learn smart strategies that can help you earn more interest than you are currently.

What Is Interest?

Interest is the percentage paid when money is borrowed or loaned out. Here are a couple of examples.

•  When you deposit your money into an account at a financial institution, the bank may pay you interest. This is your reward for keeping your cash there, where they can lend some of it out or otherwise use it as part of their operations.

•  When you borrow money (like a mortgage or car loan) or open a line of credit (say, for a credit card), you pay interest to your lender. You are paying for the privilege of using their money.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do You Earn Interest?

When you deposit money into a bank account, you are in effect loaning them the money. They pay you interest in return.

The financial institution can use that money in any number of ways, including lending it out to others. Say you deposit $10,000 in a savings account that earns a 3% interest rate. The bank could then use some of your money and that of other depositors to make a $100,000 mortgage loan at 7% to a borrower.

The difference between the 7% they are charging the person with the home loan and the 3% they are paying you and other savings account holders is one of the ways banks make money. And it’s also a good example of how and why you earn interest on your deposit.

How Does Interest Work?

Interest can work in a couple of different ways.

•  With simple interest, interest is earned only on the principal, or the amount of money you deposited.

•  With compound interest, interest is generated on the principal and the interest as it accrues. This makes your money grow more quickly. Interest can be compounded at different intervals, such as quarterly, monthly, or daily.

Here’s an example of what a $10,000 savings account would look like at the end of a year if you earned 3% simple interest:

$10,000 principal +$300 interest = $10,300 at the end of the year.

However, if that interest was compounded daily, by the end of the year, you would have:

$10,000 principal + $304.53 interest = $10,304.53 at the end of the year.

While it doesn’t sound like much, over time, the difference is amplified. If you’re wondering how to make money with interest, consider what the numbers would look like after 10 years:

Simple interest: $13,000
Compound interest: $13,498.48

It can be wise to check with financial institutions and see how often interest is compounded. The more frequent the compounding, the more your money will grow.

Recommended: Compound Interest Calculator

7 Ways to Gain Interest on Your Money

Now that you understand what interest is, consider these seven ways you might help your money grow faster thanks to the power of interest.

1. High-Interest Savings Accounts

Want to earn more interest on savings? Some banks offer high-interest or high-yield savings accounts that can pay higher rates than traditional savings accounts, while still providing fairly easy access to your money.

How big a difference can this make? In mid 2023, regular savings accounts were paying as little as .01% to .15% annual percentage yield (APY) while high-yield accounts were in the 4.25% to 4.75% zone. When looking for a good interest rate for a savings account, most people would rather snag the latter.

Typically, these high-interest accounts limit you to six withdrawals or transfers per month per Federal Reserve requirements. While this Regulation D rule has been suspended since the coronavirus pandemic, some banks will still charge fees or have other penalties for more than six withdrawals, so be sure to check.

You are more likely to find high-interest savings accounts at online-only banks. Because these institutions tend to have lower operating costs than brick-and-mortar banks, they often offer higher rates than traditional banks. They may also be less likely to charge monthly fees.

A high-yield savings account can be a great place to build an emergency fund or save for a vacation or home repair while providing safety and liquidity.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

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2. Rewards Checking Accounts

Checking accounts are traditionally used for storing money that you use frequently, and they typically don’t pay interest. However, some banks offer rewards checking accounts. These may pay higher interest rates than traditional checking and savings accounts. For instance, as of mid 2023, while some standard checking accounts paid zero interest, rewards accounts offered up to 3.30% APY.

However, there may be some restrictions. For instance, the balance that earns the elevated rate may be limited. In addition, you may have to meet certain direct deposit or debit card transaction requirements each month to earn the higher rate.

Like other checking accounts, rewards checking accounts are highly liquid and typically come with check-writing privileges, ATM access, and debit cards. Plus, deposits can be withdrawn at any time.

If you’re considering a rewards checking account, however, you may want to first make sure you can meet any requirements.

💡 Quick Tip: Your money deserves a higher rate. You earned it! Consider opening a high-yield checking account online and earn 0.50% APY.

3. Credit Unions

Another of the best ways to earn interest on your money is to consider joining a credit union.

Unlike banks, credit unions are owned by the people (or members) who hold accounts at the credit union. Because of this, these financial institutions work for the benefit of account holders instead of shareholders.

In some cases, that can translate into lower fees, better account perks, and higher interest rates. To join a credit union, you typically need to live or work in a certain geographic area or work for a certain employer.

If you have a credit union near you, you may want to check the rates it offers and see if you can get a good deal.

4. Money Market Accounts

A money market account is a type of deposit account that usually combines the features of both checking and savings accounts. This kind of account often requires a higher minimum balance to open than a standard savings account and typically earns a higher interest rate.

Some money market accounts also come with a debit card or checks (which you generally won’t find with savings accounts), but financial institutions may require that they not be used more than six times per month. Some will charge a fee if you go over that number.

It can also be a good idea to ask about other fees, such as monthly account fees and penalties, before opening one of these accounts.

Recommended: Guide to Deposit Interest Rates

5. Certificates of Deposit

Certificates of deposit (CDs), which are a kind of time deposit, typically offer higher interest rates than traditional savings accounts in exchange for reduced withdrawal flexibility.

One benefit of CDs is that you lock in the interest rate when you open the CD.

When you put money in a CD, you agree to leave the money in the account for a set period of time, known as the term. If you withdraw your deposit before the term expires, you’ll usually have to pay an early withdrawal penalty.

One benefit of CDs is that you lock in the interest rate when you open the CD. Even if market rates drop, you’ll keep earning the same rate. On the other hand, if rates rise, you’ll be stuck earning the lower rate until the CD matures.

One way to work around this is to open several CDs that mature at different times, a technique known as CD laddering. Having a mix of short- and long-term CDs allows you to take advantage of higher interest rates, if they bump up, but still have the flexibility to take advantage of higher rates in the future.

A CD ladder also helps with the lack of liquidity that comes with CDs. Because of the staggered terms of the certificates, one is likely to be coming due (or available) if you need to use the cash.

6. Bank Bonuses

Many banks offer special bonuses from time to time; these can be a way to boost the earnings on your money. You may want to keep your eyes open for high-yield savings accounts that offer a sign-up bonus or an interest rate bonus. These incentives can boost your earnings, though you may have to maintain a high minimum balance in the account to earn the higher rate.

You may want to keep your eyes open for high-yield savings accounts that offer a sign-up bonus.

Some banks also offer cash bonuses to customers who open new checking accounts. While this may also come with some requirements, such as setting up direct deposit and/or keeping your account open for a certain number of months to earn the bonus, it can be another good way to increase the income you earn on your bank deposits.

7. Bonds or Bond Funds

Another way to gain interest on your money could be with bonds, which are loans that the government or companies issue. These pay investors interest on a regular basis until the bond hits its maturity date.

These investments, however, aren’t insured the way an account is at a bank or credit union by the FDIC or NCUA. U.S. Savings Bonds are backed by the government, but other bonds may carry risk.

Type of Account

Pros

Cons

High-Interest SavingsHigher interestMay have withdrawal limits
Rewards CheckingHigher interest, unlimited withdrawals, checks, and a debit cardMay have requirements such as certain number of debit card or ATM transactions
Credit UnionHigher interestMay need to live in a certain area or work in a certain profession to open an account
Money MarketHigher interest; checking account privileges such as a debit card and checksMay charge fees and/or limit number of transactions
Certificates of DepositHigher interest, guaranteed interest rateMoney must be kept on deposit for a specific time period or else penalties can be assessed
Bank BonusesHigher interest and/or cash to add to your accountNot offered by all banks; may be minimum deposit requirements or rate may decrease after introductory period
BondsPay interest to grow your investmentMay not be insured

Other Ways to Make Your Money Work For You

If you’re planning to park your cash for at least five years or so and you are willing to take some risk, you may want to consider investing your money in the market.

While an investment might generate a higher return, all investments come with the risk that you could lose some or all of your money.

You can better weather this risk by investing for the long term, which essentially means only investing savings that you would not likely need to touch when the market is down.

There are a variety of ways to start investing. If your employer offers a 401(k), that can be one of the easiest ways to start investing. Another option for retirement is an individual retirement account (IRA).

You could also open a brokerage account for financial goals outside of retirement. This is a taxed account, typically opened with a brokerage firm, that allows you to buy and sell investments like stocks, bonds, and mutual funds.

If you’re ready to start investing, you may want to speak with a qualified financial advisor who can help you establish your savings goals and risk tolerance and help you develop a personalized investment strategy.

💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.

Creating a SoFi Savings Account Today

If you’re looking to make more interest on your money, you may be able to increase returns by opening a high-yield account at SoFi.

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


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

FAQ

What does it mean to “gain interest”?

Gaining interest is similar to earning interest. It means that your money (the principal) is growing over time thanks to the interest rate being paid. The exact amount it grows will be determined by the interest rate, how long it sits, and how frequently (if at all) the interest is compounded.

Where can you get 7% interest on your money?

As of mid 2023, only one financial institution offered an account with 7% interest: Landmark Credit Union. It was paying 7.50% annual percentage yield (APY) on its Premium Checking Account, which had requirements for e-statements and direct deposits in order to earn that amount of interest.

How much interest does $10,000 earn in a year?

How much interest $10,000 will earn in one year will depend on the interest rate and how often the interest is compounded, if at all. If the interest rate is 3%, without compounding, it would earn $300. With daily compounding, it would earn $304.53. If the interest rate were 7%, the account holder would have $700 in interest at the end of the year with simple interest, and $725.01 with daily compounding.


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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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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Jul
20
2023
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7 Ways To Simplify Your Finances

By | Budgeting & Goals, Debt Payoff, Financial Independence, Investing, money | No Comments

It may feel like there’s nothing easy about money. The older you get, the more obligations you may have. Between checking, savings, IRAs, 401(k)s, bills, loans, mortgages, and more — it can be a lot to keep track of and manage.

If thinking about your finances causes you to feel stressed and/or you find yourself putting off important financial decisions, it may be time to simplify. While streamlining your personal finances can take a little bit of time and effort in the short term, it can end up saving you time, effort, as well as money, over the long haul.

Here are seven simple moves that can help you manage your money more efficiently — and more effectively.

1. Automating Your Bills

One of the easiest ways to simplify your finances is to set up auto payment whenever possible. Putting all of your bills — including credit cards, utilities, insurance, loans, mortgage, and even rent — on autopilot can save you significant time and hassle each month. Plus, you won’t have to worry about late payments — or late fees.

You can often set up automatic payments for your bills by going to the website of the service provider and inputting your bank account information.

If a business doesn’t offer an automatic payment program, you may be able to set up a recurring payment through your bank by logging on to your checking account or using your bank’s mobile app.


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

2. Going Paperless

A major culprit of personal finance-related headaches is paperwork. Keeping track of the many documents — all those receipts, investment reports, bank statements, tax returns — can be a struggle.

Many services allow you to opt-in to a paperless experience instead. You’ll typically have access to all of the documents when you log into your account. And, with everything just a click away, you won’t have to worry about finding misplaced paper documents.

If you’re interested in leveling up your organization, you could even set up a digitized archive of your important information and files on your computer or an external hard drive, so you never have to spend hours searching through file cabinets and miscellaneous envelopes.

You can also reduce physical — and mental — clutter by taking advantage of the many retailers and service providers that offer email, rather than paper, receipts. Or, you may want to consider getting an app that scans, organizes, and stores receipts, such as Smart Receipts .

You can also get an app for filing and organizing your paperless statements. Some not only capture receipts, but will also seek out your online statements and bills and automatically download and file them to the cloud.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


3. Consolidating Accounts

Whether you’re married with three kids or single with two Labradoodles, there’s a good chance that you have more financial accounts than you need. Consolidating multiple bank accounts into just a few can help simplify your financial life. In some cases, it can also help you save you money.

If you’ve done a lot of job hopping in your career, for example, you could have multiple 401(k)s floating around. When you leave a company but don’t roll over your 401(k), you’re often subject to fees that your employer may have been covering while you were employed.

By rolling your 401(k) into an IRA, you may be able to minimize fees. Another plus is that you’ll also have all of your funds in one spot. And, you may be able to select from a wider selection of funds and investments than the ones selected by your previous employer.

If you have more than one checking or savings account, you may want to see if you can pare it down to one of each, ideally under the same roof. Or, you might want to consider switching to a checking and savings account, which functions as both a spending and saving account in one product.

You may also want to look at bundling your insurance policies. Many companies offer substantial discounts if they write both your auto and homeowner’s policies.

4. Using One Credit Card

If you signed up for a variety of credit cards, chasing the promised rewards they offered, you may have racked up more than a few credit accounts.

To make it easier to keep track of your spending, you may want to pick the card that offers you the most in return, whether that’s cash back, travel rewards, or other perks, and focus on using only that credit card.

By putting everything on one card, you’ll only have one credit card bill to pay each month, a single statement to monitor for errors and fraud, and one rewards program to track. Plus, you won’t have to think about which card to pull out whenever you’re making a purchase.

Rather than canceling your other cards (which could negatively impact your credit score), you may want to just store them away in a secure place.

5. Knocking Down Debt

One of the most effective ways to reduce financial stress is to get rid of high interest debts.

Paying off even one sizable credit card or loan can not only ease worry, but can also reduce the number of financial obligations you have to deal with each month. It can also free up money that you can then put towards something else, whether that’s getting rid of other debts or something fun like a vacation.

Two common strategies for paying off debt are the debt snowball and debt avalanche method.

With the debt snowball method, you list your debts in order of size, then put any extra money you have towards the debt with the smallest balance, while paying the minimum on the others. When that debt is paid off, you tackle the next-smallest debt, and so on. Paying off debts in full can help you feel accomplished, simplify your life, and inspire you to continue crushing your debt.

With the debt avalanche method of paying off debt, you list your debts in order of interest rate, then focus on putting extra money towards the debt with the highest interest rate first, while paying the minimum on the rest. When that debt is paid off, you put extra money towards the debt with the next-highest interest rate. While it may take you longer to see progress on your loans, you’ll likely pay less money in interest over time using this method.

6. Putting Saving on Autopilot

The set-it-and-forget-it approach can be highly effective when it comes to saving money. For one reason, you don’t have to remember to transfer money from your checking to your savings each month. For another, the money will get whisked out of your checking account before you ever have a chance to spend it.

You can automate savings in just a few minutes by setting up a recurring transfer from your checking to your savings account for a set amount of money on the same day each month (perhaps the day after you paycheck clears).

Even if you can only afford to transfer a small amount each month, it can be worth automating this task. Since the savings will happen every month no matter what, your savings will gradually build over time.


💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

7. Focusing on Fewer Goals

It can be great to have financial goals. Many of us have plans to buy a home, put kids through college, and pay for our retirement. But if you set too many goals at one time, you can end up losing focus, and not making any progress on any of them.

A better approach can be to set just one or two goals to fully focus on at one time. Ideally, one should be saving for retirement, since the earlier you start saving for retirement, generally the easier it is to reach your goal.

The other goal might be paying off your credit card debt or student loans, saving for a down payment on a home, or putting money aside to help pay for your kids’ college education.

By focusing your energy on just one or two specific goals, you may be able to make real headway. Once you start seeing progress — or actually achieve the goal — you’ll likely be inspired to set, and accomplish, other goals.

The Takeaway

Simplifying your financial life may take a bit of legwork up front but, in the long run, it can help alleviate stress and also help you better plan for your financial future.

Strategies that can help you simplify your finances include paring down the number of accounts you have, crossing off debts, automating monthly tasks like paying bills and transferring money to savings, and focusing your efforts on just one or two financial goals at a time.

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


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

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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

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