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Too often, free time winds up costing us money, whether that means going to the movies, hitting the mall, or paying for an in-demand yoga class. But the truth is, passing time outside of work doesn’t have to be expensive.

Having hobbies can be a smart, creative, and moneywise way to fill your free time. The best endeavors are those that ignite a real passion and that we can’t wait to pursue. And there are numerous hobbies that don’t require investing a lot of money in equipment, materials, or training to get started.

Here, we have compiled a list of 19 fun, fulfilling pursuits that are also typically very affordable.There’s every chance that you will find at least a couple of these inexpensive hobbies to pique your interest.

Questions to Ask Before Starting a Hobby

Before you begin a new hobby, you may want to ask yourself the following questions.

What Is the Cost of the Hobby?

There are many inexpensive hobbies to choose from, so a good place to start is by making a list of the hobbies that spark your interest. From there, you can do some research to determine what the cost of the hobby is and if it fits into your budget (or if you need to pursue a less expensive pastime for now). Something with very specialized instruction, like making gold jewelry or blowing glass, is likely to push your budget limits. You might want to aim for more accessible pursuits to start.

Is This Hobby Worth It?

No matter what the price tag of the hobby is, it can be helpful to think about whether or not the costs associated with the hobby are worth the enrichment and enjoyment the pursuit can bring to your life. Some hobbies may cost more, but may also give a higher return on investment if they offer an incredible experience and turbocharge your mood.

What Are the Benefits?

While most hobbies are fun, they can also bring a lot more to the table than just a good time. When evaluating hobbies, it can be helpful to think of what other benefits are associated with them. For example, a fitness-based pursuit is good for your health. Gardening can be a terrific way to connect with nature and clear your head. And a creative endeavor, like painting or photography, can wind up turning into a part-time job or lucrative side hustle.

Could This Hobby Be Cheaper?

If you are considering a hobby and are concerned about cost, you don’t necessarily have to limit yourself only to what would be classified as a cheap pastime. You might instead dive into what speaks to you but find a way to make it less costly.

For example, if you want to ride horses (which can be a very expensive hobby), you could pay to ride a horse by the hour at a local stable instead of buying a horse and paying for all of its care, food, and housing. Or you might find that volunteering at a local stable occasionally earns you some free time on horseback.

Recommended: 39 Passive Income Ideas to Build Wealth in 2022

Will This Hobby Hurt Future Finances?

When considering a hobby, it’s a good idea to take into account what the average cost per month will be. For instance, if you want to take up skiing, consider how it might affect future finances:

•   What equipment will you need?

•   How much will lessons cost and how many will you likely need?

•   What kind of transportation costs will be involved in pursuing skiing?

If a hobby is likely to drain your emergency savings or cause you to take on credit card debt, then it may be too expensive to pursue. Instead, you may want to do some research into more affordable hobby ideas (there’s plenty of inspiration below.)

19 Hobbies That Are Fun and Inexpensive

A cheap hobby can be just as fun and rewarding as an expensive hobby. Let’s take a look at some inexpensive yet highly enjoyable pastimes.

1. Gardening

Spending time outdoors feels good; research has shown it can improve your mood, putting you in a more positive, peaceful frame of mind. Gardening is also a great way to make your home more attractive and enjoyable to spend time in. Try planting flower seeds in window boxes or creating a windowsill herb garden to start.

2. Camping

Travel can be an expensive hobby, but camping can be done on a budget and scratch that travel itch. After all, renting a campsite for a night is typically cheaper than booking a hotel. Plus the sound of the birds and the view of the constellations at night can be priceless.

3. Discovering New Music

Instead of going to see only famous musicians play at large stadiums (ka-ching), try a creative way to save some money and check out some more affordable and unique local musicians. You’ll support the local music scene, get out of the house, and enjoy live entertainment in one fell swoop. What’s more, many towns have free concerts in warmer weather.

4. Cooking

Learning to cook well is not only an affordable hobby, it’s also a great way to save money on food by making you less tempted to dine out. There are many ways to do this, including taking low-cost local classes, watching free videos on YouTube or public broadcasting shows, and simply looking up recipes online and teaching yourself some new skills.

5. Painting

There’s no reason we need to leave arts and crafts behind once we finish elementary school. Spending some quiet time with a paintbrush in hand can be very relaxing. Whether you use oils, acrylics, or watercolors is totally up to you, as is the subject matter — which could be anything from a self-portrait to a landscape to an abstract canvas. Again, you can find videos online, inexpensive books, and local classes that will teach you how to use basic materials in new ways.

6. Drawing

Drawing is a way to tap into your artistic side and only requires paper and a pencil. Or you might choose to buy a basic set of pastels or charcoal sticks (a dozen will set you back just a few dollars; perfect for trying out new shading techniques).

7. Working Out and Exercising

Walking, swimming in a lake, or playing pickleball are all fun, inexpensive hobbies that can help keep you fit and healthy. While some fitness pursuits, like private Pilates lessons, can be pricey, there are also options that are absolutely free. (But if Pilates calls to you, check out free online videos first.)

8. Starting a Podcast

Are you passionate about a topic, say, local politics, fiction, or travel? Starting a podcast can help you share your knowledge and find a community with similar interests. This can be a low-cost project; if you have a computer, you can get started experimenting. You can then decide if you want to invest in a microphone, editing software, and a podcast hosting platform.

9. Learning Smartphone Photography

Photography was once an expensive hobby, but you can skip all the pricey equipment and learn to get really good at smartphone photography. You may find that local nature centers offer free classes in photographing nature or wildlife. Simply shooting local architecture, bicycle races, and other areas of interest and playing with cropping and filtering can unleash your creativity.

10. Learning an Instrument

Another creative outlet is learning to play a musical instrument. If you have an instrument gathering dust, brush it off. Or check local Facebook groups, Craigslist, and freecycle sites to find one on the cheap.

11. Volunteering

Giving to the community may not feel like a hobby, but choosing a cause that matters to you — such as volunteering with animals or tutoring school-age kids — can be completely engaging.

12. Visiting a Museum

Interested in becoming an art connoisseur? Museums change their exhibits all the time. Consider signing up for a membership to get exclusive invites to new exhibits and special events. Or scope out which nights or days offer free admission; many museums offer this kind of perk. Local gallery openings are another option that’s free and fun and can elevate your knowledge of and interest in the arts.

13. Learning to Dance

You know what the song says about “the rhythm’s gonna get you.” Why not indulge or jump-start your love of dance? Whether it’s at home or in a dance club, you can start simply by hitting the floor. Or many Y’s and other local centers offer inexpensive classes in ballroom, ballet, tango, and other styles of dance.

14. Fishing

Fishing can be a fun and peaceful way to connect with nature. Saving on groceries is a fun bonus of this hobby. Few things can beat a fresh-caught trout dinner.

15. Learning a Language

Get ready for that international vacation you’re saving for by learning a new language. Even if you don’t have a trip planned, building your foreign language skills can help boost your brain power by creating new neural pathways. And there are a host of apps (whether free or for a low fee) that can make this pursuit easy and fun.

16. Learning How to Sew

It takes time to master sewing, but doing so can be an almost meditative practice. Plus there are cool new trends to try, like sashiko, a beautiful form of Japanese mending. What’s more, building your skills with a needle and thread could save you pricey trips to the tailor.

17. Doing Calligraphy

Calligraphy is both a pretty and practical hobby to pursue. Wow your next dinner party guests with handmade name cards. Or offer to do the invitations for your best friend’s engagement party. All you need is pen, ink, and paper.

18. DIY Projects

Save money and upgrade your home at the same time by mastering DIY projects. Books and online tutorials can teach you how to build shelving, retile a backsplash, and more. Also, if you are a homeowner and one of your money goals is to sell your home at a profit, this can be a terrific path forward.

19. Joining a Club

There’s no shortage of local clubs you can join thanks to online meetup sites. Whether you’re looking for a hiking buddy or a group to practice a language with, you can likely find a group to suit your needs. All kinds of options are available. You might find a coffee-lovers’ group that gathers on weekends to test-drive new cafes; it could be a fun, frugal way to caffeinate and expand your social circle.

20. Starting a YouTube Channel

If video appeals to you, starting a YouTube channel can be a great way to make friends and earn some extra money from home. Whether you want to create videos of unboxing and reviewing products, or you’d like to share your knowledge of pro sports, go for it.

21. Starting a Blog

Or, you might lean into the written word with a blog on any topic that appeals. This can be a great, no- or low-cost creative outlet that connects you to others with similar interests. You might share poetry you write, chronicle your family history, or share your adventures training your new pup. The choice is yours.

22. Hiking

Need more ideas for things to do for fun with no money? Get some fresh air and exercise by exploring different hiking trails. As an added bonus, hiking can be a free hobby. Hanging out in nature (what some call forest bathing) can also be a great way to decompress and build mindfulness into your daily life.

23. Golfing

A fun way to stay active and social is to make a plan with friends to hit the golf course. You may worry that this will be a pricey endeavor, but public courses make it more affordable. What’s more, you may be able to use a local resident’s card (the kind you get at your town office or recreation department) to make it even cheaper. Also consider shopping garage sales for used clubs.

24. Upcycling Your Clothing

Use those newfound sewing skills to upcycle old clothes that need a little love and attention or transform them into something totally new. Upcycling is part of the reuse, recycle, repurpose movement. You might crop a pair of pants into shorts, or turn a dress into a blouse and/or a skirt. Some creative types save favorite worn-out clothes, then use the fabrics to create a quilt or pillow cover.

25. Playing Board Games

Board games aren’t just for kids anymore — there are tons of unique options for adults, and they offer a great way to entertain yourself as well as guests. You may also find no-cover game nights at your local pub, which can be a fun and inexpensive way to socialize. Who knows? You might be a Trivial Pursuit champion.

26. Running

One of the cheapest hobbies out there is running, especially if you already own a pair of athletic shoes. It can be a great way to spend time outdoors and can help improve your health. There are plenty of digital ways to help tap your motivation, like the popular low-cost “Couch to 5K” program for beginners.

27. Learning Photography

After getting good at smartphone photography, consider taking an online class or local community college class on the art of photography. Bargain-priced cameras can often be found online (check eBay) and at local second-hand shops.

28. Flying a Kite

Parents may be looking for a fun activity for the whole family that doesn’t cost much. Why not master the art of flying a kite? And it’s not just for those with kids. Anyone can have a great afternoon watching a kite take flight and stay aloft in a good breeze.

Recommended: 27 Cheap Date Night Ideas

29. Teaching a Pet Tricks

Pet parents can find ways to be entertained and bond with their critter by teaching it new tricks. Of course, dogs can be trained to do a variety of “shake” and “roll over” maneuvers, but pet birds and other animals can also learn new skills.

30. Geocaching

Geocaching is a fun way to explore the outdoors. It’s a pursuit in which, using an app or GPS, you find hidden “geocaches,” or containers that hold notes and small gifts. These are typically in parks and nature preserves. You can hide your own caches, too. An inexpensive hobby that is akin to a spirited scavenger hunt, geocaching can be engrossing for both individuals and families, while also connecting you with a community of fellow adventurers.

The Financial Benefits of a Cheaper Hobby

The financial benefits of having a cheap hobby are two-fold. Not only is having a low-cost hobby an inexpensive way to have fun, but hobbies can keep us busy and distracted which can help us avoid spending temptations.

Recommended: Different Ways to Earn More Interest on Your Money

Managing Finances With SoFi

There are plenty of affordable hobbies, so take your time and try a few to discover which will keep you feeling fulfilled. If you’re looking to save up funds to invest in a new hobby, the right banking partner can help you manage and grow your money.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What hobby should I pick up?

There’s no right hobby to adopt. Every individual needs to pursue a hobby that excites them. That said, many people enjoy creative endeavors (think photography or painting), athletic pursuits (running, hiking), or pastimes that channel their interests and connect with a larger audience, such as podcasting or blogging.

How can I budget for a hobby?

Budgeting for a hobby can require doing a bit of research first. Only once someone knows what their hobby will cost can they then create a budget for it. When you know the costs, work to keep them as low as possible (say, by buying second-hand equipment, if needed). You can then divide the cost by the number of months you are willing to save. Put aside that amount in a high-yield savings account to earn some interest until you have enough saved up.

Can cheap hobbies make me money?

Certain hobbies can make someone money if they turn them into a side hustle. Starting a podcast or YouTube channel, writing, and photography are all great examples of hobbies that can become lucrative.

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Photo credit: iStock/South_agency

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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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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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.

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 eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

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.

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About the author

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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. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

3.60% APY
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

The terms margin and leverage are often used interchangeably in the world of finance. While both terms refer to strategies that can be used to amplify an investor’s buying power when trading stocks and other securities, they have some key differences.

Margin trading, or “buying stocks on margin,” means borrowing money from your brokerage to purchase more stock than you could with your own funds. Your existing securities serve as collateral.

You will also pay interest on the amount borrowed from the broker.

Leverage is a broader financial concept, referring to the use of debt to take a larger position (whether in securities trading or business acquisitions) to potentially amplify returns. In the context of trading, leverage means using borrowing funds in order to increase trading positions — taking on more risk with the hope of more gains.

The use of leverage also means the possibility of losing more than you have. In addition to the risk of a trade going south, the borrowed funds must be repaid with interest. It’s important to understand how leverage works in terms of margin trading so that you know the amount of risk exposure you have.

Leverage vs Margin

The reliance on borrowed funds, or debt, to enable bigger trades or purchases is commonly known as leverage. Margin trades are a type of leveraged trade.

What Is Leverage?

The use of leverage refers to investors who use debt to finance bigger positions.

The same is true in business: a highly leveraged company is one that has taken on large amounts of debt to fund an expansion or acquisition; in other words, a company with a high debt ratio.

What Is Margin?

Again, margin is a type of leverage. Investors use margin, i.e., borrowed funds, to place bigger trades than they could afford with cash. The securities in their brokerage account are used as collateral for the margin loan.

Margin, or margin accounts, can be set up through a traditional brokerage account or when investing online. Access to margin is highly regulated in terms of how much investors can borrow, and how much collateral is required to place a margin trade.

Investors can use leverage via other means (e.g., leveraged ETFs, which do not require margin accounts).

Recommended: Margin Trading vs Futures: Compared and Explained

A Closer Look at Margin

Margin trading is a sophisticated, higher-risk strategy that enables experienced investors to trade securities using money that they’ve borrowed from their broker. As noted, margin can allow bigger trades, with the potential for bigger gains — as well as the potential for steep losses.

For investors who qualify, a margin loan generally allows them to borrow up to 50% of the cost of a trade. Like any other loan, margin funds require collateral from the existing cash and securities in the account; in addition, the loan accrues interest. Margin interest rates fluctuate and are generally decided by the broker.

Traders must also maintain a minimum balance in their margin accounts called maintenance margin. Along with collateral, this can cover potential losses.

The Margin Call

If the account falls below that threshold, the broker can require a deposit to bring the balance up to the minimum amount. This is known as a margin call. If the investor fails to cover the shortfall, the broker can sell securities in the account to restore the necessary balance.

How Margin Trading Works

When using a cash account vs. a margin account to execute trades, every cash trade is secured by moneyfo in the investor’s account, entailing no risk to the broker.

With margin, though, a portion of each trade is secured by the initial margin (or cash), while the rest of the trade is covered by borrowed funds. If the margin requirement is 50%, and you want to place a $10,000 trade, you would need $5,000 in cash.

So while margin trading affords more buying power than investors could achieve with cash alone, the additional risk exposure means that investors always need to maintain a minimum level of collateral to meet margin requirements, or they may face a margin call.

Though margin requirements vary by broker, following are minimums currently required by financial regulators.

Term	Amount	Definition
Minimum margin	$2,000	Deposit amount needed to open a margin account
Initial margin	50%	Percentage of a trade that must be funded by cash
Maintenance margin	25%	Minimum amount of equity in the margin account
Margin call	Any	If a margin account falls below the maintenance margin, the broker will require a deposit to cover the shortfall, or will sell securities in the account to do so.

As noted above, margin trading offers experienced investors some potential upsides as well as risks.

A Closer Look at Leverage

Leverage in finance is a word used to describe borrowing money to increase returns. Investors might borrow capital from a broker or bank in order to make trades that are larger than their account’s equity, increasing their trading power.

Companies might use leverage to invest in parts of their business that they hope will ultimately raise the value of the company.

How Leverage Works

Leverage in a stock account is the result of borrowing money to trade securities, using an account’s margin feature. Leverage can work to the benefit or detriment of an investor depending on the movements of an account’s holdings.

Companies often use leverage to amplify returns on their investment projects, and the same logic applies to trading equities. You may see the potential for significant returns on the upside — or you may see your account value drop rapidly if the market moves against you.

Trading with leverage is riskier than strictly using your own cash, because there is the possibility of total loss.

Futures and forex trading often use higher leverage versus a margin account. Forex trading may allow a 1% initial margin. So a $1000 deposit would enable an investor to trade $100,000.

The initial margin amount required for a futures contract can range from 2% to 12%, depending on the commodity.

The Takeaway

Margin trading and leverage can be used to boost returns, but there are substantial risks to consider.
A margin account with stocks allows you to borrow against cash and securities when trading stocks
online. Leverage measures the increase in trading power because of using margin.

It’s important to understand your personal risk tolerance before trading on margin and using leverage

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.

Get one of the most competitive margin loan rates with SoFi, 10.50%*

FAQ

Is leverage the same as margin?

Leverage is different from margin. You use a margin account to increase your leverage ratio when trading stocks. Futures and forex trading requires a trader to post margin to use leverage.

Can you trade without leverage?

You can trade without leverage, using securities with cash in your account instead. This method also avoids paying interest on margin balances. The downside is you will not be able to amplify returns as you would when trading on margin or with leverage. You can also trade leveraged ETFs without a margin trading account.

What is margin in stock trading?

Margin in stock trading happens when an investor takes out a loan on an investment with the goal of seeing that asset’s price rise. When the investment is sold, the borrowed funds are returned to the lender, but you as the investor keep the profits. The downside is if the security’s price drops, you will see enhanced losses. In either event, you owe the lender interest on borrowed funds.

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Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

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