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You just came into a cash windfall. You’re happy about this, but you aren’t exactly sure about what to do with it. Should you spend it? Save it? Invest it?

The answer will depend on the size of the windfall and your current financial situation and goals. Here are some ideas for things you can do with a financial windfall to ensure that you are handling it in the smartest way possible.

What Is a Financial Windfall

While there’s no one specific definition for a financial windfall, it typically means that you’ve received some unexpected money of a significant amount. For some people, a windfall could be a few hundred dollars; for others, it could be millions.

The key component of a windfall is the element of surprise — you may be surprised by receiving any money at all, the amount of the money, or both. Generally, a windfall isn’t money you’ve factored into your regular income and budget. This can make it a major plus, but it can also lead to some financial challenges, along with some major decisions to make.

Examples of Financial Windfalls

Financial windfalls can come from a variety of sources. Here are some common examples of windfalls:

•   Lottery or prize winnings

•   Employee bonus

•   Tax refund

•   Inheritance or life insurance payout

•   Major successes in investing

•   Profit from selling a property or business

•   Injury or lawsuit settlement

3 Tips to Help You Make the Most of Your Money Windfall

If you are fortunate enough to have a windfall land in your lap, you’ll need to decide if you’re going to spend, save, invest, donate the money, or some combination of the above. The following steps can help you come up with a plan that makes the most of your newfound cash.

•  Get professional advice: Depending on the size and source of your windfall, you might owe taxes on it and it might push you into a different tax bracket. Consulting with an accountant or financial planner can help you identify the implications.

•  Take it slow: While it’s exciting to have cash coming your way, it’s wise to take some time and reflect on how the money would be best spent versus deciding “Dinner’s on me!” for you and your 10 best pals to celebrate. For instance, could your windfall lower or wipe out some debt? Could it be invested? Don’t let the adrenaline rush drive you to make too quick a decision. Take some time to clarify your goals.

•  Think long-term: If you’ve received a sizable sum, it may be tempting to quit your day job to travel or take on a passion project. Again, it could be wise to seek financial counseling before you make that type of leap. What sounds like a major sum may not actually be enough to fully finance your dreams. It’s important to look at the financial implications of a major life change carefully.

Remember That Taxes May Be Due on Your Windfall

Depending on the source of your windfall, it may be subject to income taxes. Tax law regarding windfalls is complicated, however, so it’s a good idea to consult an accountant or other tax professional to make sure you understand how much your windfall is actually yours to keep.

Understanding Tax Implications Based on the Source of the Windfall

Whether or not you owe taxes on a windfall will depend on where your windfall is coming from. Here’s a look at some examples:

•   Inheritance: In general, any inheritance you receive does not need to be reported to the IRS. However, you may owe state taxes if the amount exceeds a certain threshold.

•   Life insurance payout: Proceeds you receive as a beneficiary of a life insurance policy typically aren’t taxable, but if the proceeds have accumulated interest, taxes may be due on that interest.

•   Lottery/prize winnings or large bonus: If your windfall is from a lottery, other prize, or large bonus, you are typically taxed at your ordinary income tax rate. This means you will pay taxes on your windfall based upon your tax bracket.

•   Sale of property or a business: Profits from selling real estate or a business are generally taxed at the long-term capital gains rate, depending how long you owned the asset.

•   A large cash gift: You typically do not have to pay taxes on a windfall that was given to you as a gift; the giver is responsible for paying any gift taxes.

What to Do With a $500 Windfall

Let’s say the amount of money you received was $500. While it isn’t a ton of money, it’s still significant enough that you should figure out what to do with it. Here are a few ideas for what to do with a small windfall.

1. Investing in Real Estate

Did you know that you can become a real estate investor with just $500? Real estate investment trusts (REITs) allow you to invest in real estate on a small scale. Similar to mutual funds, REITs are companies that own a mix of properties and typically pay dividends to investors. Although there is risk involved in investing in REITs, it might be a good way to get your feet wet if you’re interested in real estate investing.

2. Meeting With a Financial Advisor

Hiring a financial advisor to help you learn how to plan for your financial future might be a good use of this money. Financial advisor fees vary: Some charge a flat fee, some charge hourly, some are commission-based. If this professional will be managing a portfolio for you, they may charge 1% to 2% of the portfolio’s value.

3. Buying a New Wardrobe

You could refresh your wardrobe with your new supply of cash. Upgrading your clothes could give you the confidence to go after your professional goals. Or you might splurge on some clothes you’ve been eyeing that give you a self-esteem boost.

4. Traveling Somewhere Cheap

You might plan a weekend getaway or road trip for only $500. Throw in your credit card points or rewards you’ve accumulated to bump up your budget.

5. Investing in a Certificate of Deposit

Another thing you can do with a $500 financial windfall is put it into a certificate of deposit (CD). This is a type of savings account that holds a fixed amount of money for a set period of time and generally pays more than a regular savings account.

6. Getting Your Car Fixed

Have you been putting off car repairs because they’re too expensive? Now that you have $500, it might be time to invest in your vehicle so it’s less likely to break down when you’re on the road.

7. Buying Renter’s Insurance

If you’re a renter, your personal property is not covered under your landlord’s homeowners insurance policy. If you don’t have renter’s insurance, you might use your windfall to buy yourself some peace of mind. The average renter’s insurance cost in the U.S. is $148 per year, which means your windfall could insure your possessions for at least the next three years.

8. Purchasing a Life Insurance Policy

If your family depends on your income, life insurance helps protect them in the event that you pass away. The average cost of a life insurance policy is $26 per month. That means you could pay for the whole year up front with your $500 windfall. Typically, life insurance rates increase as you age and your risk of dying increases. So it’s likely to be less expensive to purchase life insurance while you’re young, rather than waiting until you feel like you can afford it.

9. Taking a Professional Development Class

While private colleges and universities might be too pricey, you may be able to find a class online or at your local community college for less than $500. Finding something that is relevant to your career may even help you move up the ladder at your job.

What to Do With a $1,000 Windfall

Did you receive a $1,000 financial windfall? Here are some ideas for how you might use this sudden influx of cash.

10. Getting Started on Your Emergency Fund

An emergency fund is a separate savings account that you can tap to cover or offset the expense of an unexpected expense or loss of income. If you haven’t started building your emergency fund, or it’s not as robust as it should be, your $1,000 windful could boost your safety net.

11. Hiring an Estate Planning Lawyer

Another important thing you could do with a $1,000 cash windfall is meet with an estate planning lawyer to write your will, establish a trust, and determine your power of attorney. You may feel some peace knowing your family will be protected and your assets will be distributed according to your wishes.

12. Opening a 529 Plan

A 529 plan offers a way to save for your child’s college education. With $1,000, you can get a nice head start on college savings. Your money will grow tax-free and if you withdraw the money for qualified educational expenses, you won’t pay any taxes on those withdrawals.

13. Doing Home Improvements

With $1,000, you could do a small home improvement project like replacing your curtains, painting a room or two, putting down a new kitchen floor, or sprucing up your backyard. If you do the work yourself, you may be able to stretch your financial windfall money even further.

14. Donating It

If there’s a nonprofit you’ve always wanted to support, you might consider using your $1,000 windfall to make a donation. Your money could make a big difference. Plus, you may also be able to deduct the contribution on your taxes (if you itemize).

15. Opening a High-Yield Savings Account

Savings accounts rates are averaging 0.42% APY as of December 16, 2024, according to the FDIC. A high-yield savings account, however, may pay 3.00% APY or higher. Plus, savings accounts are typically insured by the FDIC up to $250,000 per depositor, per insured bank, for each account ownership category, in the event of bank failure.

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

16. Saving for Retirement

If you have a 401(k) but haven’t contributed much so far, your windfall could help you increase your savings rate. Or, if you’re eligible to contribute to a traditional or Roth individual retirement account (IRA), you might open one with your $1,000 windfall to boost your retirement savings.

17. Investing in Your Side Hustle

To make money on your $1,000 financial windfall, you might use it to start a low-cost side hustle. Maybe you’re a freelance graphic designer but you need to buy some software to be able to do more detailed work. Or, perhaps you need to purchase a domain name and hire a developer to create a business website. With this initial investment, you may be able to bring in much more money and improve your finances.

What to Do With a $5,000 Windfall

You just got a cash windfall of $5,000. Now what? Here are some ideas.

18. Saving Up for a Down Payment

In some cases, you only need to put 3% to 5% down on a home. That means you could conceivably buy a $150,000 home using your $5,000 financial windfall money as your down payment. More realistically, you could use your windfall to add to money you’ve already saved for your down payment.

19. Paying Off Credit Card Debt

The average consumer credit card debt balance is $6,730. A $5,000 windfall could pay most of that bill off in one fell swoop and could save you a significant amount of money in interest.

20. Investing Via Robo-Advisors

Do you want to invest your $5,000 cash windfall, but you don’t know where to start? Robo advisors create a diversified investment portfolio based on your investment goals and the level of risk you’re willing to take.

21. Investing in Blue-Chip Stocks

You might also consider using your windfall to invest in blue-chip stocks. These stocks are from well-established and financially stable companies that typically pay dividends to investors.

22. Investing in Bonds

Though they carry some risks, bonds are considered relatively safe and stable investments. When you purchase a bond, you’re lending money to an entity like a government or corporation. In return, you receive the interest payments at regular intervals. At the end of the repayment period, you get your original investment amount back.

23. Taking a Vacation

With $5,000, you and your family could potentially take a great vacation within the U.S. For example, your windfall might be enough to fund an RV excursion, urban getaway, visit to a theme park, or a beach retreat. Check out sites like Expedia, Costco Travel, and Booking.com for deals.

What to Do With a $10,000+ Windfall

If you received a cash windfall of $10,000 or more (lucky you!), here are some things you could do with it.

24. Opening a Money Market Account

You could use your $10,000 to open a money market account, which typically earns a higher interest rate than a regular savings account.

25. Paying Off Student Loan Debt

The average federal student loan debt in the U.S. is $37,853 per borrower. If you have a $10,000 financial windfall, you could put a nice dent in your student loan balance.

26. Trying Peer-to-Peer Lending

Using a peer-to-peer lending platform, you could lend your financial windfall money to someone who is looking for a loan and potentially earn a good return. Just keep in mind that this type of lending involves risks.

27. Making Mortgage Payments

You could make a large principal-only payment toward your mortgage loan with a $10,000 cash windfall. This can help you pay off your loan off sooner and save a significant amount of interest. First, verify that there are no prepayment penalties tied to your loan.

28. Going to College

While $10,000 won’t cover a bachelor’s degree unless you also get grants or scholarships, you may be able to earn your associate’s degree at your local community college with your financial windfall money. Or it might cover several classes at a public university that could lead to career advancement.

29. Starting Your Business

Let’s say you want to do more than start a side hustle, and you’re ready to open a small business. A $10,000 windfall could help you get the ball rolling on your business without needing to borrow money. You might consult with a successful business owner in your industry for guidance on how best to allocate your money.

30. Increase Contributions to Your Retirement Account

This can help you build your nest egg, while also reducing your taxable income, which could help offset taxes owed on your windfall (if applicable).

31. Make a Move

If you’re looking to be closer to work or simply want to live in a quieter — or busier — location, a $10,000 financial windfall could be enough to cover the cost of hiring movers.

The Takeaway

Receiving a financial windfall opens up all kinds of possibilities. You might pay down debt, take a vacation, invest the funds, pursue higher education…or even do a little of each. Though it’s tempting to spend your windfall right away, it’s a good idea to step back and think through the wisest way to use your newfound cash. In the meantime, you might park the money in a high-yield savings account. This allows you to earn an above-average interest on your windfall but still keeps the money accessible.

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 amount of money is considered a windfall?

The amount that’s considered a windfall can vary from person to person. For some, it could be a few hundred dollars. For others, a windfall might be thousands or even millions of dollars.

What to do with a $50,000 windfall?

There are many ways to use a $50,000 windfall. You could pay down debt, put a down payment on a home, pump up your retirement account, start or add to a college savings account, do a home renovation, or use it as seed money to start a business.

What can you do with a $100K windfall?

With a $100,000 windfall, you might pay off your mortgage, put a down payment on a home, build your retirement or college savings fund, invest the money for long-term growth, or a combination of the above.

Should you save or invest a windfall?

It depends on your financial situation and goals. If you have high-interest debt, a good use of a windfall is to pay it off. Next, you might start or top off your emergency fund. Whether to save or invest the rest will depend on your goals. For short-term goals, like saving for a vacation, wedding, or new car, consider putting the funds in a high-yield savings account. For goals that are at least five years off (like retirement, buying a house, or a child’s college education) investing may be a better choice.

How can you avoid common mistakes with a windfall?

To avoid common mistakes with a windfall, it’s important to pause and make a plan for how to use the money, rather than spend impulsively. Smart ways to use a windfall include paying off high-interest debt, building an emergency fund, and investing for long-term goals like retirement or a child’s college education.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

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.
*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

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-Q125-090

A cash management account or CMA is a financial account offered by brokerage firms that combines some of the features of savings and checking accounts. Like a savings account, CMAs pay interest (often more than you would earn in a standard savings account). Like a checking account, CMAs provide access to checks and/or a debit card. In addition, CMAs are typically linked to brokerage accounts, making it easy to transfer funds you want to invest.

While CMAs can be convenient, they may also come with some potential downsides, such as monthly fees, minimums, and a lack of in-person banking options. And, you may be able to earn a higher interest rate elsewhere.

Is a CMA right for you? Our simple guide to cash management accounts can help you find out.

What Are Cash Management Accounts?

Let’s explore what a cash management account is exactly. A CMA or cash management account provides a solution for managing your cash flow and your money. The cash inside the account usually earns interest, so your money can grow over time. You also may have checking-writing capabilities, debit card access, or a combination of both.

Some of these nonbanking institutions charge low or no fees, another attractive aspect of using a cash management account. However, they typically make their money by charging fees for other services, such as investing, retirement planning, or financial planning services.

While traditional banking accounts have similar benefits, the biggest draw to a cash management account is that you can bank and invest with one company. This way, you’re not toggling back and forth between several companies or platforms to manage your money.

How Do Cash Management Accounts Work?

Now that you know what a CMA is in big-picture terms, let’s drill down on how they work. Cash management accounts are interest-earning accounts that offer a safe place to keep your cash. Since investment firms and robo-advisors are not banks, they don’t keep your money at their financial institution. Instead, they partner with several banks and spread your deposit out among them.

As with traditional bank accounts, account holders can deposit funds, withdraw funds, and transfer money. You also typically have online access to your account, making it easy to check on and manage your CMA.

In addition, CMAs typically earn interest like savings accounts and have checking account capabilities. Therefore, they can act as a way to merge these accounts into one. However, some CMAs may not have features of both accounts, so check with the institution to determine what features are available.

What Are the Pros of Cash Management Accounts?

Understanding the benefits of using a cash management account can help you determine if this is the right banking solution for your needs. With that in mind, here are several advantages of using a cash management account.

Convenience

The most significant pull for consumers to open a cash management account is that they can keep their investments and banking under one umbrella. Keeping everything in one place can simplify your money management efforts.

Traditional Banking Features

When you open a cash management account, you typically have access to traditional banking features like:

•   Direct deposit

•   Complementary ATM networks

•   Electronic bill pay

•   Third-party payment site access

But before you open an account, make sure you check with the institution about their banking services. This way you can ensure they have everything you need.

FDIC Insured

The Federal Deposit Insurance Corporation (FDIC) protects your banking deposits from losses up to $250,000 per depositor, per insured bank, for each account ownership category.

So, in the unlikely event that your bank should fail, you can recover your funds (up to the insured limit). While nonbanking firms can’t offer FDIC insurance directly, their partner banks can extend coverage. Since nonbanks spread funds across several partner banks, each can offer up to $250,000 of FDIC insurance per depositor.

💡 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.

What Are the Cons of a Cash Management Account?

CMAs also come with some potential downsides. Here are some points to keep in mind as you decide whether a CMA is right for you.

Lower Interest Rates

While these accounts do offer some earnings, you will often find better rates at online banks. If you are planning on parking a large sum of cash in an account, it can literally pay to explore your options elsewhere and see what annual percentage rates (APYs) are available for online savings and checking accounts. You may find a better place to park your short-term savings than a CMA.

Recommended: APY vs. Interest Rate: What’s the Difference?

Fewer Features

Cash management accounts may not offer all the conveniences that come with standard checking accounts, such as bill pay, and may not fully replace a checking account.

No Physical Branches

Many cash management accounts are offered by online brokerages and robo-advisors, which means you won’t have brick-and-mortar locations to visit. If you are the kind of person who prefers personal interaction, this may be a significant issue for you.

Cash Management Accounts vs Checking Accounts

While cash management accounts offer similar services and features to traditional bank accounts, you might wonder what the differences are. If we break down CMAs compared to checking accounts further, these features are worth noting.

•   Maintenance fees. Some CMAs don’t charge maintenance fees, but others may charge monthly fees routinely or when your balance dips below a certain threshold. This is also the case with traditional checking accounts.

•   Interest earning. Many cash management accounts pay interest, and rates are often better than what you could earn in a standard savings account. This gives CMAs an edge over regular checking accounts, which typically pay little or no interest.

•   Account integration. Investment firms and robo-advisors usually offer cash management accounts, as well as brokerage, or investment, accounts. You can usually link your CMA with your brokerage account, making it easy to move money and automate contributions. Traditional banks may also offer retirement and investment services. However, that’s not their primary business. Also, if you have your bank accounts and investment accounts under different roofs, there may be a time lag for transactions, which usually doesn’t happen with CMAs.

Considerations When Comparing Cash Management Accounts

If you’re thinking about opening a CMA, it’s a good idea to shop around and compare your options. Here are some things to keep in mind.

Customer Service

When you need an issue resolved with your money, it’s nice to know customer service is there to help. Check to make sure that the company you’re considering offers a robust customer service solution to assist you with all of your questions or concerns. For online firms, check out the hours that support is available and find out if you’ll be interacting with a human or an automated assistant.

Minimum Balance Requirement

CMAs can have minimum balance requirements to avoid fees and/or keep the account active. Therefore, you’ll want to determine these requirements in advance to see if you have the appropriate sum of cash to deposit.

Investment Management

Most of the institutions that offer cash management accounts offer investment services. If you’re looking to use their investment service, make sure you select a company you trust and feel comfortable with. You’ll also want to ensure the investments offered are suitable for your needs.

Is a Cash Management Account a Good Fit for You?

A CMA can be ideal for people who like to manage their investments and bank accounts under the same umbrella. It may make managing your money somewhat simpler and smoother.

But for those who feel a bit uncertain about using online institutions or mobile apps to complete their daily transactions, a traditional bank account may be a more viable solution. Also, if you would prefer to separate your investments and banking needs, a high-interest checking or savings account may make more sense that stashing your funds in a CMA.

The Takeaway

CMAs are interest-earning alternative solutions to traditional bank accounts like checking and saving accounts. Since investment firms usually offer CMAs, you can keep your investments and banking needs in one place, streamlining your money management efforts. As with most services, there are pros and cons to these accounts. Determining whether one is right for you will depend on your money management style and goals.

If you feel more comfortable with a savings and checking account held at a bank, SoFi offers a smart, money-savvy solution. Our online bank accounts, when opened with direct deposit, are fee-free and earn a competitive APY. Qualifying accounts can even access their paycheck up to two days early. We think it’s a great combination of convenience and money-growing features that you’ll love.

Ready to bank better? Come see what SoFi offers.

FAQ

What is the purpose of a cash management account?

Cash management accounts give consumers a way to earn interest and complete everyday banking transactions (like making purchases with a debit card and writing checks) while managing investments, all under one roof.

What type of account is cash management?

A cash management account is like a traditional bank account, except it’s offered by a non-banking firms, like an online investment firm or robo-advisor. You can complete transactions (direct deposit, withdrawals, check writing, etc.) and earn interest in the same way you would with a traditional checking or savings account.

Is a cash management account the same as a money market account?

No. While cash management accounts and money market accounts have similar features (like earning interest and providing access to debit cards and/or checks), they are not the same. Banks offer money market accounts, while nonbanks like brokerage firms and robo-advisors offer cash management accounts.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

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.
*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.

SOBNK-Q125-056

Road trips are a popular vacation idea, and there are plenty of ways to cut costs when taking to the open road. Whether you are heading to a national park or a local lake, on a wine-tasting getaway or just to hang with your college roommate, you can do a little bit of planning to bring down costs.

Learn how to minimize expenses on a road trip here.

1. Choose a Fuel-Efficient Car

If you have a choice of cars to take, you may want to go with one that is large enough to be comfortable but also gives you the best gas mileage. This is true whether you are using your own wheels or renting a car.

You can use FuelEconomy.gov’s Trip Calculator to determine which car will cost you the least in gas. This tool helps estimate fuel consumption and how much it will cost for a particular route using a specific car.

2. Drive at or Below the Speed Limit

This cautionary measure can help you save money in two ways. For one, you’ll be less likely to get pulled over and slapped with an expensive speeding ticket.

For another, observing the speed limit can actually reduce your gas consumption. In fact, according to the U.S. Department of Energy, every five miles you drive above 50 miles per hour is akin to paying an additional $0.27 per gallon.

3. Pack Your Car Wisely

You can also cut your gas costs by placing items inside the car or trunk rather than piling them on your roof. By reducing drag, this tactic can increase your fuel economy by 5% on highways according to one benchmark study.

4. Set a Road Trip Budget

When you first start talking about the road trip, you may want to roughly map out where you want to go, how long it’ll take to get there, and if you’ll need hotels or motels. From there, you can calculate the approximate cost of gas (FuelEconomy.gov can help) and tolls (try Tollsmart ), as well as food and fun.

Once you’ve established an overall budget for the trip, you start creating a travel fund.

A smart place to keep your fund is in a high-yield savings account, often found at online banks. These can help grow your money faster, thanks to favorable interest rates and no or low fees.

5. Bring Your Own Food and Supplies

Packing a cooler with water bottles, drinks, hand-held snacks, and sandwiches before leaving home is a proven frugal traveler trick. You can end up saving a sizable chunk of cash by not having to buy drinks and snacks at rest stops, vending machines, and drive-throughs.

You’ll also have a quick solution the next time someone in the car wants to pull over because they’re hungry.

6. Sign up for an Electronic Toll Account

The money-saving shift to electronic tolling is well underway. If you haven’t yet done so, getting a quick pass (or transponder) for your car can be a smart move. In New York, for example, drivers with EZ-Pass can save up to 75% on tolls.

7. Avoid Tolls Altogether

When your road trip isn’t on any set schedule, you may want to take the scenic route and completely avoid tolls. You can do this by setting your GPS app to “avoid tolls.”

If you’re in a location with pricey bridges and highways, your savings could really add up. You may want to make sure, however, that avoiding tolls doesn’t take you so far out of your way that you’re spending a lot more on gas.

8. Look for Hotels that Offer Free Breakfasts

If you’re comparing lodging options in a similar price and quality range, one way to save on hotel costs and on road trip expenses in general is to choose the hotel with a free breakfast.

Not only will you probably get a large, filling meal, but you might even be able to take a piece of fruit or cereal box as a snack for later on in the trip.

9. Pack Reusable Water Bottles for Everyone

You’ll no doubt get thirsty while driving and sightseeing, especially in summer, and buying water or drinks can put a major dent in your road trip budget.

Making sure everyone in the car has a large reusable water bottle (or two) to fill up at rest stops and in restaurants can help you avoid spending money on drinks, and also create less plastic waste.

10. Buy a National Park Pass

If you’re going to be road-tripping across the U.S. and visiting a few national parks, you may want to consider getting an America the Beautiful pass.

The pass (which costs $80 per year and $20 for seniors) covers entrance, standard amenity, and day use fees for a driver and all passengers in a personal vehicle (up to 4 adults) at more than 2,000 federal recreation sites.

Just remember that summer is primetime for many parks, from Yosemite in California to Acadia in Maine. If you need lodging, book early.

Recommended: How to Make Money Fast

11. Hit the Grocery Store

Once you’ve run out of your cooler meals and snacks, consider restocking at a local grocery store while en route so you don’t have to resort to fast food or a pricey local restaurant for the rest of your trip. That can be a good way to save on food costs.

This is also a good strategy if you’re going to be staying at a hotel for a few nights. Making good use of a hotel kitchenette and fridge can help you avoid having to eat out for every single meal.

12. Prebook Your Hotels

Spontaneity is great, but if you’re looking to save money on accommodations, it can be wiser to book ahead of time and stick to your plan. You can often secure a better rate by booking in advance (and online), than by showing up without a reservation or booking last minute.

13. Look Beyond Hotels

Your first thought when looking for roadside accommodation may be cheap hotels or motels. But you sometimes find a better deal (or a nicer option for the same price) using a home rental site, such as Airbnb, VRBO, or FlipKey, especially if you’re staying for more than one night.

When booking lodging, it can be smart to use a travel credit card or a cash back rewards credit card, since every swipe can help you earn points, miles, or cash back that you might apply to future trips.

14. Plan to Visit Free Attractions

Part of the fun of a road trip is to enjoy the journey and scenery while en route to your final destination.

To cut spending while still enjoying your travels, you may want to research free attractions, such as a hike, walk on a beach, or a free museum, on your route for times when you need to stretch and take a driving break.

You can also look for festivals and local events by checking out the online events calendar for the towns you’ll be visiting that day. You might also check out Meetup.com and see what kinds of local groups are gathering for experiences and outings.

15. Plan Gas Stops in Advance

Getting stuck in a big city with the tank close to empty can be costly (and driving in circles looking for a gas station when you’re en route to the beach is no fun either). To avoid overpriced gas, you may want to use a gas app like Gas Guru or GasBuddy, which can help you compare prices and find affordable gas no matter where you are. This hack is an easy way to lower your gas costs.

16. Set a Daily Spending Limit

You can use your overall budget to get a rough idea of how much you can spend on the road trip each day. This can help you avoid blowing the money you’ve saved, wherever you may keep your travel fund, before the end of the trip.

A spending plan can also let you know when you can splurge a bit and when you’ll have to reign it in with a meal, activity, or lodging. You may also want to set aside some of your budget for the unexpected, such as the car getting a flat and needing to be towed, or discovering the cheap hotel you planned to stay in is actually a total dump. Also factor in some summer road-trip treats: You’re likely to be stopping for ice cream here and there and maybe even a lobster roll.

17. Entertain the Kids on the Cheap

Road trips can help you afford a family vacation since you sidestep pricey plane tickets. But remember that kids have a tendency to get bored, tired, and antsy on a road trip. To avoid giving in to impulse toy purchases, you may want to bring along their favorite toys and also pick up a variety of new ones at the dollar store before you leave.

Good choices include coloring books and games they can play in the car that won’t create a mess. You might also consider borrowing audio books from the library to give yourself an hour or so of peace and quiet.

18. Search Online for Local Coupons and Passes

It can be worthwhile to research online coupons and discount codes for local attractions and restaurants at some of your scheduled stops.

Consider checking Groupon or LivingSocial for deals and steals. Sometimes booking online ahead of time saves you money, and it’ll give you a reason to try to reach a specific destination by a certain day.

19. Save on Alcohol

Sipping a cold beer or glass of wine at a local bar at the end of your long drive might sound like the perfect way to unwind.

But alcohol costs can quickly add up on a road trip vacation. Consider buying a few local beers or a small bottle of wine that’s native to that area to enjoy in your hotel room. You’ll save money on tipping too.

20. Volunteer at a Festival

Yes, you read that correctly. Some festivals and special events offer discounts or free admission to volunteers. You can look up events taking place in the town you’ll be visiting and reach out to the event organizer to see if they need help. Summer is full of events like these, from concerts to craft fairs to food festivals.

21. Sign up for a AAA Membership

An auto club like AAA can save you time, money, and hassle should you run into car trouble during your trip. What’s more, a membership (often starting at around $6 a month) gives you access to discounts at loads of hotels, restaurants, and many retailers nationwide.

22. Travel During the Off-Season

Yes, summer can be the most welcoming time of the year to hop behind the wheel. But visiting national parks when kids are back in school can often help save money on lodging and activities. Planning a road trip to a destination like Disney World or Disneyland? You’ll likely find better deals if it’s not during a spring break or other school vacation.

You can often also save money by visiting warm weather locations during “shoulder seasons.” This is the period in between a destination’s low and high seasons of tourism, when prices for hotels tend to be lower, and crowds tend to be smaller, at popular attractions.

23. Do Some Camping

Outdoorsy road trippers might enjoy setting up a tent at a free or low-cost public campsite. You can find out more on the Bureau of Land Management site.

This can end up saving you a lot of money on hotel costs, provided you don’t go out and buy a lot of expensive camping equipment.

If you don’t have any camping gear, you may want to consider renting equipment from an outdoor specialty store or asking a friend who regularly goes camping if you can borrow their equipment. As noted above, summer can be prime time for basking in some of America’s natural beauty, so book your campsite early.

24. Eat Out for Lunch Instead of Dinner

If there are special restaurants you want to try without breaking the bank, consider going there for lunch. You might get a slightly smaller portion than you would if you ordered it off the dinner menu, but you’ll likely save on dining out.

25. Take Advantage of Loyalty Programs

Booking with the same hotel chain as often as possible and signing up for their member loyalty (or “points”) program may net you a free night after a few stays.

Travel booking services, such as Expedia, Travelocity, or Hotels.com, may also offer discounted rates and free nights for loyal customers.

Recommended: 50/30/20 Budget Calculator

The Takeaway

Planning a summer vacation? A car trip might sound much more affordable than traveling by plane. However, gas, food, and accommodations can add up.
One of the best ways to cut road trip expenses is to plan out your trip and research deals, coupons, and discounts ahead of time. Packing wisely and loading up on drinks, snacks, toys, and activities can also help cut costs once you’re out on the road. It’s part of optimizing your financial wellness.

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

How can I make road trips more affordable?

Some ways to make road trips more affordable include bringing your own snacks, driving at or under the speed limit, and booking hotels or motels ahead of time.

How can I save money when traveling by car?

You can save money when traveling by car by using a gas card and taking other steps that can help you save on tolls; using electronic tolling or avoiding tolls; and bringing snacks and drinks with you vs. buying them on the road.

How can I spend time when on a road trip?

Ways to spend time on a road trip include going to local and national parks, looking for activities at a discount on Groupon or LivingSocial, and checking out any interesting gatherings that might be happening on Meetup.com.

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

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

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SOBNK-Q125-070

REIT is the abbreviation for Real Estate Investment Trust, a type of company that owns or operates properties that generate income. Investors can buy shares of REITs as a way of investing in different parts of the real estate market, and there are pluses and minuses to this option.

While developing and operating a real estate venture is out of the realm of possibility for some, REITs make it possible for people to become investors in large-scale construction or other real estate projects.

With a REIT, an investor buys into a piece of a real estate venture, not the whole thing. Thus there’s less responsibility and pressure on the shareholder, when compared to purchasing an investment property. But there is also less control, and most REITs come with specific risks.

What Are REITs?

When a person invests in a REIT, they’re investing in a real estate company that owns and operates properties that range from office complexes and warehouses to apartment buildings and more. REITs offer a way for someone to add real estate investments to their portfolio, without actually developing or managing any property.

Many, but not all, REITs are registered with the SEC (Securities and Exchange Commission) and can be found on the stock market where they’re publicly traded. Investors can also buy REITs that are registered with the SEC but are not publicly traded.

Non-traded REITs (aka, REITs that are not publicly traded) can’t be found on Nasdaq or the stock exchange. They’re traded on the secondary market between brokers which can make trading them a bit more challenging. To put it simply, this class of REITs has a whole different list of risks specific to its type of investing.

Non-traded REITs make for some pretty advanced investing, and for this reason, the rest of this article will discuss publicly traded REITs.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

Types of REITs

Real Estate Investment Trusts broadly fall into two categories:

•   Mortgage REITs. These REITs can specialize in commercial or residential, or a mix of both. When an investor purchases Mortgage REITs, they’re investing in mortgage and mortgage-backed securities that in turn invest in commercial and residential projects. Think of it as taking a step back from directly investing in real estate.

•   Equity REITs. These REITs often mean someone’s investing in a specific type of property. There are diversified equity REITs, but there are are specialized ones, including:

◦   Apartment and lodging

◦   Healthcare

◦   Hotels

◦   Offices

◦   Self-storage

◦   Retail

💡 If you’re interest in REITs, be sure to check out: What Are Alternative Investments?

Pros of Investing in REITs

Investing in REITs can have several benefits, such as:

•   Diversification. A diverse portfolio can reduce an investor’s risk because money is spread across different assets and industries. Investing in a REIT can help diversify a person’s investment portfolio. REITs aren’t stocks, bonds, or money markets, but a class unto their own.

•   Dividends. Legally, REITs are required by law to pay at least 90% of their income in dividends. The REIT’s management can decide to pay out more than 90%, but they can’t drop below that percentage. Earning consistent dividends can be a compelling reason for investors to get involved with REITs.

•   Zero corporate tax. Hand in hand with the 90% payout rule, REITs get a significant tax advantage — they don’t have to pay a corporate tax. To put it in perspective, many dividend stocks pay taxes twice; once corporately, and again for the individual. Not having to pay a corporate tax can mean a higher payout for investors.

•   Tangibility. Unlike other investments, REITs are investments in physical pieces of property. Those tangible assets can increase in value over time. Being able to “see” an investment can also put some people at ease — it’s not simply a piece of paper or a slice of a company.

•   Liquidity. Compared to buying an investment property, investing in REITs is relatively liquid. It takes much less time to buy and sell a REIT than it does a rental property. Selling REITs takes the lick of a button, no FOR SALE sign required.

Compared to other real estate investment opportunities, REITs are relatively simple to invest in and don’t require some of the legwork an investment property would take.

Cons of Investing in REITs

No investment is risk-free, REITS included. Here’s what investors should keep in mind before diving into REITs:

•   Taxes on dividends. REITs don’t have to pay a corporate tax, but the downside is that REIT dividends are typically taxed at a higher rate than other investments. Oftentimes, dividends are taxed at the same rate as long-term capital gains, which for many people, is generally lower than the rate at which their regular income is taxed.

However, dividends paid from REITs don’t usually qualify for the capital gains rate. It’s more common that dividends from REITs are taxed at the same rate as a person’s ordinary income.

•   Sensitive to interest rates. Investments are influenced by a variety of factors, but REITs can be hypersensitive to changes in interest rates. Rising interest rates can spell trouble for the price of REIT stocks (also known as interest rate risk). Generally, the value of REITs is inversely tied to the Treasury yield — so when the Treasury yield rises, the value of REITs are likely to fall.

•   Value can be influenced by trends. Unlike other investments, REITs can fall prey to risks associated specifically with the property. For example, if a person invests in a REIT that’s specifically a portfolio of frozen yogurt shops in strip malls, they could see their investment take a hit if frozen yogurt or strip malls fall out of favor.

While investments suffer from trends, REITs can be influenced by smaller trends, specific to the location or property type, that could be harder for an investor to notice.

•   Plan for a long-term investment. Generally, REITs are better suited for long-term investments, which can typically be thought of as those longer than five years. REITs are influenced by micro-changes in interest rates and other trends that can make them riskier for a short-term financial goal.

💡 Quick Tip: Distributing your money across a range of assets — also known as diversification — can be beneficial for long-term investors. When you put your eggs in many baskets, it may be beneficial if a single asset class goes down.

Are REITs a Risky Investment?

No investment is free of risk, and REITs come with risks and rewards specific to them. As mentioned above, they’re generally more sensitive to fluctuations in interest rates, which have an inverse influence on their value.

Additionally, some REITs are riskier than others, and some are better suited to withstand economic declines than others. For example, a REIT in the healthcare or hospital space could be more recession-proof than a REIT with properties in retail or luxury hotels. This is because people will continue using real estate associated with healthcare spaces regardless of an economic recession, while luxury real estate may not experience continued demands during times of economic hardship.

Risks aside, REITs do pay dividends, which can be appealing to investors. While REITS are not without risk, they can be a strong part of an investor’s portfolio.

Investing in REITs

Investing in publicly traded REITS is as simple as purchasing stock in the market — simply purchase shares through a broker. Investors can also purchase REITs in a mutual fund.

Investing in a non-traded REIT is a little different. Investors will have to work with a broker that is part of the non-traded REITs offering. Not any old broker can help an investor get involved in non-traded REITs. A potential drawback of purchasing non-traded REITs are the high up-front fees. Investors can expect to pay fees, which include commission and fees, between 9 and 10% of the entire investment.

The Takeaway

Investing in REITs can be a worthwhile sector to add to your portfolio’s allocation. They carry risks, but also benefits that might make them a great addition to your overall plan.

After all, REITs allow investors to partake of specific niches within the real estate market, which may provide certain opportunities. But owing to the types of properties REITs own, there are inevitably risks associated with these companies — and they aren’t always tied to familiar types of market risk.

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