You may have heard that you should spend three months’ salary on an engagement ring. But that rule of thumb (formulated and advertised by the diamond industry) is now considered pretty outdated.
Instead, it can be a good idea to consider not only your income, but also your savings, current debt, living expenses, partner’s preferences, other costs involved in planning the wedding, and (bottom line) what you feel comfortable spending.
How you plan to pay for the ring can also impact how much you can afford to pay for it. Options include saving up and paying cash, using a credit card, financing the ring through the jeweler, or using a personal loan. And, each payment avenue has its pros and cons.
What follows are some guidelines that can help you figure out how much you should spend on an engagement ring, along with options for covering the cost.
The Average Cost of an Engagement Ring
According to The Knot’s 2022 Jewelry and Engagement Study, the average cost of an engagement ring is around $6,000.
While that number may represent the average, the amount couples actually spend on a ring varies widely. In The Knot’s study, roughly one-third of respondents spent between $1,000 to $4,000 on their engagement ring, and 8% shelled out less than $1,000.
Why do rings vary so much in price? The cost of an engagement ring depends on a number of factors, including the size and quality of the stone, where the gem was sourced, how the gem is set, and the type of metal chosen (such as yellow gold, white gold, or platinum). There may also be markups that come along with a popular brand name.
Diamond engagement rings, sourced from a mine, tend to be the most expensive choice. But there are many other, less costly options, such as lab-grown diamonds, moissanite (a lab-grown gem that looks like a diamond), and semi-precious gemstones (such as tourmaline, morganite, and aquamarine).
Whether you’re in the market for a large, eye-catching dazzler or a more dainty design, the good news is that these days there are ways to accomplish almost any look for a range of price points.
While paying in cash can be the simplest (and often the cheapest) option, it may not be feasible for all couples. Below are some other payment options that you may want to consider, along with their pros, cons, and potential costs.
Financing an Engagement Ring Through Your Jeweler
Many jewelers offer financing options, but just because you’re buying from a jeweler does not mean you have to use the financing they offer. It can be a good idea to take note of the following:
• Promotional offers Some jewelers offer a 0% introductory interest rate during a set period of time. But after that period of time, interest rates may be very high.
• Down payment requirements Some jewelers may require a certain percentage down payment prior to financing.
Financing through a jeweler directly may make sense if you’re confident you can pay back the loan prior to the end of the promotional period. As with any loan, it’s likely that there will be a credit check prior to being approved for financing.
Buying an Engagement Ring With a Credit Card
Putting a large purchase like an engagement ring on your credit card can be a simple solution at the moment, but may become a financial headache in the future. Here are some things you may want to consider before getting out the plastic.
• Interest rate If you put the engagement ring on a card with a relatively high interest rate and don’t pay it off right away, the ring will end up becoming significantly more expensive over time. Also, keep in mind that many credit cards have a variable interest rate, which means the interest rate at the time of purchase could go up.
• Credit-utilization ratio A large purchase like an engagement ring can mean using a significant percentage of credit available on your card. Having a high credit-utilization ratio may negatively affect your credit score.
• Rewards and protections Some buyers like putting large purchases on credit cards because of the consumer protections offered by the card. They also may want to take advantage of the rewards offered by the credit card company. Those rewards, however, may only be worth it if you can pay the amount back in full at the end of the billing cycle or during a 0% interest promo rate.
Using a Personal Loan to Finance an Engagement Ring
A personal loan is another avenue for engagement ring funding. A personal loan from a bank, credit union, or online lender may have a lower interest rate than a jeweler financing program. Personal loans also typically have significantly lower interest rates than credit cards.
A personal loan also works differently than jeweler financing and credit cards. With a personal loan, you’ll get the money in your bank account and can then pay the jeweler as though you were paying in cash. You then pay back the loan (plus interest) in monthly amounts set out in the loan agreement.
Here are some things you may want to consider before using a personal loan to pay for an engagement ring.
• Interest rate In many cases, a personal loan interest rate is fixed, meaning it doesn’t change after the agreement has been signed. This means that you know exactly how much you will need to pay back for the length of the loan.
• Loan terms You may have an option to pick the length of the loan. Shorter loans may mean you’re paying less interest over time but have larger monthly payments.
• Loan costs There may be fees associated with the loan, including an origination fee when the loan begins and a prepayment penalty if you pay off the loan before the end of the agreed-upon term.
• “What if” scenarios Some lenders provide temporary deferment for people facing financial hardship, such as a job loss.
Spending three months’ salary for an engagement ring is a long-standing tradition, but these days there is no one-size-fits-all formula for how much you should spend on an engagement ring. Ultimately, it’s a personal decision and will depend on your current and predicted income, current debt, expenses, savings, and preference.
If paying for an engagement ring upfront in cash isn’t feasible, you may want to look into different financing options and compare their pros, cons, and costs.
Your jeweler may offer financing, for example. Or, you may be able to take advantage of a credit card that has a 0% or low introductory interest rate and pay the balance off before the rate goes up.
Another option is to take out a personal loan. You may be able to find one that offers a more competitive interest rate than other ring financing options. You might also be able to fold in other upcoming costs as part of a wedding loan.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
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You want to become a homeowner but aren’t sure how you’re going to save up for your down payment. Typically, you’re going to need at least 3% to 5% for a down payment for a conventional mortgage, or 20% on a loan that doesn’t require private mortgage insurance.
Fortunately, there are a number of methods you can use to stash away money for your future home. Here are some of the best ways to save for a house and get one step closer to your dream.
1. Creating a Budget
Living on a budget may not be easy, but in the long run it can help you save money to put toward a home purchase. Creating a budget to track where your money is going is a good first step in a house savings plan.
Some effective ways to do this are recording expenses in a spreadsheet or using a budgeting app to determine your spending practices and identify where changes can be made to meet your savings goal.
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2. Using Cash Envelopes
The theory behind this method is that it may be harder to part with cash than it is to swipe a debit or credit card. The cash envelope budgeting method involves distributing cash each month (or pay period) into envelopes based on categories you establish. When you’re out of cash for each category, you stop spending.
3. Deleting Your Stored Cards
Do you store your payment information on Amazon or other e-commerce stores? If so, it’s time to consider deleting them from each store or from your browser settings. If you have to manually input your card each time you want to make a purchase, you may just stop spending so much money online.
4. Downsizing Your Life
Another one of the tips for saving for a house involves downsizing your life. This could mean moving to a smaller rental or to a more affordable area of town. Just keep in mind that there is always a flip side to downsizing. For instance, your smaller apartment may not include parking, so you might be taking on an expense you didn’t have before. Moving to a different part of town might mean spending more on transportation costs getting to work each day. It’s a good idea to weigh the pros and cons before making any big decisions.
5. Setting Up Automatic Transfers
Reaching your savings goals might happen faster by setting up automatic transfers from checking account to savings account each time you’re paid. If your paycheck is direct-deposited, you may also be able to split the deposit into more than one account, on a percentage or dollar-amount basis.
6. Postponing Vacation
This method can reap plenty of savings if your usual vacation is a costly one. Instead of taking a big trip, a staycation may be entertaining and less expensive. Check out your local newspaper’s website to find free activities and events in your area. Art museums sometimes offer free admission days, and area nature trails are generally free and can be a good way to have fun and get exercise in one fell swoop. Now is the time to be creative since you’re working on your house savings plan.
7. Tackling Your Debt
If you get 4.50% APY in your high-yield savings account, but you carry a credit card balance with an interest rate of 23.99%, it may make more sense to put your money towards your debt right now rather than savings.
8. Eating at Home
Dining out is expensive. The average American household spends more than $3,000 per year on eating out. By skipping the takeout and restaurants and cooking your meals at home, you can add that money to your house savings plan.
9. Making Your Own Coffee
It’s a cliche, but it’s true: If you skip the lattes, you could boost your savings. The average American spends $92 per month on coffee, which adds up to about $1,100 per year. Purchasing a coffee maker and brewing your own cup of joe as opposed to hitting up a coffee shop every day will likely improve your home savings plan.
10. Using Coupons at the Grocery Store
Looking for coupons for items you normally buy anyway can trim your grocery bill. Coupons can be found on coupon websites and on brands’ websites.
Just because you want something doesn’t mean you need to have it right away. Waiting to buy things when they go on sale is another one of the best tips for saving for a house. Along with looking at stores’ advertised sales, you could always create a Google alert to find out when things go on sale by typing in your favorite stores’ names + sales on Google Alerts.
12. Using Promo Codes
Promo codes are like coupons for online purchases. Browser extensions that search the web for deals can bring those promo codes to you and save you precious search time and effort.
13. Cutting Out Cable
Cable television can be a major monthly expense for some households, sometimes hundreds of dollars every month. One of the best ways to save is to cut the cord, switch to streaming services, and potentially pay much less per month on your favorite entertainment by saving on streaming services.
14. Canceling Your Subscriptions
You may be spending money on monthly subscriptions without realizing how much. Canceling subscriptions to things like lifestyle boxes you aren’t using anymore or magazines you don’t read can add up to significant savings.
15. Making the Most of the Library
The local library is a fantastic resource. You can borrow books, magazines, and movies instead of buying them, and some libraries even offer access to free audiobooks. Libraries are funded by taxes, so you’re probably already contributing to this resource—there’s little reason to pay twice for items it provides as a public service.
16. Canceling Your Gym Membership
Gym memberships can be pricey, but exercise is not. Using free, online workout videos and things in your home as exercise equipment (e.g., stepping on your stairs, doing wall or table pushups, or using a chair for barre exercises), or walking around your neighborhood can save money over a gym membership.
17. Shopping Around for Insurance
You may be overpaying for insurance. Comparing rates and getting different quotes for your car, renter’s, pet, health, and other types of insurance can ensure you’re getting the best deal possible.
18. Steering Clear of Checking Account Fees
Is your bank charging you a monthly maintenance fee just to keep your account open? If so, it might be worth looking into switching banks or asking your bank how you can avoid these fees. For example, if you have a direct deposit into the account or maintain a minimum daily account balance, you may be eligible for a fee-free account.
19. Selling Your Stuff
Do you have things you never use anymore? Could they fetch some cash? Holding a garage sale or selling your stuff online might net a few dollars to add to your house savings plan. You’ll probably want to buy new things for your new home anyway, and selling your old things will allow you to save up.
20. Asking Your Boss for a Raise
During your annual performance review, consider asking for a raise, highlighting your accomplishments and why you deserve more money. Be specific about improvements you’ve made to the company by backing up your accomplishments with data.
21. Switching to a Better Job
If you aren’t making enough money in your current position, then consider switching to a higher-paying job. It’s a good idea to keep your current job until you find a new one, though.
22. Taking on a Side Hustle
If you have the time and energy, earning extra money on nights and weekends with a side hustle might be an option. For instance, you could start a dropshipping business, take up freelancing, or do affiliate marketing.
23. Signing Up for a Travel Rewards Credit Card
If you need to travel or you are still planning a vacation, using a travel rewards credit card may be a good idea. These cards offer certain rewards for different categories such as travel, gas, and dining out, and allow you to put your rewards towards flights, hotels, rental cars, and more. Plus, many of them offer other ways to save, such as providing you with rental car and baggage delay insurance or no foreign transaction fees.
With a cash-back credit card, you can earn cash rewards every time you spend. Putting that cash back toward a statement credit or bank transfer will help accelerate your savings.
25. Renting Your Spare Room
If you have an extra room in your apartment that you aren’t using, you could get a roommate or list it on a rental site to reduce your overall living expenses. Just make sure that you get permission from your landlord before inviting anyone else to move in.
26. Renting Out Your Storage Space
Another one of the best ways to save for a house is to rent out your unused storage space on a peer-to-peer site. You could generate income without having to do much work at all, and you won’t have to live with someone else—just their stuff.
27. Making Your House Savings Plan Known
Your Aunt Mildred may always get you boxes of chocolates for your birthday, and your dad might give you gift cards for Amazon. But letting your family and friends know you’re trying to save for a home might plant the seed for them to give you cash instead. If you’re getting married, this is a time to tell people about your plans so that instead of registry gifts, they might give you cash for your future home.
28. Opening a High-Yield Savings Account
Putting your money into a regular savings account may not result in much of a return. However, putting money in a high yield savings account may net more interest and get you closer to reaching your savings goals. A high-yield savings account typically offers 20 to 25 times the national average of a typical savings account.
If you’ve been doing your taxes on your own every year, you may have missed potential tax savings you might be eligible for. A tax professional may be able to maximize your savings, possibly resulting in a larger refund, or minimize taxes you owe.
30. Saving Your Tax Refund
If you get a tax refund, consider saving it instead of spending it. The money can be a nice addition to your down payment, possibly even earning interest in high-yield savings account until you need it.
31. Changing Your Tax Withholding
Among the best ways to save for a house is by keeping more money from your paycheck. If your withholding is too high, the IRS is essentially holding your money for you all year round. Instead of getting a large tax refund, keeping your money now and investing it in an interest-bearing account will help you save up for your home.
The Takeaway
Saving for a house takes some time and effort, but there are many different ways to do it. For instance, by eating out less, you could potentially save thousands of dollars a year. Launching a side hustle could increase your income. And opening a high-yield savings account, which typically offers considerably higher interest rates than a traditional savings account, could also help your money grow — and help you achieve your dream of home ownership.
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.
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Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
4.00% APY
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.
If you’re buying a new car or a used one, you will likely face the decision of whether or not to purchase an extended warranty.
An extended warranty typically covers the cost of certain repairs after the manufacturer’s standard warranty (which usually lasts three years or 36,000 miles, whichever comes first) expires.
These policies can help you breathe a little easier, knowing that if your vehicle needs a pricey repair in the future, some or all of the cost could be covered.
On the other hand, an extended warranty can be expensive in and of itself and usually don’t cover every possible repair. So it could wind up being a big expense that doesn’t really pay off.
In this guide to extended car warranties, you’ll learn about what these policies do, their pros and cons, and whether one might (or might not) make sense for you.
What is an Extended Car Warranty?
When buying a new car, it likely comes with a manufacturer’s warranty. An extended warranty is an optional plan you can buy to help you pay for the cost of certain repairs your vehicle may need while you own it, after that original warranty expires. You may be able to get an extended warranty when buying a new or used car (the latter may depend on whether the policy is transferable; more on that in a minute.)
• Extended car warranties, also called extended service contracts, typically cover the price of major repairs or replacements (with exclusions) for a certain number of years or number of miles.
• The extended warranty usually begins when the manufacturer’s warranty expires, but sometimes the two overlap.
• While these plans are often offered at the point of sale, you can typically purchase them any time until the original manufacturer’s warranty expires.
• Extended warranties are also offered by third-party vendors.
If you’re interested in getting an extended car warranty for a new or leased car, it can be worth going online to compare policies from independent providers to see exactly what each one covers, what’s excluded, and how much it costs. This can help you decide which warranty would work best for you and whether it is worth getting.
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What Does an Extended Car Warranty Cover?
Just as you may wonder, “What does car insurance cover?” you may be curious to know, “What does an extended car warranty cover?” Exactly what the policy covers will vary with every provider and the type of warranty you choose.
The only way to know for sure is to carefully read the extended warranty policy agreement, but here are some general rules of thumb.
What It Covers
Extended warranties typically cover the major mechanical parts of your car, such as:
• Engine
• Transmission
• Steering
• Suspension
• Clutch
• Air-conditioning
• Electrical systems, including in-car audio and navigation systems.
So if your engine blows or oil starts leaking, it will likely be covered. Coverage may not be 100%, however, and you may have to pay a deductible before coverage kicks in.
Some policies also offer add-ons like 24/7 roadside assistance, rental car reimbursement, trip interruption service, and tire protection.
What It Doesn’t Cover
Generally, extended warranties won’t cover routine maintenance or damage caused by normal wear and tear, such as:
• Oil changes
• Replacing the timing belt (unless it fails before the recommended replacement time)
• New tires
• New brakes
• Windshield wipers.
If an item isn’t listed in the policy, you can assume it’s not covered.
How Much Does An Extended Car Warranty Cost?
Pricing will vary depending on the type of vehicle, what the plan covers, what the deductible is, and the length of the contract. The upfront cost of the warranty can range from $1,000 to $3,000 or more. If you’ve been saving up for a new car, that can be a significant additional expense.
If you purchase a car warranty from a dealer and include it in your financing, you are likely also going to pay interest, which will increase the total cost of the warranty.
You might have to pay a deductible every time you submit a claim, plus kick in money for a portion of the bill.
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.
Pros and Cons of Extended Car Warranties
Whether you should get an extended car warranty or not is a personal decision. It will depend on how reliable the car is and, if you’re buying a used car, how old the car is. It will also depend on how well you would be able to manage if your car encountered a problem that will be costly to fix.
Here are some pros and cons you may want to consider when making the decision.
Pros of an Extended Car Warranty
First, the potential upsides of an extended car warranty.
• You may save money. If your car needs a very costly repair that’s covered under your extended warranty, you could save money. Instead of paying the entire bill out of pocket, you’d only be responsible for covering the deductible (if you have one) and then the warranty provider would pay for all or most of the rest.
• It provides peace of mind. If you’re worried about how you would cover a car repair bill, having an extended warranty can make you feel less money stress over something going wrong with your car. If your plan also incorporates roadside assistance, you won’t have to worry about breaking down on the road.
• It can make your car more attractive to a future buyer. If you plan to sell your car down the road, a transferable warranty can make your car more appealing to prospective buyers.
Con of an Extended Car Warranty
Now, some of the downsides of extended car warranties to consider.
• You may never use it. Many people who purchase an extended car warranty don’t wind up using it. And if they do, the cost of the repairs they need may be less than the cost of the warranty.
• There may be overlap. If the coverage period of the extended warranty overlaps with the manufacturer’s warranty, you may end up paying for coverage you’re already getting at no cost.
• Exclusions and limitations. Every contract comes with fine print that specifies how you can use the warranty. For example, the provider might deny coverage for a problem caused by normal wear and tear or reduce the payout based on your car’s depreciation. You may also be required to take the car to certain auto repair shops to be covered.
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Are Extended Car Warranties Worth It to You?
If you are trying to decide whether a car warranty is worth it, here are a few times it may be a good investment.
1. When Your Car Is Unreliable
If you were to buy a car you were leasing and you know it tends to have a certain kind of issue (maybe the A/C is temperamental), then an extended warranty might be a good idea.
2. When You Are Worried About Getting a Big Repair Bill
If you know that you couldn’t handle a large repair bill if you were to receive one, it might be wise to get an extended car warranty. Yes, it will cost you, but it could help you avoid incurring high-interest credit card debt at an inopportune time.
3. When You Are Planning to Keep Your Car for a Long Time
Perhaps you are planning on selling your vehicle and then buying or leasing a car in the next year or two. In that case, it might not be worth it to purchase an extended car warranty.
However, if you are in it for the long haul, so to speak, you might benefit from an extended warranty. Over the years, repairs can inevitably crop up. This kind of policy might help you organize your bills better and afford to pay them.
One point to note: With an extended car warranty, it may be especially important to keep up with the cost of car maintenance. Not maintaining your car properly could lead to the insurance becoming void.
5 Tips for Choosing an Extended Car Warranty
If you decide an extended warranty makes sense for you, it’s a good idea to look at the policy contract closely — this is where you’ll find the fine print that spells out all the rules and exceptions — and not just the glossy brochure or the online advertising.
If the seller won’t show you this info before you sign on the dotted line, it can be wise to take your business elsewhere.
Here are some things you may want to look for in a contract before you sign.
1. Check the Deductible
Look at the deductible: You might have to pay $100 or more out-of-pocket every time you get a repair, before the coverage kicks in. It’s wise to know what you are signing up for.
2. Understand Whether the Policy Is Transferable
This is a consideration if you are thinking of selling your car down in the future. Typically, these contracts aren’t transferable if you sell to a dealer. So if you are thinking you might want to offload your vehicle before too long, definitely weigh this factor.
3. Know How the Service Contract Pays Out
In some cases, you may have to foot the bill and then file a claim to get reimbursed. With this scenario, it’s possible that after you pay for a repair, the claim can be rejected. If this feels like a challenging prospect, you may want to review a variety of extended warranties and see if there is one (or some) that offer a better fit.
4. Delve into the Exclusions and Requirements
You will need to read the fine print to find out what repairs are and aren’t covered and other limitations or restrictions. If, say, you have a particular concern (such as the example above, with a car that has temperamental air conditioning), you will want to make sure you are covered.
5. Check Where You Can Go for Repairs
Manufacturer-backed contracts typically require that you go to a dealer. Third-party vendors may have restrictions on where you can take your vehicle, or they may let you choose the repair shop. It’s wise to see what options are available and which extended car warranty best suits your needs.
Typically, you will have a choice between an extended car warranty from the original equipment manufacturer (or OEM) and one that comes from a third party.
The OEM will be the car brand, such as Toyota or Ford? What exactly is a third-party extended car warranty? It means that a company that is not the car brand is offering you this policy. It might be an insurance or a warranty company.
Third-party policies are similar to and possibly less expensive than OEM ones, but look carefully at these points. Third-party coverage can be more restrictive and limited:
• Are there limitations regarding what is covered?
• Do you have your choice of where your car will be repaired, or will the policy dictate that?
• Does the policy specify that OEM parts must be used, or could any type be used?
• What is the deductible?
• Will you have to pay for repairs out of pocket and then be reimbursed?
By sizing up these factors, you can find a policy that suits you best.
An extended warranty could add thousands of dollars to the purchase of a car but can, in some circumstances, offer additional protection that makes it a wise buy. However, your circumstances will play a key role in whether an extended car warranty is worth it.
If you would have trouble covering the cost of a major repair and/or worrying about car expenses keeps you up at night, the cost of one of these contracts might be worth the peace of mind it can bring.
If you’re buying a vehicle with a reliable track record, however, it might make sense to skip the warranty and, instead, set aside the money you’d spend on it, and then use the funds for needed repairs.
If you don’t end up using all of it for your car, you can keep saving it or use it for something else.
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
Do you really need a car warranty?
Nearly all cars come with a warranty that lasts 36 months or 36,000. Whether to get an extended warranty can depend on how much you want that peace of mind, whether you feel you couldn’t afford a major repair otherwise, and if you feel your car is unreliable.
Is it worth it to get an extended car warranty?
Whether an extended car warranty is worth it depends on your personal situation and your car. If your car tends to need a fair number of repairs or if you plan on owning it for a long time, or if you worry you wouldn’t have funds available for repairs, it can be a wise move. But if you don’t like paying for a policy you may never use, it may not be a good fit.
What are the disadvantages of an extended warranty?
In terms of the cons of an extended warranty, consider that it will probably cost at least $1,000 or more and have a deductible. It may have limitations about what is covered, it may not stipulate that original equipment manufacturer (OEM) parts be used, it may not allow you to pick where the repair is done, and you may have to pay out of pocket and then get reimbursed.
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.
Most people dream of the day that they clock into work for the very last time. In most cases, we imagine that’ll be when we’re in our 60s. But what if you could take the freedom and independence of retirement and experience it 20 or 30 years earlier?
That’s the basic principle of the Financial Independence Retire Early (F.I.R.E) movement, a community of young people who aim to live a lifestyle that allows them to retire in their 30s or 40s rather than their 60s and 70s.
While it may sound like the perfect life hack, attempting to live out this dream comes with some serious challenges. Read on to learn more about the F.I.R.E. movement and the techniques followers use achieve their goal of early retirement. That can help you determine whether any of their savings strategies might be right for you.
What Is the FIRE Movement?
F.I.R.E stands for “financial independence, retire early,” and it’s a movement where followers attempt to gain enough wealth to retire far earlier than the traditional timeline would allow.
The movement traces its roots to a 1992 book called “Your Money or Your Life” by Vicki Robin and Joe Dominguez. F.I.R.E. started to gain a lot of traction, particularly among millennials, in the 2010s.
In order to achieve retirement at such a young age, F.I.R.E proponents devote 50% to 75% of their income to savings. They also use dividend-paying investments in order to create passive income sources they can use to support themselves throughout their retired lives.
Of course, accumulating the amount of wealth needed to live for six decades or more without working is a considerable feat, and not everyone who attempts F.I.R.E. succeeds.
💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.
F.I.R.E. vs. Traditional Retirement
F.I.R.E. and traditional retirement both aim to help people figure out when they can retire, but there are major differences between the two.
Retiring Early
Given the challenge many people have of saving enough for retirement even by age 60 or 70, what kinds of lengths do the advocates of the F.I.R.E. movement go to?
Some early retirees blog about their experiences and offer tips to help others follow in their footsteps. For instance, Mr. Money Mustache is a prominent figure in the F.I.R.E. community, and advocates achieving financial freedom through, in his words, “badassity.”
His specific advice includes reshaping simple but expensive habits—like eliminating smoking cigarettes or drinking alcohol, and limiting dining out.
Of course, the basic premise of making financial freedom a reality is simple in theory: spend (much) less money than you make in order to accumulate a substantial balance of savings.
Investing those savings can potentially make the process more attainable by providing, in the best-case scenario, an ongoing passive income stream. However, many people who achieve F.I.R.E. are able to do so in part because of generational wealth or special circumstances that aren’t guaranteed.
For instance, Mr. Money Mustache and his wife both studied engineering and computer science and had “standard tech-industry cubicle jobs,” which tend to pay pretty well—and require educational and professional opportunities not all people can access.
In almost all cases, pursuing retirement with the F.I.R.E. movement requires a lifestyle that could best be described as basic, foregoing common social and leisure enjoyments like restaurant dining and travel.
Target Age for Early Retirement
Early retirement means different things to different people. While some individuals may consider age 55 to be an early retirement, FIRE proponents aspire to retire in their 40s or even in their 30s, if possible.
According to the 2024 SoFi Retirement Survey, 12% of respondents say their target retirement age is 49 or younger. Men were more likely than women to choose this response.
Of those whose target retirement age is 49 or younger:
• 66% have a household income of less than $100,000
• 60% are men,
• 47% are single
• 27% are age 24 or younger
Source: SoFi Retirement Survey, April 2024
Saving Strategies for Retiring Early
Retiring early can involve making some serious adjustments to an individual’s current lifestyle. People who follow the FIRE movement generally try to put 50% to 75% of their income in savings. That can be challenging because once they pay their bills, there may not be much leftover for things like going to the movies or having dinner out.
Of the SoFi survey respondents who say they want to retire at age 49 or younger, 18% are not using any strategies that might help them retire early. Most of the rest are working on it, however — and these are the strategies they’re using to try to retire early:
• 40%: Non-retirement investment accounts (such as brokerage accounts, real estate,and so on)
• 24%: Debt payment strategies such as the snowball and avalanche
• 23%: Roth conversion ladder
• 21%: Working a second job/passive income
Traditional Retirement
Most working people expect to retire sometime around the age of 65 or so. For those born after 1960, Social Security benefits can begin at age 62, but those benefits will be significantly less than they would be if an individual waited until 67, their full retirement age, to collect them.
People saving for traditional retirement typically save much of their retirement funds in tax-incentivized retirement accounts, like 401(k)s and traditional IRAs, which carry age-related restrictions. For example, 401(k)s generally can’t be accessed before age 59½ without incurring a penalty.
Even a traditional retirement timeline can be difficult for many savers. Recent data from the Federal Reserve shows that approximately 25% of Americans have no retirement savings whatsoever. Still, Americans between the ages of 25 to 40 plan to retire at age 59, according to a 2022 survey.
Online calculators and budgeting tools can help you determine when you can retire—and are customizable to your exact retirement goals and specifications.
Financial Independence Retire Early: Pros and Cons
Although financial independence and early retirement are undoubtedly appealing, getting there isn’t all sunshine and rainbows. There are both strong benefits and drawbacks to this financial approach that individuals should weigh before undertaking the F.I.R.E. strategy.
Pros of the F.I.R.E. Approach
Benefits of the F.I.R.E. lifestyle include:
• Having more flexibility with your time. Those who retire at 35 or 40, as opposed to 65 or 70, have more of their lifetime to spend pursuing and enjoying the activities they choose.
• Building a meaningful, passion-filled life. Retiring early can be immensely freeing, allowing someone to shirk the so-called golden handcuffs of a job or career. When earning money isn’t the primary energy expenditure, more opportunities to follow one’s true calling can be taken.
• Learning to live below one’s means. “Lifestyle inflation” can be a problem among many working-age people who find themselves spending more money as they earn more income. The savings strategies necessary to achieve early retirement and financial independence require its advocates to learn to live frugally, or follow a minimalist lifestyle, which can help them save more money in the long run—even if they don’t end up actually retiring early.
• Less stress. Money is one of the leading stressors for many Americans. Gaining enough wealth to live comfortably without working could wipe out a major cause of stress, which could lead to a more enjoyable, and healthier, life.
Cons of the F.I.R.E. Approach
Drawbacks of the F.I.R.E. lifestyle include:
• Unpredictability of the future. Although many people seeking early retirement thoroughly map out their financial plans, the future is unpredictable. Social programs and tax structures, which may figure into future budgeting, can change unexpectedly, and life can also throw wrenches into the plan. For instance, a major illness or an unexpected child could wreak havoc on even the best-laid plans for financial independence.
• Some find retirement boring. While never having to go to work again might sound heavenly to those on the job, some people who do achieve financial security and independence and early retirement struggle with filling their free time. Without a career or specific non-career goals, the years without work can feel unsatisfying.
• Fewer professional opportunities. If someone achieves F.I.R.E. and then discovers it’s not right for them—or must re-enter the workforce due to an extenuating circumstance—they may find reintegration challenging. Without a history of continuous job experience, one’s skill set may not match the needs of the economy, and job searching, even in the best of circumstances, may be difficult.
• F.I.R.E. is hard! Even the most dedicated advocates of the financial independence and early retirement approach acknowledge that the lifestyle can be difficult—both in the extreme savings strategies necessary to achieve it and in the ways it changes day-to-day life. For instance, extroverts might find it difficult to forgo social activities like eating out or traveling with friends. Others may find it challenging to create a sense of personal identity that doesn’t revolve around a career.
Investing for F.I.R.E.
Investing allows F.I.R.E. advocates—and others—to earn income in two important ways: dividends and market appreciation.
Dividends
Shareholders earn dividend income when companies have excess profits. Dividends are generally offered on a quarterly basis, and if you hold shares of a stock you could earn them.
However, because dividend payments depend on company performance, they’re not guaranteed, those relying on them to live should have other income sources (including substantial savings accounts) as a back up income stream.
Market Appreciation
Investors can also earn profits through market appreciation when they sell stocks and other assets for a higher price than what they initially paid for them.
Even for those who seek retirement at a traditional pace, stock investing is a common strategy to create the kind of compound growth over time that can build a substantial nest egg. There are many accounts built specifically for retirement investing, such as 401(k)s, IRAs, and 403(b) plans.
However, these accounts carry age-related restrictions and contribution limits which means that those interested in pursuing retirement on a F.I.R.E. timeline will need to explore additional types of accounts and saving and investing options.
Whether you’re hoping to retire in a traditional fashion, shorten your retirement timeline, or are just looking to increase your wealth to achieve shorter-term financial goals, like buying a new car—investing can be one of the most effective ways to reach your objectives.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Invest with as little as $5 with a SoFi Active Investing account.
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If you feel as if you aren’t clear about where your money goes or why you aren’t saving as much as you’d like (or why your credit card debt isn’t going away), you might benefit from some financial discipline. While the word “discipline” can sound harsh, it’s really just a way of saying that you have found money-management habits that lead to success. It’s not about saying you can never buy concert tickets or new shoes again.
Having financial discipline can help you take control of your money, gain independence, and save for your big-picture as well as short-term goals.
This guide shares seven essential ways to achieve financial discipline and enjoy its rewards.
What Is the Meaning of Financial Discipline?
Financial discipline is the act of setting specific monetary (spending and saving) goals and measuring oneself against how well they are achieved. Once that financial discipline is established, a person can take further steps to becoming financially independent.
Financial independence means having enough money to pay one’s living expenses without being dependent on people or a particular employer. It provides a financial runway that’s flexible enough for a person to make decisions based on short- and long-term needs instead of the immediate state of their finances.
💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.
How Can Financial Problems Be Improved?
Financial problems can bring about a level of stress that might be difficult to shake. Sitting and worrying won’t necessarily change the state of a person’s finances, but putting together a financial plan is a tangible step in the right direction.
By confronting their current financial realities and committing to practicing money discipline, a person who’s struggling with stressful financial problems can improve their overall outlook and make progress toward a more stable financial future.
7 Steps For Achieving Financial Discipline
There are many paths to financial discipline, but these seven steps can help you create the habits that help you take control of your money and your financial destiny.
1. Getting Clear About Financial Goals
It could be difficult to get disciplined about money without embarking on a vital first step: setting financial goals. Writing down specific short-term, mid-term and long-term financial goals can help whittle things down even further and illuminate a plan for how to proceed.
Here are some common examples of financial goals (though real goals will vary depending on a person’s individual priorities and plans). They range from short-term money goals to longer-term ones:
Short-term Financial Goals
• Paying off credit cards and charge cards
• Paying off student loan debt
• Setting a spending limit for the month
• Setting up an emergency fund
• Saving a certain amount each month
Mid-term Financial Goals
• Saving money for a trip abroad
• Setting aside funds for a major gift
• Putting away money to buy a big ticket item like a boat or car
• Saving up for an important home renovation
Long-term Financial Goals
• Setting aside money for retirement
• Saving for a dependent’s future college tuition
• Putting away money for a down payment on a house
• Investing in stocks and bonds for future returns
💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.
2. Creating a Convenient Budget
Building a monthly budget isn’t necessarily at the top of everyone’s bucket list, but seeing spending habits and current expenses in black and white can make it easier to get a handle on overall finances. Whether it’s written out by hand, using an online spreadsheet, or finding software that helps turn financial data into a trackable budget, there are many ways to build a budget.
Once someone finds a system that works, they can better understand how much money they’re making versus how much they’re spending, saving, and possibly investing. The transparency that comes with creating a budget can bring them closer to becoming financially disciplined.
3. Paying Down Existing Debt
Debt comes in many forms — from student loan debt to car loans, medical payments, mortgages and credit card debt. It might seem fairly obvious, but paying down debt as a step toward financial discipline can make it easier to start the subsequent steps like saving money, making investments and planning for a brighter financial future. Adding the debt paydown directly into the budget ensures it’s consistently covered each month.
4. Opening a High-Yield Savings Account
There’s no specific answer to “How much money should I have in savings?” However, it is important to get started and contribute regularly. Even if it’s as little as $20 a month, setting something aside for savings in spite of one’s current debt-to-income ratio ensures some funds will start to add up. By opening up a savings account and setting up a recurring deposit, a pivotal piece of financial discipline can practically go on autopilot.
Of the different types of savings accounts, the specific kind you choose can make a big difference. According to the FDIC, the national average interest rate on savings accounts was 0.45% APY as of October 21, 2024. In the case of certain high-yield accounts, however, interest rates can reach 3.00% APY or higher (these are typically found at online banks).
By putting money into a high-yield savings account, it’s simple to earn even more money just by setting funds aside in the first place.
Get up to $300 when you bank with SoFi.
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5. Establishing an Emergency Fund
More than one in five Americans have no emergency savings; about 30% of people do have some money set aside for a rainy day, but not enough to cover three months’ worth of basic expenses. That means these individuals would likely have to take on credit card debt, a personal loan, or ask family or friends for financial help if they, say, lost their job or had unexpected bills to pay.
Establishing an emergency fund isn’t just a step along the path to financial independence, it’s a way to weather unforeseen expenses without having to worry about day-to-day expenses being paid for or financial goals being met.
Most money experts advise socking away enough to cover three to six months’ worth of living expenses. You might want to automate your savings to help you reach this goal.
6. Cutting Back on Spending
Despite the best of intentions, overspending happens. Whether it’s a pileup of holiday gift purchases, a particularly eventful summer, or a lavish trip overseas, spending more than what you earn is bound to occur from time to time. If it happens constantly, that’s another story.
Cutting down on spending is a tangible way to practice sound money discipline. There’s no one-size-fits-all approach to doing so, but by building a budget, hunting for bargains, creating ironclad shopping lists, using promo codes and coupons, and thoroughly tracking spending, it can be easier to cut back and get one step further to financial independence.
7. Seeking Sound Investment Strategies
If you’re searching for a head start to financial independence, familiarizing yourself with a wide variety of investment accounts and strategies can help get you on the map. Depending on your individual financial situation, weighing the risks and benefits of certain account types, penalties, fees, and the ability to access funds can help you select the right investment strategy.
By researching different markets and understanding your personal risk tolerance, you can select an approach to investing that directly aligns with your current and future financial goals.
Focusing on Financial Planning
The term “financial planning” might feel more like a unicorn you only get to meet when you’re floating high on a cloud of financial independence, but it’s actually another sound step along the way. These days, financial planning isn’t designated for the already-wealthy, it’s becoming accessible and essential for people at every stage of life. In fact, in the age of digital transformation, financial planning can even be automated.
The Takeaway
Financial discipline or money discipline is the act of setting specific financial goals and tracking their achievement. By practicing financial discipline, you can create a budget, build up savings and an emergency fund, hit your money goals, and make progress toward a more stable financial future.
Finding the right financial institution to suit your needs can be another important step. Doing so can help you track your saving and spending and budget better, as well earn interest on the money you keep stashed away.
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 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.
