For millennia, people have used precious metals like gold and silver to store their wealth. And while there are other options in the modern world, investing in gold is still quite popular. In terms of how exactly to do that, you may be able to buy gold with a credit card — but it may not be the best choice.
One of the biggest drawbacks to doing so are the credit card charges for gold purchase on credit cards. If you buy gold with a credit card, you’ll likely owe a processing fee on top of your purchase price. This can make investing in gold with a credit card a less desirable option, and it may make it worth considering alternatives.
Can You Buy Gold With a Credit Card?
It is possible to buy precious metals with a credit card, but it may not be the best investment option for you.
Part of what a credit card is includes processing fees, which are charged to merchants and often get passed down to the consumer. These fees typically range from around 1.5% to 3.5% of the purchase amount. If you have to pay processing fees in order to buy gold with a credit card, you may want to consider other investment options.
Guide to Buying Gold With a Credit Card
If you decide to buy gold with a credit card, here are a few steps to help guide your journey.
Searching for Reliable Dealers
First, you’ll want to look around for reliable gold dealers. There are many different websites where you can buy gold online with a credit card, and each site has its own pros and cons. It’s smart to read up on the company to help ensure you’re choosing a reliable dealer.
Comparing Prices and Reviews
Once you’ve found a few dealers who appear reliable, you can start comparing prices and reviews. Reading reviews from other investors can give you a sense of what you’re likely to go through with this particular dealer. You’ll also want to compare gold prices at different sites, since the price may vary from dealer to dealer.
Completing the Checkout Form
Once you’ve settled on a dealer, you can go through their checkout process. Before you enter your credit card or other financial details, you may need to enter in additional information. This will likely include your name and address or other identifying information.
Submitting Your Credit Card Details
You’ll then likely be taken to the checkout screen to complete your purchase. If you are using a credit card, you’ll enter your credit card information. Make sure to read the terms and conditions for your purchase, as some dealers charge a market loss fee if you cancel your order.
Completing the Purchase
Once you complete the purchase, you can await the delivery of your gold. If you’re taking physical hold of your gold, it will be shipped to your address on file. If you have made other arrangements, your gold will get delivered per the instructions you entered during the purchase process.
After the purchase is added to your credit card balance, make sure to follow essential credit card rules. This includes making on-time payments and attempting to pay off your balance in full each month to avoid paying interest.
Besides investing in gold with a credit card, there are a few other ways to buy gold.
Debit Card
You may be able to buy gold with a debit card, depending on the dealer that you choose. Investing in gold with a debit card may also come with processing fees. However, it’s common that debit card fees are less than those associated with using a credit card, given how credit cards work compared to debit cards.
ACH or Wire Transfer
Another option to consider is sending the money electronically through your bank. You may be able to fund your purchase using ACH or a wire transfer. Just make sure you understand any fees associated with buying gold in this manner.
Money Order
You also may be able to use a money order to invest in gold. How to do this will depend on the dealer you use. Generally, you’ll need to mail a money order to the dealer. Once your funds are deposited, you’ll be able to use them to make a gold purchase.
Cash Deposit
If you live near the physical establishment of a gold dealer, you may also be able to use cash to invest in gold. You can deposit your cash funds and then use that amount to purchase gold. Of course, you will want to be cautious if you are transporting a large sum of cash, as loss or theft are risks.
P2P Apps
Peer-to-peer (P2P) payment apps like Cash App, and Venmo may serve as additional ways to invest in gold. Check with your dealer to see if these (or any other) P2P apps are options to fund your investment. Also make sure you look at the terms and conditions to understand any additional fees that you may owe.
The Takeaway
While it is possible to invest in gold with a credit card, it may not be the best investment option. Not all dealers allow you to buy gold with a credit card, and many that do pass along processing fees of 1.5% to 3.5%. These additional fees mean that you may be better off with another type of investment or a different funding source.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
Does it still pay to invest in gold?
If you’re wanting to invest in gold, it can still make sense, depending on your individual financial priorities. The price of gold varies from day to day (and even within the same day), so just like any other type of investment, you’ll want to make sure you understand the underlying value and if or when buying gold makes sense for you.
Can you buy precious metals with a credit card?
You can buy precious metals like gold with a credit card, but it may not be the wisest investment option. Many credit card processors charge a fee to merchants using a credit card, and in many cases, that fee is passed down to consumers. This additional cost can mean it may not be worth it to buy gold with a credit card.
What are the charges for gold purchases on a credit card?
The exact list of fees and charges for buying gold with a credit card will depend on the exact dealer you use to make your purchase. It’s common for dealers to charge a processing fee (up to 3.5% or higher) if you use a credit card to buy gold.
Photo credit: iStock/Talaj
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Savings accounts sometimes have withdrawal limits, such as no more than six outgoing transactions per month. That’s because savings accounts are fundamentally different from checking accounts, which are designed for everyday spending.
Because money in a savings account is meant to primarily stay put and be added to, it earns interest. Checking accounts, on the other hand, generally offer no interest or a nominal interest rate, as it’s constantly flowing in and out. Due to this distinction, there are sometimes withdrawal limits on savings accounts.
Here, you’ll learn more about savings withdrawal limits, why they exist, when they are applied, and how you might be able to avoid them.
Key Points
• Savings accounts typically impose withdrawal limits to distinguish them from checking accounts, which are intended for regular transactions and spending.
• Regulation D historically limited convenient transactions from savings accounts to six per month, though this enforcement was lifted in 2020, allowing banks more flexibility.
• Many banks still impose withdrawal limits despite the change, potentially resulting in fees or account conversions if exceeded, emphasizing the importance of checking individual bank policies.
• Only certain transactions, like electronic transfers and debit card purchases, count toward the withdrawal limit, while in-person withdrawals and ATM transactions do not.
• To avoid exceeding withdrawal limits, use checking accounts for frequent transactions and consider making larger transfers to checking when anticipating more withdrawals.
How Many Times Can You Withdraw From Savings?
“How many times can I withdraw from savings?” is a common question. To help maintain the distinction between checking and savings accounts (and encourage people to save money), bank accounts traditionally come with savings account withdrawal limits. A federal rule called Regulation D used to limit certain types of transfers and withdrawals — known as “convenient transactions” — from a savings deposit account to no more than six a month.
That changed in April 2020, when the Federal Reserve removed the requirement that banks enforce the limit. However, many banks and credit unions have kept restrictions in place. They may charge a fee, transition your account to a checking account, or close it if you go over that amount.
💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.
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Why Is There a Savings Withdrawal Limit?
Savings account withdrawal limits stem from Regulation D, mentioned above, which is a federal regulatory rule that sets standards for how banks and credit unions oversee savings deposits. But why are these guardrails in place? Some points to know:
• One of the main reasons Regulation D exists is to ensure that banks and credit unions have the necessary amount of cash on hand to always cover customer withdrawals.
• When you deposit any amount of money in your bank account, the bank uses most of that money for other things, such as consumer loans, credit lines, and home mortgages. (They most likely loan that money at a higher rate than the interest rate they pay you, the savings account depositor. That’s one of the ways banks make money.)
• Banking institutions, however, face a legal requirement to have cash available to service customers. Withdrawal limitations help protect both banks and consumers.
• One of the other motivations for Regulation D is to encourage consumers to see their transactional accounts and savings accounts as separate.
• A savings account ideally encourages long-term savings, whereas checking accounts enable short-term spending. In some cases, these limitations can help motivate consumers to prioritize saving overspending.
Recent Changes in Savings Account Withdrawal Rules
Because of the financial strain caused by the coronavirus pandemic, the Federal Reserve altered the rules regarding Regulation D in April 2020. Currently, depository institutions have the ability to suspend enforcement of the six transfer limit.
Regulation D
As you’ve learned, in the past, Regulation D was in place and enforceable in order to limit the number of transactions flowing out of savings accounts. This encouraged bank customers to keep money in savings accounts, hopefully save for their goals, and allow banks to use the funds on deposit, confident that the money wouldn’t constantly be flowing in and out.
Now, however, financial institutions can allow their customers to make an unlimited amount of convenient withdrawals and transfers from their savings accounts. The word “can” is important here.
Just because banks aren’t required to follow the six transaction limit anymore, however, doesn’t mean they won’t continue to penalize the account holder for going over that limit.
Many banks still enforce caps on the number of convenient transactions customers can make from their savings accounts.
It can be well worth your while to check in with your financial institution and find out what policies are in place regarding savings withdrawal limits.
💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.
Which Transactions Apply to the Cash Withdrawal Limit?
Only “convenient transactions” count towards the monthly withdrawal and transaction limits that consumers face when managing their savings account. But what exactly are convenient transactions?
Regulation D sees these types of transactions as convenient transfers:
• Transfers or wire transfers made by phone, fax, computer, or mobile device.
Which Transactions Don’t Count Toward the Withdrawal Limit?
While the six transaction limit per month can sound fairly strict, it does not mean account holders can’t access their savings accounts more than six times a month.
Whatever type of savings account you have, there are less-convenient transfers you can make that do not count towards the monthly limit. These include:
• Withdrawals or transfers made in-person at the bank.
As mentioned above, Regulation D defines convenient transfers to include such transactions as:
• Transfers, whether by check, electronic funds transfer, overdraft, or other means.
• ACH transfers
• Payments made with your debit card.
What If I Go Over The Savings Withdrawal Limit?
The penalty for exceeding the cap set by your bank for savings transactions will depend on your institution.
You may be charged a fee, and even if your financial institution charges a low (or no) fee for exceeding the cap on transactions per month, you may still want to watch how many withdrawals or transfers you make.
The reason: If there are excessive withdrawals from a savings account, financial institutions have the right to convert the savings account into a checking account or even close the account.
Savings Withdrawal Limit Fees
If you are charged a fee for too many convenient transactions, it might be called a “withdrawal limit fee” or “excessive use fee.” These fees tend to run anywhere from $1 to $15 per transaction.
In some cases, you might ask your bank and see if they would waive the fee.
3 Tips to Avoid Hitting Withdrawal Limits
If your financial institution does have withdrawal limits, here are a couple of ways to avoid fees.
Use Your Checking Account
One simple way to avoid overstepping savings account withdrawal limits, is to use your checking account for most of your transactions.
It can be easy to get your accounts mixed up when you are banking online or in an app. By learning which account is which as you transfer funds, you can minimize use of your savings account.
Do a Single Large Transfer to Checking
If you think you will need to use your savings account to make more than six (or whatever your bank’s current transaction limit is) in a given month, consider making one substantial transfer from savings to checking at the beginning of the month.
You can then arrange to have your withdrawals or automatic bill payments taken right out of checking.
Try Work-Arounds If You Get Close to Your Limit
If you are already at your limit, you can avoid penalties by visiting the bank in person or using the ATM to initiate withdrawals or transfers from your savings account. (You may want to make sure, however, that you’re not triggering any out-of-network ATM charges.)
💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
Opening a Bank Account with SoFi
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
How much can you withdraw from your savings account?
Individual banks set limits about withdrawals, both the number and the amount, often according to method (such as ATM withdrawals). Check with yours to learn the specifics.
Why can you only withdraw 6 times from savings?
Regulation D set the number of convenient transactions out of a savings account at six to encourage people to save and to leave their funds in the account, earning interest. The bank, in turn, could count on having a significant amount of those funds to use in their business activities.
Can banks stop you from withdrawing money?
Your bank account can be frozen, which will stop you from withdrawing money. Your bank may do this if they think illegal activity is occurring, or if a creditor or the government requests it.
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.
Putting cash into a savings account can be one way to help your money grow, not only by stashing it away so you don’t spend it, but also by potentially earning interest as it sits in the account. One type of interest-earning savings account you might want to0 consider is a tiered-rate savings account.
The interest rate that a tiered-rate savings account earns typically increases as the amount of your savings increases — which can make saving cash even more motivating.
Key Points
• A tiered-rate savings account offers multiple interest rates based on the account balance, encouraging higher savings as interest rates increase with larger deposits.
• Minimum balance requirements often apply to open and maintain tiered-rate accounts, along with potential monthly transaction conditions to retain higher interest rates.
• These accounts generally provide higher interest rates compared to traditional savings accounts, allowing savings to grow more rapidly through the effects of compound interest.
• Investing in tiered-rate accounts may yield lower long-term returns compared to other investment options, like stock market investments, due to lower interest rates.
• Alternatives to tiered-rate savings accounts include high-yield savings accounts, money market accounts, and certificates of deposit, each with varying benefits and requirements.
What Is a Tiered-Rate Savings Account?
A tiered-rate savings account is a savings account that has multiple interest rates that can be applied, depending on the amount of money in the account.
The way tiered-rate savings accounts generally work is that as the account holder’s savings grow, their interest rate on the savings account also rises. Interest rates for these accounts are offered on a tiered scale with the largest balances getting the highest interest rates.
A tiered savings account might encourage customers to save more money as they work towards earning the highest possible interest rate. It may also keep account holders loyal to their current bank with a long-term account.
How Do Tiered-Rate Savings Accounts Work?
If you open a bank account that’s a tiered-rate account, the higher your balance is, the higher your interest rate is likely to be. That means as your balance grows, your interest rate has the potential to rise, and your savings may grow more quickly.
Tiered-rate accounts offer account holders different “tiered” interest rates that correspond with different account balances. For example, if a bank offers a tiered-rate savings account they may give a 0.05% interest rate for savings account amounts up to $25,000. For savings ranging from $25,000 to $100,000 they may raise that interest rate to 1.00%.
Tiered-rate savings accounts tend to have a minimum balance threshold needed to open an account for the first time. Typically, a minimum daily balance must also be maintained. In addition, these accounts may require that their holders make a minimum amount of monthly transactions, such as making deposits or transferring money to another account.
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Characteristics of Tiered-Rate Accounts
The following features are typically associated with tiered-rate accounts:
• Interest rates rise as account balances grow
• Minimum initial deposit and ongoing balance requirements
• Minimum monthly transaction requirements
Pros of Tiered-Rate Savings Accounts
These are some of the advantages to having a tiered-rate savings account:
Opportunity to Earn Higher Interest Rate on Savings
Tiered-rate savings accounts typically offer higher interest rates than traditional savings accounts do — especially for motivated savers who work to increase their account balances.
Potential for Money to Increase Quicker
Because interest rates can be higher with tiered-rate savings accounts, it’s possible for money held in these accounts to grow faster than it might in other types of savings account, as long as it remains in the account. Because of the effect of compound interest, your money could make more money.
Cons of Tiered-Rate Savings Accounts
There are also some disadvantages of tiered-rate savings accounts that are worth keeping in mind.
Putting Money Elsewhere May Be Better to Build Wealth
The interest rates offered by tiered-rate accounts tend to deliver a lower return when compared to some other investments over time, such as investing in the stock market. While investing in stocks is considered far riskier than earning interest in a savings account, investors could potentially see a higher return over the long term from stocks. This could be helpful when saving for long-term goals like retirement.
Need a Larger Account Balance for the Highest Rates
To secure the best interest rates through a tiered-rate savings account, account holders may need to keep a large sum of money in their savings account. If someone doesn’t have that amount of money, they may find that a standard savings account is better for them.
Here is a chart comparing the pros and cons of tiered-rate accounts:
Pros of Tiered-Rate Accounts
Cons of Tiered-Rate Accounts
Opportunity to earn higher interest rates on savings
Putting money elsewhere may be better for building wealth
Potential for money to increase more quickly
Need a larger account balance for the highest rates
Alternatives to Tiered-Rate Savings Accounts
If you’re looking to earn money on your savings, there are a few different vehicles you can consider for earning competitive interest on your funds.
• High-yield savings accounts: High-yield savings accounts are similar to standard savings accounts, but they earn much higher interest rates. High-yield savings accounts are often found at online banks. These financial institutions don’t have to finance bricks-and-mortar branch locations, so they may pass along the savings to their customers in the form of higher interest rates, lower fees, and/or special bonuses.
• Money market accounts: Money market accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) like savings accounts. They tend to have higher annual percentage yields (APYs) than traditional savings accounts. There is, however, a potential downside: Money market accounts may have significantly higher minimum deposit and balance requirements, and they might also have withdrawal limits much like some savings accounts do.
• Certificate of deposit (CD): Certificates of deposit vs. savings accounts can be a wise choice for some consumers. CDs are time or term deposits, meaning the money stays in the account for a specific period of time (typically six months to a few years, though longer and shorter terms are available). If you withdraw the funds before the maturity date, or the end of the term, you will likely pay a penalty fee. Because of the time commitment involved, CDs may offer higher interest rates than savings accounts and money market accounts.
The Takeaway
If an individual has a sizable amount of money to deposit, they may find that a tiered-rate savings account could be a good option. This type of account offers a way to earn a higher interest rate the more the account holder has in the account.
If, however, a person is just starting their savings journey, a traditional savings account may be a better fit. Either way, an aspiring savings account holder should evaluate such variables as interest rate, minimum deposit and balance requirements, and account fees. That can help them find the right savings account for their needs.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
What is tiered APY?
Tiered-rate accounts offer account holders different tiered APY, or annual percentage yield, which is how much you will earn on your cash over the course of a year. The amount of money an account holder has on deposit will qualify them for a certain tier or level. Typically, the more money on deposit, the higher your APY.
What is tiering in banking?
Tiering in banking refers to tiered-savings accounts, which provide account holders with different interest rates based on the balance in their savings account. Usually, the higher someone’s account balance is, the higher their interest rate is.
Is a tiered interest rate good?
A tiered interest-rate structure tends to benefit savers who have high account balances because the more money you have on deposit, the higher your interest rate. If someone has a smaller amount of savings, a traditional or high-yield savings account with a single interest rate may be more advantageous to them.
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.
*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.
Making a budget can be the foundation of taking control of your money and reaching your financial goals. It can help you get in touch with the cash you have coming in, your spending, and your savings. Put simply, a budget can get your financial life in balance.
The math involved doesn’t have to be complicated, and a good budget can be easily revised to align with changes in your life, whether that’s a rent increase or a raise at work. Read on for the five simple steps to creating a budget that can boost your financial savvy and make your money work harder for you:
Key Points
• Establishing clear financial goals serves as the foundation for effective budgeting and motivates individuals to manage their money intentionally.
• Calculating total income accurately is essential for understanding the financial resources available for budgeting purposes.
• Reviewing monthly expenses helps identify spending patterns and distinguishes between needs and wants, enabling better financial decisions.
• Selecting an appropriate budgeting method, such as the 50/30/20 rule, helps allocate funds efficiently towards essentials, discretionary spending, and savings.
• Regularly adjusting the budget in response to life changes or unexpected expenses ensures it remains effective and aligned with financial goals.
Setting financial goals is a crucial first step to being more intentional with your money management tactics. As in, having a purpose can give you more motivation to stick to your budget and get you on your way to creating smart financial goals that suit your life.
How to set financial goals? Start by taking time to come up with a clear idea of your short-term and longer-term aspirations. What kind of things could you dream about? Anything that’s ultimately important counts.
Examples of financial goals could include:
• Having $1,000 in the bank
• Hosting an amazing 30th birthday party for your partner
• Buying a home
• Saving enough to cover your kid’s college tuition
Before allocating money for various spending categories and goals, you need to know how much money you have to work with each month. Calculate your income — you can look at your paystub and/or other earnings from your side businesses or second job. Or maybe you are the lucky holder of an investment account that generates dividends. Perhaps you regularly receive bonuses or tips at work. Add it all up.
💡 Quick Tip: Make money easy. Open a bank account online so you can manage bills, deposits, transfers — all from one convenient app.
Check out our Money Management Guide.
This article is from SoFi’s guide on how to manage your money, where you can learn basic money management tips and strategies.
3. Review Your Expenses
To make a solid, workable budget, you also need to know exactly how much money is typically going out. Pull together all your financial statements and look at how much you typically spend per month for different categories.
Budget categories can include:
• Loans (such as student or car loan payments) and debt (including credit cards)
• Insurance premiums
• Housing
• Utilities
• Monthly food expenses
• Childcare, child support, or related family obligations
• Transportation-related expenses
• Healthcare
• Savings/investments (for instance, 401(k) or IRA automatic savings deductions).
In addition, think about some other spending categories that are more about discretionary purchases. This is about identifying wants vs. needs. For instance, in terms of wants, you can also track discretionary spending:
• Dining out (even those lattes to go)
• Entertainment, such as movies, books, concert tickets, and streaming services
• Personal care (manicures, yoga classes, etc.)
• Travel
• Gifts or treating friends to birthday drinks or dinners
• Non-essential clothing, electronics, home furnishings, and any other fun things you might go shopping for.
As you gather this information, you may want to look at a couple of months’ worth of records. For example, your credit card bill may vary considerably, so averaging a few months will give you a more realistic picture than checking a single month.
Once you have an idea of what you spend, it’s time to take a look at where you may be able to make adjustments.
• Many people look at their spending as “needs” versus “wants.” A need is something required for basic existence, while a want is discretionary spending. Needs also include debt payment, so if you have a student loan or similar monthly expenses, include that in the need category.
• Also consider looking at each spending category in terms of fixed and variable expenses. For instance, your mortgage is a fixed expense since it typically won’t change from month to month, whereas entertainment would be a variable expense since it can change. Don’t forget to look at occasional expenses — like semi-annual car insurance payments — so you can set aside money in your budget each month to account for this expense.
💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.
4. Choose Your Budgeting Method
Subtract your monthly expenses from your monthly income. How are you doing? If there’s money left over, it means you may be able to meet your financial goals. Otherwise, you may need to either cut your expenses a bit or earn more money (or try a combination of both).
Whichever direction your money is trending in, you can benefit from a budget to get your cash aligned with your goals and provide guardrails for your spending and saving.
While there are a bunch of budgeting methods, what’s most important is to find an organizing principle that works for your personal and financial style. Some options to consider:
• 50% on essential expenses. This category could include housing costs, utilities, car payments, debt payments (student loans, credit card minimums due, etc.), education costs, food, basic clothing, childcare, and medical expenses.
• 30% on discretionary expenses. Your discretionary expenses could include shopping, entertainment, personal care, travel, and other expenses that may not necessarily be considered essential.
• 20% toward your goals. This amount of money can go into savings and investments as you work toward things like an emergency fund, a new car, retirement, and/or covering your child’s college education expenses.
The 70/20/10 rule is another type of budgeting method. It’s similar to the 50/30/20 one, but you organize your money differently. In this case, you divide it up as follows:
• 70% toward spending on both needs and wants
• 20% toward saving
• 10% toward debt payoff and/or giving.
This budget can be a good variation for people who want to be sure they are covered for that debt payoff and/or giving category.
Zero-Based Budget
The zero-based budget system gives every single dollar a purpose so that every bit of your income is accounted for. You start with your monthly income then keep subtracting expenses (even savings or a sinking fund counts here) until you get to zero. This system can help you be more mindful since you know how your money is allocated.
The Envelope Budget System
With this technique, you write the name and cash amount you have for each spending category for a month. For example, you allocate $2,000 for housing for one envelope, and $600 for food in another. You can only spend the allocated amount in each category.
If there is no more cash in the envelope but the month isn’t over yet, you will need to wait until the next month to replenish it or borrow from another category and spend less there. For instance, if you need cash for an insurance premium that went up, you could save on streaming services by dropping a platform or two while you adjust your budget.
This method can be adapted to use debit card payments. You don’t have to literally only use cash.
5. Make Adjustments
A budget is a dynamic, living entity. Some months may be more expensive than others. For instance, you might have an emergency one month (your laptop dies) and wind up spending more (or even going into debt) to make ends meet. Life happens: use these situations to learn and readjust.
You can also look for trends in your money. If you find you are living paycheck to paycheck, you might find ways to economize (such as getting a roommate) or to earn more money.
After using your new budget plan, you should review and update it regularly. You may need to do it more often at the beginning of your budgeting journey when you’re getting used to looking at your finances in a new light. Still, it is typically useful to review your spending at the end of each month to see if your budget is still working for you. If not, then take the time to see what may be happening and tweak your spending as necessary.
Another reason you may want to make adjustments is if your life situation changes, such as you have a baby or get a divorce. Or your income may have gone up, so you will need to think strategically about how best to allocate those dollars to help you reach your financial goals.
Why Is Creating a Budget Important?
Creating a budget is important because it allows you to see where your finances stand: You see how much money is coming and how much is going out, plus what it is being spent on.
It can provide you with a snapshot of your financial life, and it can illuminate any issues you need to address. Think about it: If you don’t know where your money is going, you can easily spend more than your means, leading to more debt than you can handle. Not budgeting can also prevent you from reaching your goals, such as having enough in retirement savings or being able to afford that kitchen renovation you’re pining for.
Although some people think a budget will cramp their style, the truth is that a budget doesn’t have to hold you back, restrict you from fun, or sour your lifestyle. It can eventually set you free from the financial burdens that are keeping you from setting and reaching your ultimate life goals.
Monthly Budget Example
Here is an example of a family’s monthly budget:
Total monthly income: $4,650
Monthly breakdown of expenses:
Monthly income
$4,650
Monthly expenses
Rent
$2,000
Groceries
$400
Student loan payments
$337.50
Car payment
$150
Credit card payment
$300
Discretionary spending
$232.50
Utilities
$330
Auto & renters insurance
$150
Career enrichment class
$60
Savings
$400
TOTAL:
$4,360 ($290 surplus)
How to Handle Unexpected Expenses in Your Budget
You know how it goes: Life can be filled with unexpected expenses, such as a car repair or larger than expected medical bills. Instead of letting these derail you, work unexpected expenses into your budget.
There are several ways you can go about it, one of which is to have a bit of a buffer in your account. Meaning, you can allocate some extra cash each month just in case — any money that isn’t spent, you can roll it over onto the next month. It can act as a cash cushion in your checking account.
You can also consider building up an emergency fund, a separate set of savings in case you have unexpected expenses. The amount will vary, but a good rule of thumb for how much to have in an emergency fund is to save three to six months’ worth of basic living expenses.
💡 Quick Tip: An emergency fund or rainy day fund is an important financial safety net. Aim to have at least three to six months’ worth of basic living expenses saved in case you get a major unexpected bill or lose income.
How to Work With Your Family or Partner to Create a Budget
Creating a budget with others means being open to a conversation about what each one needs and how you can keep each other accountable. It can start by having a meeting about family spending. You can discuss and agree to budget goals and reasonable expenses and use a budget planner to help you solidify things.
Once a preliminary budget is created, find a way to ensure that everyone sticks to it. Some tactics include having one joint account to ensure everyone can track spending or having an app where your partner or family can see an overview of the finances. Whatever you choose, it’s important to meet regularly to review your budget to see whether adjustments need to be made.
The Takeaway
Creating a budget to set and reach your financial goals doesn’t have to be hard, and it can be a great way to guide your spending and saving. While there are many approaches and techniques to try, what matters most is finding one that is a good fit for you personally and helps you feel in control of your cash. By learning how to manage your money well, you can be on track to crush your personal and financial goals, whether short- or long-term.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
Why is creating a monthly budget important?
Creating a budget is important because it allows you to see where your finances stand: You see how much money is coming and how much is going out, plus what it is being spent on. It can also help illuminate any issues you need to address.
What are some common budgeting mistakes to avoid?
Common budgeting mistakes include not tracking your spending, not saving enough (say, for an emergency fund or retirement), and forgetting to plan for occasional expenses, such as membership renewals, car maintenance, and holiday gift giving.
How often should I review and update my budget?
It’s wise to review and update your budget regularly. Some people may want to do so monthly; others, quarterly. You can find the right frequency to suit your needs. It’s also a good idea to tweak your budget after big life events, such as moving, getting married, or having a child.
How can I involve my family or partner in creating and sticking to a budget?
To involve others in creating and sticking to a budget, you might first meet and develop the plan together. Then, you could share accounts and both (or all) use an app so that all involved are watching where the money is going. This can help everyone stay on track.
How can I handle unexpected expenses in my budget?
You can allocate a bit of money in your budget to be “just in case” funds. This cash cushion or buffer can help if there’s an unexpected expense. If you have a major unplanned expense, you might have to dip into emergency savings; that’s why it’s crucial to have this kind of safety net.
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.
Saving money can be daunting. But what if you could make it seem less like a chore and more like a game? That’s the idea behind TikTok’s viral 100 Envelope Challenge. With this popular money-saving hack, you set aside a predetermined dollar amount in different envelopes each day for 100 days. By the end of the challenge, you’ll have saved over $5,000.
One of the appeals of the 100 Envelope Challenge is that you visually see your progress as you fill up each envelope, which can make the process of saving more tangible and fun. And like many savings challenges, this money game can help you save a sizable sum in a short period of time.
That said, the 100 Envelope Challenge may not be realistic for everyone. Here’s a closer look at how it works, its pros and cons, plus some other fun saving strategies to consider.
Key Points
• The 100 Envelope Challenge is a savings technique where participants set aside increasing amounts of money daily for 100 days, aiming to save over $5,000.
• Participants can choose to fill envelopes in numeric order or randomly, providing flexibility in their savings approach tailored to individual preferences.
• The challenge encourages financial discipline and provides a visual representation of progress, motivating individuals to stay committed to their savings goals.
• While the challenge is simple to start, it may pose difficulties for those with tight budgets, as it requires consistent cash contributions over the designated period.
• Alternatives to the challenge include shorter savings plans, like the 30-Day Savings Challenge or digital methods such as rounding up spare change from transactions.
What Is the 100 Envelope Challenge?
The 100 Envelope Challenge, also known as the 100-Day Money Challenge, is a savings technique that involves setting aside a specific amount of money each day for 100 days. The goal is to accumulate $5,050 in just over three months.
The concept is simple: You start with 100 envelopes and number them from 1 to 100. On day 1 of the challenge, you put $1 into envelope #1. On day 2, you put $2 into envelope #2. On day 3, you put $3 in envelope #3. You continue this pattern, increasing the amount by $1 each day until you reach the 100th day, when you deposit $100.
There are also variations on the game. For example, instead of stuffing envelopes in chronological order, you can shuffle the envelopes, put them in a bucket or basket, and then randomly pick one each day. This allows you to alternate between low and high cash amounts throughout the challenge.
If your budget is tight, and saving $5,050 in 100 days isn’t feasible, you can do the 100 Envelope Challenge over 100 weeks, rather than 100 days. You’ll still get to $5,050 — it will just take longer.
And if you’re not a fan of cash, you can do the challenge digitally. Simply download a free “100 Envelope Challenge” printable (widely available online). You then check off the “envelopes” in order (or use an online number generator to pick a random number each day). Once you’ve selected your envelope number, you transfer that amount to your savings account. If you open a high-yield savings account, you’ll have the added advantage of earning competitive interest on your cash.
Earn up to 4.00% APY with a high-yield savings account from SoFi.
No account or monthly fees. No minimum balance.
9x the national average savings account rate.
Up to $2M of additional FDIC insurance.
Sort savings into Vaults, auto save with Roundups.
How to Do The 100 Envelope Challenge
Here’s a step-by-step guide to the original 100 Envelope Challenge.
1. Assemble Your Supplies
You’ll need 100 plain envelopes and a marker or pen to set up the challenge. If you don’t normally carry cash, you’ll also want to hit the ATM and withdraw some money to cover you for the first week. You’ll likely make multiple trips as you make your way through the challenge — and your paychecks get deposited.
Label each envelope with number, starting with #1 and ending with #100. You’ll also want to find a safe place to keep your envelopes, such as a box, drawer, or safe. The idea is to keep them accessible but still secure.
3. Start Stuffing
Each day, pick out an envelope in chronological order (or, as an alternative, you can choose randomly) and place the corresponding amount of cash inside.
4. Stay Consistent
The key to any money-saving challenge is consistency, so do your best to stick to the rules as closely as you can. If you miss a few days, don’t give up — simply dust yourself off and get back on track. Or consider switching to a weekly or biweekly schedule to make the challenge more manageable.
5. Put Your Savings to Good Use
When you reach the finish line, it’s time to put your envelope cash to good use. For example, you might use your $5,050 to start your emergency fund (if you don’t already have one), pay off credit card debt, or fund something fun like a vacation. Or you might use the money to get started on a larger, long-term goal, like a home down payment, kid’s college fund, or retirement savings.
How Much Money Is Involved in the 100 Envelope Challenge?
By the end of the 100 Envelope Challenge, you will have saved a total of $5,050. You get to this amount by progressively increasing your daily (or, if you prefer, biweekly or weekly) deposit, starting with $1 and ending with $100. While the amounts may seem small at first, they add up over time, demonstrating the power of consistent saving.
The 100 Envelope Challenge comes with both pros and cons. Here are some to consider before you decide to jump in on the trend.
Pros of the 100 Envelope Challenge
• Easy to start: You don’t need to comb through bank statements and set up spreadsheets to start this savings plan. All you need to get going are envelopes and some cash.
• Visual progress: The envelopes provide a visual representation of your progress. Watching them stack up can motivate you to keep going.
• Builds discipline: The challenge encourages regular saving habits, helping to build discipline and financial responsibility.
• Flexible: You can adjust the challenge to fit your budget, preferences, and savings goals.
Cons of the 100 Envelope Challenge
• Cash-based: The default design relies on using cash, which may not be convenient for everyone.
• Risk of loss: Keeping cash in envelopes can be risky, since they can potentially get lost or stolen.
• It’s not all fun and games: Even though it’s a game, you’ll likely need to cut back on spending (and, yes, fun) to come up with the cash you need to stick with the program, especially near the end, when you’re stuffing large sums every day.
• Not realistic for everyone: If your monthly essential expenses are already close to your monthly income, you might find it difficult to stick with a 100-day Envelope challenge.
Alternatives to the 100 Envelope Challenge
While the 100 Envelope Challenge is a popular savings method, it may not be the right approach for everyone. Here are some alternatives to consider.
• The 30-Day Savings Challenge: Here, you start with just 30 envelopes, numbered 1 through 30. Each day, you’ll save the amount indicated on the envelope you choose. You could go in order or shuffle the envelopes and randomly select one. At the end, you’ll have saved $465.
• The Spare Change Challenge: This involves saving the spare change from your everyday transactions. You can do it manually, by dropping your spare change into a jar each day and, once it’s filled, bringing it to the bank. Or you can do it digitally, using an app that automatically rounds up your purchases and transfers that money into savings. Either way, you’ll accumulate savings without much effort
• No-Spend Challenge: In a no-spend challenge, you commit to not spending money on non-essential items for a set period of time, such as a week or a month. This can help you identify and eliminate unnecessary expenses, allowing you to save more money.
• Savings Percentage Challenge: In this challenge, you commit to saving a specific percentage of your income each month, such as 10% or 20%. To make it easy, you can set up an automatic transfer from checking to savings for this amount for the same day each month (ideally right after you get paid). This can help you save consistently and build your savings over time.
The 100 Envelope Challenge is a simple yet effective way to save money and build financial discipline. By following the steps and sticking with the program, you can reach your savings goal and have a tangible reminder of your progress along the way.
If socking away $5,050 in a little over three months feels too challenging, however, you might want to try one of the many other ways to gamify saving. The best approach to boosting the balance in your savings account is the one you’ll stick with.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.
FAQ
Can I save $5,000 in 3 months with 100 envelopes?
Yes, it’s possible to save around $5,000 in three months with the 100 Envelope Challenge. The challenge is designed to be completed over 100 days, which is a little over three months.
How it works: You gather 100 envelopes and number them from 1 to 100. Each day you fill up one envelope with the amount of cash to match the number on the envelope.You can fill up the envelopes in order or pick them at random. After you’ve filled up all the envelopes, you’ll have a total of $5,050 saved.
How long does it take to complete the 100 envelope challenge?
The 100 Envelope Challenge is designed to be completed over 100 days. Each day, you deposit a specific amount of money into an envelope, starting with $1 on day #1, and increasing by $1 each day until you reach $100 on day #100. By then, you’ll have saved $5,050.
You can also choose to do the 100 Envelope Challenge over 100 weeks, filling each envelope according to the week number. In this version, you’ll save $5,050 in a little less than two years.
What are other money saving challenges besides the 100 envelope challenge?
There are several other money-saving challenges that you can try besides the 100 Envelope Challenge. Some popular alternatives include:
• 30-day Savings Challenge Here, you start with 30 envelopes, numbered 1 through 30. Each day, you put cash into an envelope, basing the amount on the number written on the envelope you choose. At the end, you’ll have saved $465.
• No-Spend Challenge With this approach, you commit to not spending any money on non-essentials for a set time period, say a week or a month. This can boost your bank account and highlight how much you spend on unnecessary purchases.
• Savings Percentage Challenge In this challenge, you commit to saving a specific percentage of your income each month, such as 10% or 20%. If you set up an automatic transfer, you can build your savings without even thinking about it.
Photo credit: iStock/solidcolours
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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