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The 50/30/20 budget rule (aka the 50 30 20 rule) is a simple budgeting technique that involves dividing your money into three basic buckets. It can be an effective way to manage your earnings, allocating 50% of your take-home income to “musts,” 30% to “wants,” and 20% to saving for your future.

For anyone who has ever felt that budgeting was too complicated and headache-triggering to take on, this guideline can make things clear and easy.

What Is the 50/30/20 Rule?

The 50/30/20 budget or “rule” is a budgeting framework that can be relatively easy to create and implement. It’s one potential way to help keep your finances on track and help you work towards your goals.

The 50/30/20 numbers refer to percentages of your take-home income that you would allocate to three main categories: ”needs” or “musts” (essentials), “wants” (nonessentials), and saving (financial goals), respectively.

The primary goal of the 50/30/20 rule is to learn to prioritize saving money by making it a key part of your spending plan.

Everyone’s financial needs and goals are different, however. And, while these percentages can be a great starting point, you may find that you need to tweak these exact numbers to better suit your needs and current financial situation.

Where Did the 50/30/20 Rule Come From?

The 50/30/20 budget rule gained popularity when Sen. Elizabeth Warren explained it in her book, “All Your Worth: The Ultimate Lifetime Money Plan,” which was first published in 2005.

The simplicity of the concept (and the math) contributed to its appeal. The idea of dividing one’s money into three instantly understandable buckets proved to have staying power.

How the 50/30/20 Rule Works

In the 50/30/20 budget, you allocate your take-home (or after-tax) income into three main categories or buckets according to percentages.

Recommended: Check out the 50/30/20 calculator to see a breakdown of your money.

50% to “Needs”

These are things you cannot live without and the bills you cannot avoid paying. Consider them the “musts;” the items that you need to survive or that would leave you in a difficult situation if you didn’t pay them.

Here are some examples of typical needs:

•   Rent or one of the different kinds of mortgage payments that are possible (in a nutshell, your housing costs)

•   Utilities, including electricity, wifi, and water

•   Car payments and/or other transportation expenses (say, to get to work)

•   Groceries (but not that pricey takeout salad)

•   Basic clothing (what you need to wear in daily life, at work, and/or to stay warm; not the latest style of jeans just because they’re cool)

•   Insurance payments

•   Healthcare costs

•   Debt payment, such as the minimums on student loans and/or your credit card

The “needs” category does not include items that are extras, such as Netflix, dining out, and clothing beyond what you need for work. Those fall under the next category.

30% to “Wants”

Also known as personal, discretionary, or nonessential spending, these are the things you buy that you could technically live without. This includes:

•   Dining out or takeout food

•   Going to the movies, a show, or a concert

•   Vacation/travel costs

•   Streaming channel subscriptions (unless they are somehow vital for your work)

•   New clothes, simply because you feel like buying them

•   Electronics that are cool but not vital to your job

•   Spa treatments

•   Ubers or taxis instead of public transportation.

Wants are all the little extras and upgrades you spend money on that make life more fun.

20% to Savings

This is the money you save for future financial goals. This category often provides a means to financial security. This includes:

•   Money put into an emergency fund

•   Saving for a down payment on a home

•   IRA or other retirement contributions

•   Extra payments to help pay off your loans sooner (minimum payments are part of the “needs” category).

Even though the budget is written as 50/30/20, the purpose of this system is to prioritize the saving aspect, this 20%. (It may be more appropriately named the 20/50/30 budget.) The goal here is to get people to save for tomorrow rather than just spend today.

The idea is to make space for the 20% without laboring over the rest. The minutiae of where your fun money is going ($5 for a latte here, $10 for an appetizer there) isn’t super important if you’re saving enough to meet your financial goals.

Another point to note: If you aren’t saving 20% of your income right now, that’s okay. The process of setting up the 50/30/20 budget will help you find out where your money is going so that you can make adjustments. After completing your budget breakdown, you can address the areas where you’d like to cut back.

Benefits of the 50/30/20 Budget

The 50/30/20 rule may be a minimalist budget, but it can pack the same powerful benefits you would get with a more labor-intensive budget.

Some of the payoffs of setting up and following a 50/30/20 include:

•   Knowing where you stand. As a popular adage goes, “what gets measured gets improved.” It can be hard to start spending less and saving more if you aren’t clear on how much and where you are currently spending.

•   Identifying easy ways to cut back. As with any budgeting process, the 50/30/20 budget can reveal opportunities to cut back on spending. Simply going through the process – and seeing exactly where your money is going each month – can help to motivate you to make some relatively pain-free adjustments.

•   Reducing financial stress. While building a budget may seem like a stress-inducing exercise, it can ultimately relieve a lot of financial worry. It can add structure and clarity to your spending. Instead of angsting over every purchase, you’ll have built-in boundaries that allow you to spend freely within your budget.

•   Simplifying the budgeting process. By having fewer categories than a traditional monthly budget, the 50/30/20 rule of thumb can be easy to set up and to maintain. It can also be simple to track a 50/30/20 budget digitally.

•   Achieving your savings goals. By making saving a priority and setting some money aside before you start spending, a 50/30/20 budget can help you work effectively towards your financial goals. Whether that’s creating an emergency fund, making a down payment on a home, or going on a great vacation is your decision.

Tips for Implementing the 50/30/20 Budget

Want to give the 50/30/20 budget a try? If you decide to go this route, or you’re just looking for some budgeting basics, here are some steps you can take to get started.

Gathering Your Financial Records

To get started with any kind of budget, it’s helpful to collect the last three months or so of bank and credit card statements, pay stubs, receipts, and bills.

Calculating Your Monthly Income

You can use your statements to figure out exactly how much money you are bringing in each month after taxes are taken out. You can think of after-tax dollars as the pot of money you have to siphon into the three budget categories each month.

Setting a Savings Target

You may want to begin with the most important category, which is the 20% (savings). Since the goal for this budget is to turn the 20% into a nonnegotiable part of the plan, you’d calculate 20% of your monthly after-tax income and set that figure aside for things like debt repayment, cash savings, retirement investing, and any other financial goals that you have.

Even if you don’t feel it’s realistic for you to put 20% into saving right now, you might run the exercise assuming that you will. You’ll be able to tinker with the numbers later.

Calculating Essential Monthly Expenses

Next, you may want to make a list of all of your monthly essential or fixed expenses, such as rent/mortgage, utilities, groceries, and insurance.

Currently, do essential items absorb more than 50% of your take-home income each month? If so, what percentage do they comprise? And, is there any way to reduce any of these monthly expenses?

Building a Hypothetical Budget

After adding up savings and essentials, what is left over is what can be allocated towards discretionary spending, or the “wants” outline above.

It can be helpful to keep in mind that the 50/30/20 numbers are just a guideline. If the cost of living is high where you live, for example, it may not be feasible to keep essentials to 50% of your take-home income. In this case, you may need to reduce spending on wants.

Or, you may decide that at this point you can’t quite afford to put 20% into savings. There are variations on the 50/30/20 theme that accommodate these situations, such as the 70/20/10 rule, which acknowledges that for some people, a hefty 70% will be needed for the “musts” of life.

Recommended: Cost of Living by State Comparison

Once you see your numbers in black and white, you can play with the percentages and come up with a workable plan for roughly how much you can spend on nonessentials, or fun, each month.

Putting Your Plan into Action

Now that you have a basic guideline of how much money you will put into one type of savings account each month and how much cash you can spend each month on wants, it’s time to give your budget a try.

You may want to plan on tracking your spending for two to three months to start. You can do this by saving receipts and logging expenses according to the three categories at the end of the day. Or, you could use a budgeting app that makes it easy to track and categorize expenses.

Another tip: Try automating your finances and having money transferred from your checking account to your savings right after payday. That way, you won’t see the cash sitting in your checking account and think it’s there for the spending.

Making Some Tweaks

After tracking your spending for several months, you’ll probably have enough data to refine your original 50/30/20 budget. From there you can adjust the categories based on your actual spending, not just your projected spending.

You may also find that you need to adjust your spending. Discretionary spending is typically the easiest place to do some trimming.

You may decide you need to cook at home (rather than get takeout) a few more times a week, save on streaming services by dropping a channel you rarely watch, or ditch the gym membership and work out at home.

It may also be possible to pare back some of your fixed monthly expenses. Reducing utility bills, saving on gas, and, if possible, rent, could free up more money for fun spending. You may also want to look into whether you are paying bank fees. Switching to an online bank or other financial institution with low or no fees could free up a bit more money in your budget.

After making some adjustments, you can execute your new and improved budget. You may want to continue to track spending in a method that works best for you until spending according to your budget becomes second nature.

Recommended: How to Make Money From Home

The Takeaway

The 50/30/20 rule of thumb is a set of easy guidelines for how to plan your budget. Using them, you allocate your monthly after-tax income to the three categories: 50% to “needs,” 30% to “wants,” and 20% to saving for your financial goals.

Your percentages may need to be adjusted based on your personal circumstances and goals. But using this simple formula can be a good way to get a better handle on your finances, and to start working more effectively towards your goals.

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

Is the 50/30/20 rule a realistic goal?

For many people, the 50/30/20 rule is a realistic way to budget for essentials, discretionary expenses, and savings contributions. For others, it may not be realistic. If you are just starting your work life, earn a lower salary, live in an area where housing is very expensive, or have considerable debt to manage, you might do better with a different budget guideline.

Is the 50/30/20 rule weekly or monthly?

When budgeting, people typically work with their monthly expenses, since that is how housing costs, utilities, and other payments (say, student loans and credit card debt) are assessed. You could, however, apply the 50/30/20 guideline to your weekly spending and see how your finances are tracking.

What is the 60/30/10 rule budget?

The 60/30/10 budget is a different version of the 50/30/20 rule that can work well for those with higher costs of living. It allocates 60% more for the “musts” of life and 30% for discretionary spending. The remaining 10% is for saving and paying off debt.

What is the 70/20/10 rule for money?

The 70/20/10 rule is a budgeting system that allocates 70% of one’s take-home income towards “needs” (minus debt) and “wants” (discretionary spending), 20% to saving and investing, and 10% towards debt repayment or donations.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

SOBNK-Q125-043

Both brokerage accounts and cash management accounts (CMAs) are offered by brokerage firms and both have the potential to earn returns on your money. However, these accounts serve different purposes and work in different ways: Brokerage accounts are for investing in the market, while CMAs focus on managing cash with easy access and the ability to earn interest on your balance.

Here’s a closer look at brokerage accounts vs. cash management accounts to help you decide if you need one or the other, or both.

What Is a Cash Management Account?

A cash management account (CMA) is a type of cash account offered by brokerage firms that offers some of the same features as checking accounts and savings accounts. CMAs allow you to deposit money and earn interest. Most provide access to your money via debit cards, in addition to checks.

What Is a Brokerage Account?

A brokerage account allows customers to deposit money which can then be used to buy and sell investments such as stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other securities.

There are three main types of brokerage firms.

•   A full-service brokerage firm usually provides a range of financial services including financial advice and automated investing.

•   A discount brokerage offers lower fees in exchange for fewer financial planning services.

•   Online brokerages allow you to trade via the internet and often charge the lowest fees.

Similarities Between a Cash Management Account and Brokerage Account

Although brokerage and CMA accounts work in different ways, there are some similarities.

Both Offered by Brokerages

Both types of accounts are offered by brokerage firms. When you open a brokerage account and link it to a CMA at the same firm, it can provide a convenient way to transfer assets from one account to another when you buy and sell securities.

The Potential to Earn Returns

When considering a brokerage account vs. a cash management, remember that they both offer customers the potential to earn money on investments or deposits, respectively.

In a brokerage account, you have the potential to earn returns from your investments, although you also face the risk of loss that comes with investing in stocks, bonds, and other securities.

A cash management account is generally a safer place to keep your money and you’ll earn interest on your deposits. But those rates are generally lower than the gains you might see from other investments.

Brokerage Account vs Cash Management: What Are the Differences?

Cash management accounts and brokerage accounts work in different ways. CMAs mirror traditional savings and checking accounts and brokerage accounts are strictly for investments. Here are the details:

Earnings Come From Different Places

In a brokerage account, potential earnings come from the gains you might see when investing in stocks, bonds, and other investments. Investing in securities also comes with the risk of losses.

Earnings in cash management accounts come from the interest rate paid on your balance. Usually, these rates are similar to the rates paid in traditional savings accounts.

CMAs also act like checking accounts because you can use checks or a debit card for purchases. But traditional checking accounts don’t usually pay interest, or if they do the rate is often lower than a CMA.

Earnings on Brokerage Accounts Are Potentially Higher Over Time

Over the long term, investing has historically provided higher returns than savings accounts. With those potential earnings comes market risk, meaning you may experience losses too, especially in the short-term.

To manage a brokerage account or work with a broker, you need to take into account your tolerance for market risk and what combination of stocks and bonds is right for your financial goals.

Insurance Is Provided by Different Sources

When you open a new bank account, up to $250,000 of your cash deposits are typically covered by the Federal Deposit Insurance Corporation (FDIC) in the unlikely event of bank failure. The $250,000 limit is per depositor, per insured bank, for each account ownership category.

Most brokerage accounts, however, are insured by the Securities Investor Protection Corporation (SIPC) in the event of theft, fraud, or if the brokerage fails. The SIPC offers up to $500,000 of coverage total, per person, if such a loss were to occur. The SIPC does not cover investment losses.

Cash management accounts have so-called sweep accounts, which are insured by the FDIC. Here’s how it works: CMAs sweep funds into a variety of FDIC-insured banks. If you make a $200,000 deposit, for example, your money may be split into four $50,000 deposits in four different bank accounts. (The CMA provider manages this process — you only see your total CMA balance.)

Before your money is moved into the different accounts, your deposit is protected by SIPC insurance if the brokerage is an SIPC member.

What Money in These Accounts Can Be Used for

Because CMA accounts typically offer checks and/or debit cards, you can use that money for purchases or bill paying or ATM withdrawals.

Money kept in a brokerage account is strictly used for trading securities. But by linking a CMA to your brokerage account, you can easily transfer cash from one to the other, for investing purposes.

The Takeaway

When considering a brokerage account vs. cash management, it helps to know what makes these accounts different, and how they can work together. While a brokerage account is for trading securities, and comes with the risks associated with investing in securities, a cash management account (CMA) is similar to a traditional checking or savings account. There’s almost no risk of losing money, and your deposits can earn interest. Because both are offered at brokerage firms, you can have both, and use your cash management account as a place to keep funds you don’t wish to invest.

Or, as an alternative to a cash management account, you might consider keeping your extra cash in a high-yield savings account. This is a type of federally insured savings product offered by banks and credit unions that typically earns a much higher rate than a regular savings account.

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

Are brokerage accounts and cash management accounts the same?

No. Brokerage accounts are used to buy and sell securities. Cash management accounts act more like traditional bank savings and checking accounts, but are provided by brokerage and other non-bank financial institutions. Sometimes the accounts may be linked. However, the accounts earn money from different sources.

Can you keep cash in a brokerage account?

Yes, you can deposit and keep cash in a brokerage account. However, money in a brokerage account is strictly for investing in stocks, bonds, funds and other securities. If you’re just looking to store cash and earn interest, you’re likely better off with a cash management account, money market account, or high-yield savings account.

Do cash management accounts and brokerage accounts work together?

Generally, yes. If you have a cash management account (CMA) and a brokerage account at the same brokerage firm and the accounts are linked, you can use your CMA to move cash into your brokerage account in order to execute trades. You can also transfer the money from sales of securities into your CMA for safekeeping. The combination gives you the ability to purchase stocks, bonds, mutual funds and other securities, but also offers the flexibility, liquidity, and interest earnings of traditional bank accounts.

Photo credit: iStock/Aja Koska

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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.

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SOBNK-Q125-057

P2P payments, aka peer-to-peer transfers, are a popular tech-powered way to send money to and receive money from other people. With a money transfer app or perhaps one from your financial institution, you can send a friend your half of the dinner bill, gas money, or other payments, quickly and easily from your mobile device. Chances are, you can also buy items (say, on Instagram or a website) using one of these apps.

To move money via P2P, all you need to do is to download a transfer app, like Venmo or PayPal, and connect your bank account, debit card, or credit card to it. Or your financial institution may offer app options you can enable. Either way, once you are set up, you are just a few clicks away from being able to send money.

What Is a P2P Payment?

With a P2P payment, you can send money to a friend with just a few clicks on your mobile device. This replaces the need to get cash at an ATM or write out a personal check, options that aren’t always quick or convenient.

For traditional P2P apps, both parties need to have an account with the transfer service in order to make the transaction. For example, if you want to use Venmo to repay a friend for the salad they bought you at lunchtime, that person would also need to have a Venmo account to receive that payment.

Typically, a P2P account is attached to your online bank account. Some P2P platforms, however, allow customers to link their P2P accounts to a debit card or even a credit card, though it may involve additional fees.

Recommended: How to Transfer Money From One Bank to Another

Understanding How P2P Transfers Work

Here’s a closer look at what goes on when you use a P2P payment app.

Overview of the P2P Transfer Process

Say that you want to send money P2P to your sister for your mother’s birthday present. Depending on the type of P2P service you use, you’ll follow some variation of these basic steps.

•   Creating a P2P account. You will need to download a P2P app and then sign up for an account. In order to send money to your sister, you’ll both need to have an account with the same money transfer service.

•   Linking your bank account to your P2P account. Some P2P services have the ability to hold funds, but they generally must be linked to a primary bank account (such as your checking account), credit card, or debit card in order to be fully operational. This is how the account will pull any funds needed to make a payment.

To link your checking account, you may need your checking and routing number (which appear at the bottom of a check). Some P2P transfer services may only need your bank log-in information. Others may allow you to set up extra verification measures.

•   Searching for a user to transfer funds to. To send money to your sister, you’ll need to find her on the P2P platform. You can typically search by username, email address, or a phone number. In most cases you will be able to add her account as a contact or “friend” in your account.

•   Initiating a transfer. The next step in how a P2P payment works is getting the money moving. Your sister can request a payment from you, or you can initiate the payment yourself. This requires choosing the option to send funds, entering a dollar amount, and then clicking submit. If you’ve enabled additional security measures on your account, you may need to enter a PIN that gets texted to you as well.

You may be prompted to choose whether you are making a purchase or sending money to a friend or family member. This can impact whether fees get assessed and what kind of protection you receive for the transaction.

You may have the option to add a description or “memo” to your transaction. Some P2P services may require this information so that they can charge a fee for business-related transactions. Others offer the option to act as a personal ledger should you need it in the future.

•   Waiting for the transfer to complete. Now the funds are in motion via a P2P bank transfer. When money is sent from one customer to another, it moves in the form of an electronic package safeguarded with multiple layers of data encryption. This makes it hard for hackers to access the data (like your bank account number) within the transfer while it is in motion. Similarly, data encryption keeps your money and account information safe. Once the data set reaches its destination, it is decoded and deposited as currency.

•   Transferring the funds into the payee’s bank account. When a P2P transfer is completed, the funds may be deposited directly into your sister’s bank account. Or they may go into an account created for her by the P2P service. Funds received into P2P user accounts can then be transferred into a person’s bank accounts at little to no cost. (You are likely to pay a fee if you want the funds transferred ASAP versus in a couple of days.)

Your sister will likely receive some combination of email, text, and/or in-app notifications that the funds have arrived. If she decides to leave the money in her P2P account, she can use that account balance the next time she needs to pay someone or purchase something from a business that accepts P2P transactions.

How Long Do P2P Transfers Take?

The general rule of thumb for P2P transfer services is to allow one to three business days for a transfer to complete (although some seem instantaneous; timing varies). That’s because standard bank transfers use the ACH (or Automated Clearing House) system, which can take a day or two to complete.

When it comes time to move funds from the app to, say, a checking account, some apps may not charge a fee; others may assess a charge of 0.5% to 1.75% of the overall transfer amount.

Are P2P Money Transfers Safe?

You may wonder if mobile payment apps are safe. Any time your bank account, credit, or debit card information is online, there is a chance that someone can get a hold of it, and P2Ps are no different. While all major money transfer companies encrypt your financial information, no P2P system can say it’s totally impervious to hacks and scams.

There are also additional measures you can take to make sure that your account remains secure. For example, you may be able to set up two-factor authentication, which might involve typing in a unique pin number that is texted to your phone for each transaction. Or you might elect to receive notifications each time there’s a transaction posted on your account, enabling you to spot financial fraud right away if it were to happen.

You may also want to take care when you type in a recipient’s email address, phone number, or name. A typo could lead to the money going to the wrong person.

How Do Peer-to-Peer Transfer Companies Make Money?

P2P transactions are largely offered for free to consumers, which may beg the question of how the companies that offer these services stay in business. Here are two major ways that P2P money transfer apps may generate income.

Account Fees

Typically, you can make P2P payments from a linked bank account or straight from the P2P account for free. If you want an instant transfer or you are transferring money using a credit card or from depositing checks into your P2P account, there may be a fee involved.

Business Fees

P2P platforms aren’t just for consumers — they are used by businesses as well. Compared to the free transactions that standard user profiles offer, business profiles are generally subject to a seller transaction fee for each customer purchase made with a P2P money transfer app. Venmo, for instance, charges a fee of 1.9%, plus 10 cents for each transaction.

What Are the Benefits of P2P Money Transfers?

There are three main benefits to using online money transfer services.

•   They’re fast. Depending on the service, P2P money transfers can happen very quickly. They can take anywhere from just a few seconds to a couple of business days.

•   They’re cheap. When exchanging money between friends and family, P2P money transfers are often free. There may be a small fee, however, if you want an instant bank transfer, are using a credit card instead of a bank account, are making a transfer above a certain dollar amount, are conducting a high volume of transfers, or are using the service for a business transaction.

•   They’re easy. P2P transfers eliminate the need to make trips to the ATM or a local bank branch to get cash. They also eliminate the need to get out your checkbook, write a check, and then mail it to someone. For a P2P transfer, all you likely need is a mobile device, the app, and cell service or wifi.

Alternatives to P2P Money Transfers

What if a P2P money transfer isn’t available or doesn’t suit your needs? Try these options instead to move money.

Sending a Check

You can go old-school and write a paper check. You fill out the necessary details and hand or mail the check to the person you are paying. Typically, no fee is involved, although you may have to pay for a new checkbook when you run low and order more checks.

Money Orders

Money orders are in some ways similar to a check, but you don’t write them from a bank account. Instead, you purchase them (essentially pre-paying for the amount you are sending) at the post office, businesses like Western Union or Moneygram, or from certain retailers.

Typically, you will pay a small fee. For example, the United States Post Office will issue domestic money orders up to and including $1,000. Those that are for amounts up to $500 will be assessed a $2.35 fee; for ones that are $500.01 to $1,000, $3.40 will be charged. Once you have a money order, you can either give it to the recipient in person or mail it. You can also typically track a money order to see when it’s cashed.

Using Online Bill Payment Services

Many financial institutions offer ways for their customers to pay bills electronically. A key feature of mobile banking, this service can be a simple way to send funds from your checking account, regardless of where you are or what time it is. You may be able to set up recurring payments as well for bills you receive regularly.

Wire Transfers

Wire transfers are another way to send funds electronically using a network of financial institutions and transfer agencies that operate globally. Typically, you will access a wire transfer via your bank, its website, or its app. You’ll need to have your payee’s banking details and will likely pay a fee to wire money.

For instance, domestic wire transfers can charge a fee of anywhere from $0 to $50 (depending on whether they are incoming or outgoing), and they can often be processed in a few hours or within a day. International wire transfers can cost more (with both the sender and recipient possibly paying fees, typically $35 to $50 for the sender) and can take longer, typically two days. Certain banks may offer free wire transfers, perhaps only for certain types of accounts (such as premium ones), so if this is an important feature for you, it can be worthwhile to do your research.

Recommended: What Is an E-Check (Electronic Check)?

The Takeaway

Peer-to-peer (or P2P) payment apps facilitate mobile money transactions. You can use them in place of cash or writing a check when you want to give friends or family money, whether it’s to cover your portion of a dinner bill or split the cost of a vacation rental. Some businesses also accept this form of payment.

All you need to make a P2P transfer is a mobile device, an internet connection, and your P2P app, which you must link to your credit card or bank account.

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 much time does a P2P transfer take?

P2P accounts can take just a few seconds or a few days to move funds. Then, if the person who has money in the P2P app wants to transfer their cash to a bank account, that can also take between hours and a couple of days. Often, you may be charged a fee if you want the money moved ASAP.

Is P2P digital money?

P2P, or peer-to-peer-payments, are a digital way of moving funds from one person to another. Once the transfer is complete, the recipient has money they can use to pay for purchases or transfer into a bank account.

What’s an example of a P2P payment?

An example of a P2P payment would be to use a P2P app such as PayPal or Venmo to send funds to a friend you owe money. Or you might send a payment to a service provider or retailer using P2P apps as well.

Do banks use P2P?

Many banks offer their own version of P2P apps. For example, you might be able to almost instantly send funds from your account to a friend, a retailer, or a service provider by using a bank’s app.

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.

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

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

Third-Party 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.

SOBNK-Q125-023

Whether from parents, friends, or financial advisors, you have probably heard plenty of people say that you should be saving money. But did you ever stop and consider why exactly saving money is so important?

Saving money is truly a smart move: It can help you achieve your financial aspirations, prepare for the future, and weather unexpected events. It can even help you earn money without doing anything at all. When you look at it in a big-picture way, saving can also relieve a lot of money stress from your life.

Reasons Why Saving Money is Important

It can be hard to get motivated to save money just because it’s the “responsible” thing to do. But you may see the appeal once you understand the huge advantages that saving offers. Here are a few.

Peace of Mind

If money is tight, you may find yourself worrying how you will pay the rent or other critical bills if an extra unexpected expense were to suddenly come up, as they often do. After all, cars break down, and dental work can crop up. Or what if your kid discovers a passion for soccer and wants to go to a pricey summer camp.

Having savings in the bank (whether that’s an online bank or a traditional one) can provide the sense of security that comes with knowing you can get through these kinds of moments without hardship. You’ll be able to have that back-up money to afford many of life’s expenses that crop up. By saving, you may also worry less about tomorrow, knowing that you have stashed away some cash. That means you can breathe a little easier.

Avoiding Debt

When you have money in the bank, you can make purchases, planned or not, with the money that’s on deposit. That means you can avoid using high-interest credit cards or potentially taking out a personal loan or a home equity line of credit (HELOC) to pay for things.

That can help you avoid debt, which can help save a significant amount of cash in the long run.

Expanding Your Options

Generally, the more money you have saved, the more control you can have over your life and your financial security.

If you’re unhappy with where you live, for instance, having some savings can open up the possibility of moving to a more desirable location or putting a down payment on a new home.

If you dislike your job, having a cushion of cash in your savings account might afford you the option of leaving that job even before you have another one lined up.

Money certainly does not solve all problems, but having savings can give you a little bit of breathing room and allow you to take positive steps in your life.

Having Financial Freedom

Another benefit of savings is that you are on a program that can give you financial freedom. If you stick to a plan of stashing 10% or 20% into savings, as many financial experts recommend, you can avoid living paycheck to paycheck and have more financial freedom.

For example, with adequate savings, you might be able to take a sabbatical from work and pursue a passion project. You might have enough cash to start your own business or retire early. Or you might plan a luxe anniversary celebration somewhere tropical. Savings can enable your dreams.

Recommended: Guide to Improving Your Money Mindset

Saving for Big Purchases

Having a savings account is a great way to afford big purchases without racking up credit card debt and the high interest that goes along with it or turning to other expensive financing options.

Say you want to take your kids on a Disney vacation or you really need that second car. Or maybe there’s a designer bag that you’re totally in love with. By putting money aside in a savings account and earning interest on those funds, you can be in a position to buy your wish-list item outright, rather than borrowing funds to do so. (To see how your money can grow when in an interest-bearing account, you might use an online savings account interest calculator.)

Saving Money for Emergencies

Here’s another reason why it is important to save money: Life has its twists and turns. One minute, everything is humming along nicely, the next, your car needs $2,000 worth of repairs. Or the hot water-heater conks out or you lose your job. These situations and others can put a real strain on your finances.

That’s why financial experts generally recommend building up an emergency fund of at least three to six months’ worth of living expenses to prepare for any financial surprises.

It can be hard to prioritize this, but saving for an emergency fund is important. To help make it happen, you might set up an automatic transfer from your checking into savings the day after payday. This can painlessly, seamlessly whisk money to your emergency fund so it doesn’t sit in savings, tempting you to spend it. Whether the amount is $15 or $150, just do it. Every bit helps.

Recommended: Emergency Fund Calculator

Earning Interest

Savings accounts come with interest, which is the bank’s way of thanking you for keeping your money with them, where they can use it until you withdraw it.

Here’s an example: That can help your savings along. If you have $5,000 in a savings account with a 3.00% APY earning compound interest monthly, that would give you an extra $152 at the end of the year. Add $20 per month to the account and let it sit for five years, and you’ll have a total of $7,101. Nice! That’s cash in your account for doing absolutely nothing.

Reducing Your Taxes

Here’s the part about how saving money makes you money, beyond interest you’ll earn. If you save money into certain tax-advantaged retirement vehicles, not only do you have that nest egg for later in life, but you can lower your tax liability.

By putting money into your employer’s 401(k), if available, you can lower the income on which taxes are assessed. If you are self-employed, there are various retirement accounts that may allow you to put pretax dollars away for the future.

When you save money this way, you could even challenge yourself to put the tax savings back into a savings account. That’s a way to increase your money in the bank another notch or two.

Giving Back

Another reason why saving money is important is it can enable you to give back to others. When you have a cash cushion and aren’t living paycheck to paycheck, you have the opportunity to help those around you.

That might involve sending a few hundred dollars to a relative who has a big dental bill and is struggling to pay it. Or you might make a charitable donation to a medical research cause, a disaster fund, or a local after-school program that you love. The choice is yours, but having a healthy savings account can make it possible.

Benefiting from Compound Interest

Another big incentive to save, as mentioned above, is the power of compound interest.

Compound interest means you earn a return not just on the amount you originally put away, but also on the interest that accumulates.

Over time, that means you can end up with much more than you started with. And the earlier you start saving, the more your money grows, since compound interest is able to work its magic over a longer time horizon.

You saw an example above that involved putting money into a savings account at a bank. Here’s another example: A person who starts putting $100 per month towards retirement at age 25 will wind up putting $12,000 more of their money into their retirement fund by age 65 than the person who started saving $100 per month at age 35.

But because of compound interest (and assuming a 7.00% annual rate of return), the person who started at 25 will wind up with over $120,000 more at age 65 (way more than the extra $12,000 they deposited).

How to Get Started with Saving

If you’re convinced that saving is the right move, how do you actually do it? The key is to make a budget and make sticking to it easy.

This doesn’t have to be intimidating. The key is to get familiar with what you spend, what you earn, and what your goals are.

Here are some steps you could take to help get started.

Figuring Out What You’re Saving for

Is it a long-term goal, like retirement or your kids’ college tuition? A short-term goal, like an emergency fund? Or a medium-term goal, like a wedding or home renovation? It can help to get a sense of how much you need to stash away and by when.

The point of this is twofold:

•   First, you can divide the amount you need by the months left until your deadline to get a clear picture of how much you’ll need to save each month.

•   Second, you will know where to put your money. If your goal is less than a couple of years away, you may want to keep your savings in an online savings account, a certificate of deposit (CD), or money market account.

These options might help you earn more interest than a standard savings account but still allow you to access your money when you need it.

If your goal is in the distant future, you might consider investing the money in a retirement account, 529 college savings plan, or brokerage account so that it could have the chance to grow over time. All investments, however, come with risk, and growth is not guaranteed.

Sticking to a Budget

You don’t really know where your money is going unless you track it. That’s why for a month or two, you may want to take note of all your daily and monthly expenses.

Next, you’ll want to tally up your net monthly income, meaning what goes into your account after the different types of taxes and deductions are taken out.

The difference between your monthly income and your expenses (everything from rent to student loan payments to food and dining out) is what you have left over to save. If there’s not enough left over, you can work on finding ways to cut spending or increase your income. You might try following the 50/30/20 budget rule to help guide your spending and saving.

Putting Savings on Autopilot

If you’re manually putting cash away every month, it can be easy to fall behind.

For one thing, you may forget to move money into savings regularly amid your busy schedule. And, unless you protect the money in advance by transferring it to a different account, you may accidentally spend it.

One way to avoid this is to set up automated savings through your bank account or retirement plan.

If you’re putting away the amount you identified you need for your goal, you may get there without even thinking about it.

Recommended: The Different Types of Savings Accounts

Common Places to Save Your Money

Where to put your money as you save? Consider these options:

•   Traditional savings account: You could put your money in a savings account at a financial institution, whether at a bank or credit union.

•   High-yield savings account: These accounts are likely to pay a much higher interest rate than a conventional savings account while offering the same convenience and security. They are often found at online banks.

•   CD: A CD gives you a specific rate of interest but you must agree to keep your money in the account (that is, not withdrawing any of it) for a specific term, whether that’s several months or years. Withdrawing earlier could trigger penalties.

•   Investments: There are many options here, such as Treasury bills and bonds. These can earn healthy returns and are typically considered safe places to keep money.

A quick note: While typically it’s a savings account that earns interest, some checking accounts earn a bit of interest, too. This can be especially true if you deposit your money in a checking account at an online bank. While it may not offer a high rate of interest, earning some money on what you keep in your checking account can contribute toward building your wealth.

The Takeaway

It’s important to save money for a variety of reasons. It can provide peace of mind, open up options that improve your quality of life, increase your wealth due to compound interest, and possibly lower your tax liability, and may even allow you to retire early. Many people earn wealth through a combination of working and savvy saving. Having the right banking partner can be part of the process.

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 are the benefits of saving money?

There are many benefits of saving money: It helps you save for your future, cover unexpected expenses, make major purchases, and have financial freedom. What’s more, the money you save can help make you more money, thanks to compounding interest and lowering your tax bill.

What are common things to save money for?

Common things to save money for are an emergency fund, retirement, a big purchase (like a car, a vacation, or the down payment on a home), and educational expenses, among others.

What happens if you don’t save money?

If you don’t save, you may lack financial security and the ability to meet certain aspirations. For instance, you wouldn’t have a retirement fund and would therefore have to keep working indefinitely. You wouldn’t have money for a big purchase like a car or a home or your child’s education. Plus you wouldn’t be able to handle some expenses, whether planned or unexpected, and might have to take out a loan or use credit cards, which means you are paying for the privilege to borrow funds. That takes away from your earnings.

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.

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

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

Third-Party 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.

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

SOBNK-Q125-034