The Pros and Cons of Unpaid Internships

The Pros and Cons of Unpaid Internships

Paid and unpaid internships can provide students with relevant work experience in their field of choice. But while both opportunities offer knowledge and training, only one rewards you with a paycheck.

Although paid internships are more common, it doesn’t mean everyone can land one. So if you want the experience and don’t want to pass up a chance to beef up your resume, you may have to work for free. Spending several months at an unpaid internship can be difficult, especially if you’re already carrying debt, dealing with high living expenses, or need to work a paying job.

Whether interns should be paid or not is an ongoing debate with a lot to consider before committing to one. Find out about the pros and cons of an unpaid internship to see if it’s worth the investment.

What Is an Unpaid Internship?

An unpaid internship is a temporary work arrangement offered to graduate or college students, or as internships for high school students, so they can gain training and knowledge by working in their area of interest. Interns are able to perform duties related to their chosen career, observe professionals in a workplace setting, and receive direct guidance from mentors.

These non-compensated arrangements differ from an apprenticeship, which is designed to provide hands-on training in a specific trade or industry. Apprenticeships are paid and wage increases occur as new skills are acquired.

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Are Unpaid Internships Legal?

Yes, according to the The Fair Labor Standards Act (FLSA), which states that “for-profit” employers must pay employees for their work. However, interns and students may not be “employees,” in which case the law doesn’t require payment for their work. If an internship qualifies as paid, companies must pay their interns at least minimum wage for their services plus any overtime.

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How Do Unpaid Internships Work?

Unpaid internships typically require you to work for a specific period of time during the school year or during the summer. The program may ask you to work on site, but with the increase in some employees working from home, remote internships have become more of a possibility.

Before you start your internship, you’ll likely discuss what you’ll be doing and when you’ll be able to work with your supervisor. Since you’re not being compensated, you’ll probably have more flexibility with scheduling.

It’s important to remember an unpaid internship isn’t volunteer work and should be more beneficial to you than the business or organization. After all, the reason you’re there is to receive training and education you simply can’t get by sitting in a classroom.

Pros of Taking Unpaid Internships

Building your professional resume can be priceless and let’s face it, your calling card once you hit the job market. Besides offering exposure to what it will be like working in your specialty, you’ll build potentially lifelong connections with people who may be able to open doors for you down the road.

There are many ways an unpaid internship can help prepare you for future career success. Here are some significant advantages:

Getting Valuable Experience

As an intern, you’ll get actual hands-on training that attracts future employers. According to the National Association of Colleges and Employers (NACE), applicants with industry internship experience have a leg up when it comes to employers’ hiring decisions.

Working as an intern allows you to develop crucial skills you’ll need in a professional setting, such as how to communicate effectively and collaborate with others. These abilities can make you even more of a stand out to prospective employers.

Valuable experience gained from an internship isn’t exclusive to undergrads. Already have your degree? You can still build upon your knowledge with an unpaid post graduate internship. These secondary education opportunities allow you to keep actively learning while you’re pursuing full-time employment or, if you want some down time after graduation.

Networking Equals Potential Opportunity

Making connections is one of the most important things you can do to grow your career. In fact, an estimated 80% of all positions are filled through networking. Many jobs aren’t publicly advertised so if you’ve left a positive impression, you may be the first person your past internship boss calls when a job opens up. Even if your internship doesn’t culminate in employment, building a solid network and maintaining relationships can pay off if you need a future job reference, letter of recommendation, mentoring, or career advice.

Companies Offering College Credit

Many companies will offer unpaid internships for college credits as compensation for your work. Knowing you’re receiving credits towards your degree, which can be a form of currency in its own right, may help justify the decision to take an unpaid internship.

Working in a Relevant Field

Internships give a preview of what it may be like working in your area of expertise, placing you in an environment where you’re exposed to the latest technology, industry norms, and business culture. With some concrete training spent working in your field, you may be more likely to be hired compared to someone with zero internship experience or those who have interned in an unrelated field.

Helps With Making Future Career Decisions

During an unpaid internship, you may come to the realization your selected career isn’t all you imagined. In this case, you could save yourself from wasting valuable time in the future and start exploring other career options. On the other hand, your internship could crystallize how much you love what you’re doing, validating you’ve made the right choice.

You may also decide to continue on with your education as something to do after college instead of entering the job market right away. This could be an ideal time to fit in an unpaid internship before pursuing a graduate degree.

Recommended: How to Make a Budget in 5 Steps

Cons of Taking Unpaid Internships

The main cons of unpaid internships center around the obvious: no financial compensation for your efforts. Unpaid internships can also create barriers for disadvantaged or low-income students, possibly eliminating some extremely qualified candidates from gaining training and having a shot at making a serious contribution to a company.

Consider these downsides when thinking about applying for unpaid internship:

No Money for Your Hard Work

Strapped with tuition and other college-related costs, many students simply can’t work without pay. Participating in an unpaid internship can require commuting or even relocation during the summer months, increasing your need to have money in a bank account or earning it at another job.

Often Not Receiving Company Benefits

As an unpaid intern and temporary worker, you’re not entitled to the same benefits of a paid employee, such as paid vacation days, medical insurance, or the ability to contribute to a 401(k). Performing duties similar to a permanent employee’s and not gleaning any of the perks may also lead to feeling resentful, unappreciated, or lonely, especially if you’re the only one working while employees get to leave early for a three-day holiday weekend.

Possible Inequalities in the Workplace

Student interns who aren’t paid may find themselves doing more menial tasks and feel looked down upon by other employees. Staffers may be dismissive, impatient, condescending, or exclude them from conversations because they’re the intern.

One major criticism of unpaid internships concerns the perpetuation of socioeconomic and racial inequities. For example, the National Association of Colleges and Employers 2023 study found that white students were more likely to have paid internships than Hispanic or Black students.

Potential Lower Future Income

Showing you’re willing to work for free may give employers the idea you might accept a lesser amount compared to someone who had a paid internship. Making this assumption on their part could lead to a lower salary offer.

Recent research by the Strada Education Network found having a paid internship as an undergraduate is linked with a predicted increase in annual wages of $3,096 just one year after graduation. Unpaid internships, practicums and cooperative learning aren’t associated with higher earnings post-graduation, the study reports.

Are Unpaid Internships Worth It?

Of course, it’s an individual choice based on a student’s particular circumstances, but unpaid internships can be worthwhile. Even if you’re not being compensated, these situations can provide training you can only get by working with professionals and mentors. Taking an unpaid internship could take the pressure off some of the expectations, duties, and necessary time commitment you’re more likely to have as a paid intern.

The Takeaway

An unpaid internship can pay off in significant ways such as offering college credits, meeting and networking with people in your field, and providing solid work experience to bolster your resume. Unpaid internships can also help you decide whether or not you’re on the right career path. But, interning without compensation can pose some major challenges for those who can’t afford to work for free. Before applying, think through the pros and cons to help you determine your best route to working toward your career and financial goals.

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FAQ

Are unpaid internships exploitation?

A criticism of unpaid internship programs is that they take advantage of a student’s free labor without providing any practical experience or educational benefits. While you may be asked to move some boxes or go on a coffee run, an unpaid internship that is not exploitative should mostly involve tasks that expand your skill set and teach you about your future career.

Is there a better workflow if interns are paid?

Interns help boost a company or organization’s workflow regardless, but paid interns may boost workflow more, since being financially compensated is associated with feeling satisfied and valued, which in turn is connected to productivity.

What percentages of companies offer unpaid internships?

Research shows that nearly 41% of interns in the U.S. are unpaid, and 59% are paid.


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

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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.

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Getting a Second Job: The Pros and Cons

Getting a Second Job: The Pros and Cons

Many of us have had that moment where we think, “I need to earn more money.” If you are feeling the pinch of rising expenses plus a static income, you might consider getting a second job to boost your monthly take-home pay.

You’re not alone. According to the Federal Reserve Bank of St. Louis, 8.4 million people in the U.S. have multiple jobs, which is more than 5% of the workforce. That figure, however, may not capture the full impact of the Gig Economy, and all of those who sometimes hop behind the wheel of an Uber or otherwise do freelance work.

Working more than one job can help you save money, but it can also be a challenge. To help better understand the pluses and minuses of moonlighting, read on.

What Is Moonlighting?

Moonlighting is defined as taking on a secondary job in addition to a primary full-time job. (Typically, second jobs were done at night, by moonlight, after one’s day job.) That extra job might require you to be on-premises, or it could be a project that can be done from home.

These days, some people use the term loosely. You might hear someone say, “I moonlight editing college application essays” or “I moonlight now and then at a catering company.” The hours may be variable and flexible, but it’s an additional form of employment that brings in money, potentially helping an individual to create financial freedom.

Generally, as long as moonlighting doesn’t impact an employee’s performance while they’re on the clock, employers will allow moonlighting. However, company rules, such as a non-compete policy, could bar full-time employees from moonlighting jobs in similar industries.

Having a second job can accomplish a variety of goals, from adding money to your bank account, to paying down credit card debt to funding a new car purchase to buying a home.

How Does Moonlighting Work?

Moonlighting jobs can take many different forms. Typically, it’s a part-time job in addition to full-time work. It may or may not be related to your primary job. For instance, it could include any of the following possibilities:

•   Waiting tables on the weekend, outside of a 9 to 5 job

•   Working as a music teacher in a school, but teaching private music lessons after hours

•   Taking on gig work, like food delivery, outside of working hours

In some cases, moonlighting may offer some of the best ways to make money from home. In your spare time, you might tutor, design websites, edit copy, make jewelry, analyze data, or do any number of other tasks.

Having a second job or moonlighting typically involves dedicating some time and energy to the pursuit on a regular basis. In this way, it differs from passive income ideas, which could include buying stocks and receiving dividends or renting out a room in your home.

Reasons Why People Take a Second Job

People may take on moonlighting work for any of the following reasons:

•   Financial. Bringing in more income could help pay off debt faster.

•   Personal. A moonlighting job may allow someone to explore an area of interest more seriously or provide an antidote to a boring but profitable day job.

•   Professional. People who moonlight may learn new skills that benefit them in their full-time work or help them switch industries entirely.

Recommended: How to Earn Residual Income

Pros of Working a Second Job

While working two jobs will take more of your time and energy, there are definitely benefits to doing so. Here’s a closer look at the pros:

More Money

No surprise here: One of the most immediate (and most sought-after) benefits of moonlighting is earning additional income. Having some extra cash can help when you’re budgeting for basic living expenses, especially in times of high inflation.

Beyond that, the additional cash can allow you to do anything from paying off debt faster to opening a high-yield savings account and building an emergency fund to starting a travel fund for vacations.

New Skills or Benefits

Have you been thinking about switching to another line of work, like retail? Working in a store on Sundays could let you see if it’s a good fit. Or is there a project, like web design, that you dream of making your full-time career? Freelancing at that pursuit a few nights a week might lay the foundation. Moonlighting work doesn’t necessarily have to be related to a person’s full-time job, so it can be a great tool to explore a hobby or interest with less risk. You can build your resume and hone your talents.

Moonlighting work may also provide benefits a full-time job doesn’t. If someone is passionate about art, they may take a moonlighting job at an art store to score an employee discount, saving them money on their hobby.

Less Financial Stress

If you’re anxious about money, join the club. One recent survey found that a stunning 65% of Americans say that money is their biggest source of stress. An additional job could be a way to achieve financial security, as you’re not relying solely on one employer for all of your income.

The money you make moonlighting might be a way to pay off debt faster without using savings, whether that means whittling down your student loans or a credit card balance. You could save it and decide where to keep an emergency fund in case an unexpected major bill comes along. Or you could funnel the funds into a retirement account. In any of these situations, the extra money can help increase your financial fitness as well as your peace of mind.

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Up to 2-day-early paycheck.

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Cons of Working a Second Job

Taking a second job can be enticing for the extra income alone, but that doesn’t tell the whole story. There are some cons to working two jobs that it’s wise to consider before you begin moonlighting. For some, the following downsides may prove to outweigh the benefits.

Less Time for Self, Friends, or Family

More work will mean less free time. Losing that free time could disrupt your ability to maintain work-life balance while increasing your stress. Not having time to see friends and family or pursue hobbies could have a negative effect on your wellbeing.

Increased Physical and Mental Tiredness

Working two jobs, whether physically demanding or not, can lead to exhaustion. Without the time to recharge and rest, moonlighters may experience burnout.

Reduced Focus at First Job

If moonlighting leaves you exhausted or distracted, it could cause you to be less successful at your primary job. This, in turn, could jeopardize your main income stream.

Violating company guidelines

Moonlighting can put your main job in danger if you go against existing guidelines. Let’s say you are a lawyer for one company, and you signed a non-compete agreement. If another company asks you to review some documents for them as a freelancer, doing so could be problematic.

More paperwork

As you begin earning income for your second job, you will need to keep track of that money, any expenses you incur while working, and what taxes you owe.

Tips to Make Working Two Jobs Work

There are pros and cons of working two jobs. However, if you choose your additional work carefully, moonlighting can be a successful endeavor. Consider these tips when searching for moonlighting work:

•   Pick a passion. When a second job is boring, it might be more exhausting. Instead, consider a gig you are passionate or excited about as your moonlighting gig.

•   Start small. Taking on too many hours of moonlighting work upfront can lead to burnout. Try starting small, with only a few additional hours a week or even a seasonal position. If it goes well, you can ramp up your hours.

•   Double-check employer policy. Before signing up for a moonlighting job, check with policies at your full-time position. There could be non-compete or conflict-of-interest clauses that prohibit employees from working in certain fields. It can be best to follow these guidelines when you’re pursuing additional hours elsewhere.

•   Keep good records. It’s possible that your moonlighting job will be handled as a W-2, meaning your employer takes out taxes, but it’s likely this is freelance or contract work that involves an IRS Form 1099. Keep careful track of earnings, expenses, and when estimated taxes are due and for how much.

The Takeaway

Taking on a second job, or moonlighting, can be a great way to earn some extra cash and bulk up your bank account when money is tight or you want to save towards a specific goal. This kind of additional work can also help you explore a personal interest that might blossom into a new career direction.

However, working a second job, even if it’s a small commitment of hours, can throw your work-life balance out of whack, so proceed with caution to avoid burnout. The goal is to amp up your earning power, not exhaust you.

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

Is it unhealthy to work 2 jobs?

Moonlighting can be challenging for individuals who already struggle with work-life balance. With two jobs, it may be hard to pursue a personal life or relax. It might be wise to start a second job with a small commitment of time, see how it goes, and then gradually add more hours.

How do I survive 2 jobs?

Surviving two jobs may hinge on setting boundaries for both, as well as finding enjoyable work that’s not too physically or mentally taxing. Self-care is obviously important. Another consideration is making sure that you are not violating any non-compete or conflict-of-interest guidelines at your primary job so as not to jeopardize your status.

How does tax work for 2 jobs?

If both jobs are W-2, not contract, the employers will withhold taxes for the employees. However, if for your moonlighting job, you receive a 1099 as a contract worker, you should set aside and pay your own taxes. Also, taking on two jobs could boost you into a higher tax bracket, which could mean being taxed at a higher rate.

Is it illegal to work two jobs?

Unless explicitly stated in a job offer or contract, it is not illegal to work two jobs. Do make sure you are not violating any non-compete or conflict-of-interest stipulations at your primary job. Also know that most contracts are “at will,” meaning an employer has the right to fire an employee if a second job interferes with their performance.


Photo credit: iStock/Phynart Studio

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.

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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.

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Guide to Altered Checks and How to Spot One

Guide to Altered Checks and How to Spot One

When a check is altered (typically the payment amount or recipient name), it constitutes a form of check fraud and can be financially damaging to its victims. Learn more about this situation, as well as tips for how to spot an altered check.

What Is an Altered Check?

An altered check is a paper check that was altered by someone other than the check writer, which can be a kind of bank fraud. Essentially, it occurs when someone writes a check and another person changes the amount on the check (usually by adding an extra zero at the end of the check amount or by changing the payee’s name) in order to commit fraud.

The payer or payee who was defrauded needs to report this fraud within a year to help ensure the loss will be covered. If a bank has reason to believe a check has been altered fraudulently, it can legally refuse to cash it.

The Office of the Comptroller of the Currency (OCC) advises not leaving large spaces in the number and amount lines when writing a check to help avoid fraudulent alterations from occurring.

Altered checks are one of the most common types of check fraud. Other types include forgeries and counterfeit checks.
Who is liable when a bank finds an altered check? According to the Uniform Commercial Code (UCC) — which addresses altered checks in Section 3-407 — the liability can affect multiple parties, including:

•   The check writer

•   The check cashier

•   The bank that presents the check

•   The bank that verifies and cashes the check

It’s not always easy to know when a check is good (you’ll learn more about this below). If you do find evidence of an altered check, you should ideally report the loss within 30 days, but you have to do so within one year if you want to be reimbursed for the loss.

To help soften the blow of altered check fraud, consumers can benefit greatly from examining their bank statements after they write a check to ensure the right amount is processed.

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Example of an Altered Check

Not sure what an altered check looks like? Here’s an example of an altered check which may make it easier to spot one.

Say a check is made out to a dollar amount of $1,000. Look closely at that payment amount. Ask yourself these questions:

•   Does the last zero look like the same type of ink was used to write it and was written in the same style of handwriting?

•   Does that final zero appear to cross over a period?

It’s much more common to see an altered dollar amount than a changed name because it’s a lot easier to add a zero at the end of a series of numbers than it is to change a name completely.

However, there is a crime known as check washing in which someone can get a hold of one of your checks and use household chemicals to erase the name and amount. They can then fill in their own name and whatever amount they please.

Recommended: How to Sign Over a Check to Someone Else

Can an Altered Check be Cashed?

It is possible to cash an altered check, but fortunately it’s fairly difficult to pull off these days, thanks to advanced security efforts. Banks use high-tech watermarks and other authentication and fraud detection methods to make it very hard to cash altered checks.

One of the reasons that banks take fraud detection so seriously is because the liability can fall on the bank if they fund an altered check.

Is It Illegal to Alter a Check?

It is illegal to alter a check and if the amount of the check is more than $1,000, altering it is considered a felony. For altered checks of less than $1,000, this crime would be prosecuted as a misdemeanor. All jurisdictions have differing penalties, and these penalties can vary depending on factors such as the check amount.

All forms of check fraud are illegal, including counterfeiting and payroll fraud.

What Types of Checks Are Typically Altered?

Here’s a closer look at the most common types of checks to be altered in addition to basic personal and business checks.

Cashier’s Checks

A cashier’s check functions similarly to personal checks. The main difference between them is that with a cashier’s check the bank or credit union that issued the check guarantees that it will cash. Despite the fact that cashier’s checks have added security features like watermarks and signatures from two bank employees, they can still fall prey to check fraud.

Traveler’s Checks

A traveler’s check is a paper document someone can use to make purchases while traveling in other countries instead of using a normal check or cash. All traveler’s checks have unique serial numbers that make it possible to get refunds if the checks are lost or stolen. It’s important to be careful when traveling as criminals look for tourists to steal from. While traveler’s checks may not be as popular as they once were, they are still used and can be altered if they fall into the wrong hands.

Recommended: Can You Deposit Traveler’s Checks in Your Bank Account?

Money Orders

Money orders can be more secure than personal checks, but they can still be altered, so it’s always a good idea to pay close attention to the details. Similar to a cashier’s check, a money order is guaranteed by the issuer of the check, but instead of a bank this can be the U.S. Postal Service or a retailer.

Tips for Banking Securely

Check out the following tips to protect yourself and your money.

Monitor All Bank Accounts

Keeping an eye on the transaction history of a checking or savings account can help consumers catch fraudulent behavior like altered checks while there’s still time to remedy the situation. It can be wise to monitor your bank account a couple or a few times a week.

Change Passwords Often

It’s a good idea to change your online banking and other passwords frequently and not to use the same password for multiple different accounts to help avoid someone stealing login information and using it to commit financial fraud. It’s also helpful to not include personal information (name, birthday, etc.) in a password and to use a mix of upper- and lower-case letters, special characters, and numbers when creating a new password.

Only Access Online Bank Accounts From Secure Locations

You shouldn’t log onto their online bank account when using shared public wifi at your favorite coffee shop or when traveling. It’s best to only ever log into important accounts when using a secure connection like at home so no one can intercept and steal account login information.

Recommended: Cashing a Check Without a Bank Account

The Takeaway

Check fraud is an unfortunate reality so it’s a good idea for consumers to keep an eye on recent bank transactions to make sure any checks they wrote were cashed for the correct amount. A fraudulent check is a check with altered information on it — such as the amount or payee information.

There are steps consumers can take to protect their financial lives when banking. For example, it’s always best to bank with a financial institution that prioritizes security, like 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 do you tell if a check is altered?

More often than not, the payment amount is the part of a check that is fraudulently altered. Check the payment amount closely to see if it looks like an extra zero was added at the end or another number was changed.

How long does a bank have to return an altered check?

If you notice an altered check, ideally you should report it to the bank within 30 days. That being said, consumers have up to one year to report the loss to their bank in order to get the amount of the check returned to them.

What happens if you deposit a fake check without knowing it?

If you deposit a fake check without realizing you are doing so, there’s a possibility you may be liable. The bank that credited the account could choose to later reverse the funds if the check is found to be fraudulent. All banks have different policies regarding fraudulent checks.


Photo credit: iStock/AntonioGuillem

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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

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

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

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

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

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

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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

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Guide to Budgeting and Saving for a Gap Year

Should I Take a Gap Year? The Impact It Has on Your Money

Gap years are less popular in the U.S. than in many other countries, but still, data shows that 3% of students take a gap year between high school and college. The idea of taking a break before, during, or after college is likely one that many students can relate to.

Obtaining an education involves a lot of hard work. From long days in the classroom to late-night study sessions, the rigors of academia can take their toll. And college can carry a hefty price tag. It’s understandable that someone might want to take a gap year before they start college or after they finish college to regroup before they begin working.

There are a lot of benefits associated with taking a gap year, but getting ready for a year off requires quite a lot of financial planning to make this choice sustainable.

What Is a Gap Year?

Before diving into how much to save in your bank account for a gap year, it’s helpful to understand exactly what a gap year is. Essentially, a gap year involves taking a year off from school or work to travel, do an internship, take on a temporary job, volunteer, develop a skill, or do a combination of those activities. Some students design their own program; others sign up with an organization that, say, leads them on travel or volunteer projects.

More often than not, people take a gap year between when they graduate high school and start college, but it is possible to take a gap year during college or after graduation but before starting a job or going to graduate school.

A gap year can give someone the time they need to discover what they want their next move to be, to rest, to learn about an area of interest, or to simply get out of their comfort zone.

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No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

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What Are the Benefits of Taking a Gap Year?

Some parents may look down on the idea of a gap year, fearing that their child won’t get “back on track” with their studies or post-grad life. But there are many benefits associated with taking a gap year.

•   Time to rest and recharge. After many years of academic pressure, some students need a year off to recover from burnout before they start their next big endeavor.

•   Room for discovery. Students who aren’t sure what path they want to take next may find that taking a gap year gives them the opportunity to discover or deepen their interests and formulate next steps.

•   Can explore passions. If a person knows they’re interested in a certain industry or job role, they can spend some time interning, pursuing a fellowship, or researching that career path before they pursue a degree toward that job.

•   Develops independence. A gap year can provide the opportunities young adults need to become more self-sufficient. That could mean traveling solo or taking on a job in a new town, not to mention getting better with money.

Is a Gap Year Beneficial Financially?

If you’re contemplating taking a gap year, it’s natural to wonder how much to save to make it a reality. You may also be curious if a gap year could be a boost or a bust for your finances. In truth, a gap year can be beneficial financially and in other cases it can be financially damaging — it just depends on how the person chooses to spend that year. For instance, if you are working at a local business while living at home, you might open a high-yield savings account and really plump it up with your earnings. If, on the other hand, you go on a gap-year guided tour of another continent, that could cost $10,000, $20,000, or more.

There is some concern that gap years can hurt someone’s overall lifetime earnings. By pushing off entering the working world with a college degree in hand by a year, they can lose a year’s earnings as well as a year’s progress towards a higher paying job.

That being said, someone may spend their gap year interning, working as a fellow, or finding other ways to earn income or boost their resume. They may find their efforts propel them forward financially or at least help them break even. On the other hand, if a person spends the year traveling and relaxing, their finances might take a major hit if they don’t plan and budget appropriately.

Typical Expenses to Prepare for During a Gap Year

Parents may not be able to (or eager to) fund a child’s gap year, so a student can benefit from preparing to pay some or all of their expenses. Saving in advance or working part-time during the gap year can help make it a reality. (Planning for a gap year can actually be a great way to get your finances in order and learn how to budget.)

Here are some of the expenses to consider:

•   Rent and utilities or other housing (say, youth hostels if you are traveling)

•   Transportation

•   Travel costs

•   Food

•   Entertainment (movies, concerts)

•   Clothing

•   Personal-care products

•   Health insurance

•   Medical costs

•   Car insurance

•   Cell phone/data plan; internet access

•   Student loan payments, if applicable

•   Credit card debt payments

•   Gym membership/fitness costs

Financial Tips to Save for a Gap Year

The very act of planning and saving for a gap year can be a great exercise in money management for college students; it will definitely give you a new perspective on saving and spending.

Budgeting While Planning a Gap Year

Budgeting for a gap year takes quite a bit of forethought and planning regarding your personal finances. It’s a good idea to plan for a gap year a full 365 days in advance to make it easier to build up a savings fund. It can be helpful to put your cash into either a savings account, money market account, or CD to gain interest and help build your funds.

You might want to determine how much you need to save over the next year, divide that amount by 12, and then add that amount into your budget so you can set the money aside each month. This can be a great time to familiarize yourself with different budgeting techniques (like the envelope system or the 50/30/20 budget rule) and see which one suits you best.

Getting a Job or Internship

Getting a part-time job or a paid internship while in school can make it easier to save for a gap year. Your school may have an online board where you can scan for opportunities. You might also consider a side-hustle, whether that means selling photographs you took while hiking or doing a weekend shift at a local coffee shop.

Cutting Unnecessary Expenses

As mentioned, it’s a good idea to budget for a gap year. Now it’s time to up the ante. You can take a cold, hard look at your budget to see where you can cut your spending (hello, subscription services and those pricey daily smoothies). The money you save can be put towards your gap year fund.

Selling Items You No Longer Use

From clothes to workout equipment to electronics, most of us have things we simply no longer use. If you’re trying to fund a gap year, you can cut the clutter and make some extra cash by selling this stuff. You might offer items up online (eBay and the like) or organize a yard or stoop sale.

Reduce Credit Card Spending

Credit card debt has a way of snowballing and getting very expensive. With credit card interest rates at 24.62% as of mid June 2024, owing money on your plastic can be an expensive thing. Aim to only use your credit card for purchases you can afford to pay off right away. That way, you can use any cash-back and travel-point bonuses to help fund your gap year without carrying a balance. It’s wise to focus on managing your money in a way that doesn’t require relying on a credit card.

Consolidate Credit Card Debt

The above strategy may not be possible if you’ve already racked up a good deal of credit card debt and are feeling as if you are in financial trouble. (Yes, this can happen quickly, even if you’re a student who’s only had a card for a short time.) You may find that consolidating multiple sources of credit card debt can help you get a lower interest rate (which could save money) and streamline your debt, making it easier to pay off.

For instance, you might find a balance-transfer card that offers breathing room thanks to an introductory, interest-free period. Or perhaps you would do better with a credit card consolidation loan that lets you pay off the debt and then pay back the funds at a lower interest rate. If you need guidance, consider talking with a debt counselor at the non-profit National Foundation for Credit Counseling (NFCC).

Cook at Home

Eating out will almost always cost more than eating at home. To save extra cash, get comfortable in the kitchen and build your meal-prep repertoire. In addition, you might start making your own lunch; those popular salad bars can be a budget-breaker if you go often.

Recycle, Reuse, Rewear

One way to save big is to be planet-friendly. Did you know the average American spends about $100 per year on bottled water? Buy yourself an insulated reusable water bottle in a color or design you love, and use it.

Also consider that each of us typically spends almost $2,000 on clothes per year. Commit to wearing what you own or perhaps shopping second-hand (there are plenty of cool things to be found at thrift and vintage stores) to whittle that expense way down.

Think Carefully About Big Purchases

If you’re planning for a gap year, you may want to slow your roll when it comes to making big purchases. Upgrading to the latest mobile phone or buying a premium mattress as you enter adult life may seem enticing right now. However, if you delay gratification, you may be closer to making your gap year dreams a reality. Better money management can sometimes mean knowing how to say “no” to things you think you have to have.

The Takeaway

A gap year can be a great way to intern, explore, volunteer, destress, and more. But it typically isn’t free. If you want to enjoy this kind of experience, you likely need to save more in your bank account and spend less. Yes, this can help your gap year become a reality, but it has another bonus: It teaches you money management skills that can last a lifetime.

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 money is needed for a gap year?

How much money you need for a gap year depends on your goals. For instance, if you want to travel the world during that year, you will require a lot more money than if you plan to live at home and intern in an industry you’re interested in.

Can taking a gap year help you save money?

Usually a gap year doesn’t help students save money, other than the fact that no tuition will be due that year. The exception would be if you live with your parents during your gap year and work during that time.

How can a gap year hurt?

A gap year can potentially hurt someone’s lifetime earning potential. By delaying entering the working world for a year, the individual misses out on a year’s salary and career growth that can lead to a higher salary down the road. However, a gap year could also be a positive: It could involve an internship or connections that eventually lead to a dream job.


Photo credit: iStock/ijeab

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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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7 Ways to Tackle Financial Stress

7 Ways of Dealing With Financial Anxiety

If you’ve found yourself worrying about money lately, you’re not the only one. Nearly half of Americans say 2024 has been the most stressful year of their lives financially, often citing high costs for essential goods like food, according to a May 2024 poll of 2,000 adults by MarketWatch Guides . Nearly nine in 10 respondents (88%) reported feeling financial stress, with 65% saying their finances are the most stressful aspect of their life.

Many of today’s financial stressors are out of our control — like inflation and high mortgage rates. Even so, there are actions you can take to manage money-related anxiety. Here, you’ll learn steps you can take to tackle financial goals despite challenging times.

What Is Financial Anxiety?

It’s normal to worry about money from time to time, but if you are continually worrying about bills, your money worries keep you up at night, and/or you find it difficult to face your financial situation head on and come up with solutions, you may be dealing with financial anxiety.

Financial anxiety is defined as an intense fear or discomfort caused by things related to money, such as debts, expenses, investments, income, savings, or adverse economic situations. This type of anxiety can affect anyone, regardless of their income or financial status, and it can often be debilitating.

Like other forms of anxiety, financial anxiety can interfere with everyday life and affect your mental and physical well-being, leading to depression, loss of appetite, insomnia, an inability to focus, and even cardiovascular and other medical problems.

Can You Overcome Financial Anxiety?

Yes, it’s possible to overcome financial anxiety with the right strategies and mindset. Overcoming this issue involves understanding the root causes of your anxiety, developing a proactive approach to managing your finances, and seeking support when needed. While financial anxiety may not disappear entirely, you can learn to manage it effectively and reduce its impact on your life.

7 Ways to Deal With Financial Anxiety

While there’s no one-size-fits-all solution to money stress, there are strategies that can help you feel more in control of your finances. Consider trying one or more of these tips, and see what works best for you.

1. Tackle One Decision (or Problem) at a Time

Financial anxiety can be paralyzing when you try to address all your financial concerns at once. A good first step to reducing financial stress is to figure out what’s making you feel most anxious. Is it your spending, your student loans, your mortgage, or saving for the future? Then focus on tackling one decision or problem at a time.

It can also be helpful to break down larger financial goals into smaller, manageable tasks. For instance, if you’re worried about debt, start by creating a plan to pay off the smallest debt or the highest-interest loan first. Gradually addressing each issue can help you feel more on top of your money and reduce overall stress.

2. Create a Budget

A major facet of money stress can involve feeling out of control in terms of your finances. There’s a simple solution to that: making and sticking to a budget. A budget allows you to see exactly where your money is going and helps you make informed decisions about your spending.

While budgeting may sound like an overwhelming process, it simply involves looking at your income and spending over the last several months, categorizing your spending, and (if necessary) identifying areas where you can cut back. There are all different ways to allocate your money, but one simple framework is the 50/30/20 budget. It recommends putting 50% of your after-tax income toward needs, 30% toward wants, and 20% toward savings and debt repayments beyond the minimum.

Having a clear financial plan can provide a sense of control and reduce uncertainty about your financial future.

3. Prepare for the Unexpected With an Emergency Fund

One great way to allay financial stress is to know that you have some back-up funds when or if you need them. Should life throw you a financial curveball (like a major car repair, unexpected medical bill, or loss of income), having a solid emergency fund you can tap means you won’t have to run up expensive debt to cope.

A general rule of thumb is to keep at least three to six months’ worth of living expenses stored in a separate savings account (ideally a high-yield savings account). And since you already created a budget, you know how much, on average, your necessities cost each month.

Keep in mind that you don’t have to build your emergency fund overnight. It’s okay to start small; even setting aside $50 to $100 a month can add up over time. Consider setting up an automatic transfer on payday from checking to a linked savings account so you aren’t tempted to spend that amount.

Recommended: How to Build an Emergency Fund in Six Steps

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4. Deal With Debt

Even in the best of times, debt can cause worry and stress. It may feel like a weight that is always hanging over you. And inflation and high interest rates (ouch) can make the anxiety more intense.

If you have debt that is causing you stress, it’s a good idea to take steps to reduce it — think of it as a form of financial self-care. Start by listing all your debts, including the interest rates and minimum payments. Then consider using strategies like the debt snowball method (paying off the smallest debt first) or the debt avalanche method (paying off the highest interest debt first). You may also want to explore options for consolidating or refinancing your debt to reduce interest rates and monthly payments.

5. Just Say No to Splurging

When we’re stressed, there are a lot of ways to relax or blow off steam — and many of them cost money. Retail therapy, a big night out, a weekend getaway: Sure, they are all wonderful, but if you are dealing with financial stress, they may not be good options. They can add to any debt you are carrying, give you less cash for daily life, and lead to more financial stress.

Here are some tips that can help you develop better spending habits:

•   Don’t window-shop or pit-stop at your favorite stores. That’s just putting temptation in your path.

•   If you see something you feel you must have, even though it’s not a true need, wait for a while (anywhere from 24 hours to 30 days) before buying it. You may find that the urge cools.

•   Set aside some “fun money” in your budget for low-cost treats. Some ideas: getting a fancy coffee on Friday morning to reward yourself for a week of hard work; taking yourself to the beach one afternoon; climbing a mountain and savoring the view; getting a 10-minute massage at a nearby spa.

6. Add a Second Income Stream

Sometimes it’s not about subtracting spending from your daily life, but rather, about adding more cash to your pocket. There are many benefits to a side hustle: Picking one that fits into your current lifestyle without taking up too much of your free time can really add value to your wallet and your life.

Before choosing a gig, think about what you’d like to do. You might be able to freelance as a writer or social media consultant. Or perhaps you can sell your suitable-for-framing travel photos online. If you enjoy driving around on weekends, you might sign up with a ride-sharing app. Love animals? Consider starting a dog-walking service.

If you don’t have time to take on additional work, you might sell items you own that are in good condition but you no longer need. There are dozens of places to sell your stuff: For clothes, try a local second-hand store near you, such as Crossroads or Buffalo Exchange. For furniture and other goods, try listing on eBay, Etsy (yes, it’s for more than crafts), Facebook Marketplace, or Nextdoor.

7. Reframe Your Financial Stress

Changing the way you think about financial stress can help manage anxiety. Instead of viewing financial challenges as insurmountable obstacles, try to see them as opportunities for growth and learning. Focus on the progress you’ve made rather than the setbacks. Practicing gratitude for what you have and acknowledging your efforts can shift your mindset and reduce anxiety.

It can also be helpful to talk to those close to you. Let them know you are dealing with financial stress, and ask how they manage theirs. Talking about your worries can help put them into perspective. And in addition to getting reassurance and comfort, you may learn some new strategies.

Getting Help for Your Financial Anxiety

If you’re having trouble sorting out your finances and managing your anxiety on your own, it can be worthwhile to seek outside help.

For practical solutions to money issues, you might seek out a financial advisor. These professionals can offer advice on savings, investments, and retirement planning tailored to your financial situation, helping you develop a strategy to achieve your financial goals.

If your money anxiety is more deeply rooted or affecting your mental or physical health, you might want to consult a mental health professional, such as a psychologist, social worker, or financial therapist. These professionals can help you understand and work through the emotional aspects of your money worries and provide you with coping mechanisms to manage stress.

The Takeaway

Money worries can get the best of us, especially in challenging times, such as when inflation and interest rates are high and there’s talk of a potential downturn in the economy.

To manage financial stress, it’s wise to take steps to improve your cash situation — say, by budgeting, building up an emergency fund, and lowering high-interest debt. It’s also a good idea to work on your emotional wellness by tackling one problem at a time, avoiding temptation and the subsequent guilt, seeking support from those close to you and, if necessary, enlisting the help of a financial or mental health professional.

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 do you stop being financially anxious?

There are a number of steps you can take to reduce financial anxiety. If you’re worried about debt or lack of savings, for example, you might want to assess and categorize your spending over the last several months, then look for places to cut back. Any money you free up can be redirected toward paying more than the minimum on your debts and/or building your savings.

Other ways to stop feeling financially anxious include: building an emergency fund (this provides a safety net for unexpected expenses); seeking advice from a financial advisor to develop a long-term plan; and practicing stress-reduction techniques, such as mindfulness, exercise, and adequate sleep.

Why do you get anxious about money?

Financial anxiety can stem from a number of factors, including:

•   A lack of control or understanding of your financial situation

•   Job insecurity

•   Inflation

•   Unexpected expenses

•   Insufficient savings

•   Cultural and societal pressures (i.e., the expectation to maintain a certain lifestyle)

•   Past financial mistakes or trauma

How do you stop obsessing about money?

You might start by setting some clear financial goals, and then creating a realistic monthly budget that can help you achieve those goals. This can reduce financial worries — and help you stop obsessing about money — by giving you a greater sense of direction and control.

Other ways spend less time thinking about money include:

•   Automating savings and bill payments.

•   Limiting the amount of time you spend reviewing your accounts to once or twice a month.

•   Engaging in hobbies and activities that bring you joy and distract you from financial worries or temptations to spend money.

•   Seeking support from friends, family, or a therapist if money worries persist.

•   Educating yourself about personal finance to build confidence and reduce fear stemming from the unknown.


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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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.

*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.

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