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While you may think of your credit card as what tends to break a budget, it’s actually possible to budget with a credit card to spend smarter. In fact, there are a number of advantages of budgeting with a credit card. If you spend only what you can afford to pay off each month, you can enjoy earning rewards, building your credit score, and accessing other perks without accruing interest.

It isn’t always easy to set — and then stick to — a budget though, and a credit card budget is no different. Read on for tips on budgeting with a credit card.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Why Use Credit Cards?

Although credit cards can have downsides — especially when someone tends to overspend — they also offer benefits that you can’t get when you pay with other methods. This includes:

•   Fraud protection: It can be easier to dispute charges and fraudulent activity on a credit card as opposed to a debit card or cash.

•   Opportunity to improve your credit score: When a credit card is used responsibly, it can positively impact a person’s credit score.

•   Credit card rewards: Credit cards often come with perks like travel points or cash back.

•   Travel insurance: Some credit cards offer specialty protection benefits like travel insurance.

Why Is Budgeting Important?

Whether using a bank account or credit card, a monthly budget is an essential part of financial wellness. Budgeting can:

•   Help to reach financial goals, such as establishing an emergency fund or saving for a downpayment for a home.

•   Alleviate financial anxiety that can come from uncertainties around finance.

•   Improve credit history through a record of on-time payments and responsible spending.

At first glance, budgeting may seem like a limiting factor, but it actually allows you to spend guilt-free. When budgeters know how much they can spend on certain categories each month and adhere to those guidelines, they don’t have to worry about overspending.

Recommended: When Are Credit Card Payments Due

Specific Budgeting Methods You Can Work With

There’s no one-size-fits-all budgeting method. However, here are some popular methods that you might consider trying if you’re interested in creating a personal budget.

The Zero-Sum Budget

In a zero-sum budget, every dollar is “spent” or has a job. However, that doesn’t mean an account should be $0 at the end of the month. Instead, it means that every dollar earned should be allocated to a specific category, with no money left unassigned by the end of the month.

Each time an after-tax paycheck comes in, a zero-dollar budget will assign it to a category, starting with necessities like rent, food, student loan payments, and insurance. The rest goes toward discretionary spending or saving.

Zero-sum budgeting means taking a critical look at each dollar entering a bank account, which can feel frustrating for some but helpful for others.

The Spreadsheet Budget

A spreadsheet or line-item budget groups spending and purchases into categories balanced against monthly post-tax income. In its most basic form, the spreadsheet budget is a list of expenses, shown line by line and grouped by type. Income covers expenses, with surpluses going toward additional savings or debt payoff.

The Online Budget

Apps and other digital tools make budgeting as easy as creating a log-in and connecting existing accounts to track spending. You can also set up budgets for upcoming purchases.

An online tool can be helpful for those who feel intimidated by budgeting prep or prefer a more passive look at spending.

11 Tips for Budgeting With a Credit Card

Using a credit card to budget isn’t so different from a traditional budget. Keep these 11 tips in mind when building a credit card budget.

1. Determine Your Monthly Income

To figure out take-home pay each month, budgeters can consult their bank account or look at paystubs from their employer (typically through an online portal). If your income varies each month, take the average income over the past year to get a rough ballpark figure.

2. Pick a Budgeting Method

A person can’t budget with a credit card if they don’t have a budgeting method in mind. Consider one of the aforementioned methods or an alternative like the 50/30/20 budget, where you allocate 50% of your budget to needs, 30% to wants, and the remaining 20% to savings.

3. Track Your Spending

Some budgeting methods are specific about how spending should be tracked. However, you can easily track your spending with pen and paper, a spreadsheet, or a spending app. No matter the method, it’s important to track each purchase.

4. Categorize Your Spending

When it comes to how to budget credit card payments, it helps to look back at your spending first. Gather financial statements from credit cards and bank accounts for the past month. Break each transaction into a category, such as needs, wants, savings, or something more specific.

With an idea of historical spending, now’s time to put a plan into place moving forward.

5. Create a Plan

Armed with a structure and an understanding of your past spending, now comes the time to plan for the future. When creating a plan, consider:

•   Recurring expenses

•   Savings goals

•   Debt repayment goals

•   Annual subscription costs

•   Emergency savings needs

6. Pay Yourself First

A top priority when budgeting with a credit card should be paying yourself first. When money hits a bank account, it should go toward personal savings goals, emergency savings, or an accelerated debt repayment plan.

It’s important to prioritize paying yourself first, as many try to budget with the reverse in mind, only setting aside what’s left over at the end of the month. This approach can lead to falling short on savings goals.

7. Calculate Your Expenses

After setting aside money for savings, it’s time to break down the remaining income into monthly expenses. This includes necessities like rent or mortgage payments and wants like dining out or entertainment.

If monthly income can’t cover all of the anticipated expenses, it may be time to cut back on spending. Is there slack in the budget from underused subscriptions? Or can grocery spending go down?

Figuring this out before you swipe can help you to avoid overspending on credit cards.

8. Plan for Debts

The difference between credit card budgeting and traditional budgeting comes when the credit card bill is due. If someone has been primarily spending on a credit card, it’s unlikely they’ll see their bank account change most of the month. However, that changes when the bill comes due.

With each transaction on the card, the budgeter should have enough money in their check or savings to cover the cost. Planning for this debt means avoiding the scramble that sometimes comes with a credit card due date.

9. Simplify Your Billing Schedule

Missing a credit card bill can harm a credit score and add financial stress to a person’s budget. Mark credit card due dates on the calendar each month, and consider paying the bill early or breaking it into multiple payments throughout the month.

10. Use Rewards as a Bonus

The benefit of budgeting with a credit card comes from the various credit card rewards you can earn. Remember to cash in on cash back perks every few months for a discounted bill or redeem the travel miles you’ve earned for an upcoming trip.

Recommended: Can You Buy Crypto With a Credit Card

11. Avoid Carrying a Balance

Carrying a balance on a credit card could indicate an imbalanced budget due to how credit cards work. When a credit card bill isn’t paid in full, the remaining balance can accrue interest, leading to a ballooning balance that becomes harder to pay.

That’s why upfront planning is essential to budgeting with a credit card. Without a plan in place, there’s a bigger risk of overspending, which can snowball into credit card debt. If you’re using a credit card, it’s important to stick to one of the most important credit card rules of always trying to pay off your balance in full.

Recommended: How to Avoid Interest On a Credit Card

Pros and Cons of Budgeting With a Credit Card

There are benefits and drawbacks to credit card budgeting, including:

Pros	Cons
Opportunity to earn credit card rewards and cash back from spending	Possible to more easily go over budget with a higher credit limit
Improved credit score with responsible spending	Exceeding budget could mean incurring interest charges and additional debt
Option to set up account alerts to better stay on top of account spending	Potential to harm credit score with missed or late payments

Recommended: What is the Average Credit Card Limit

The Takeaway

There are advantages of budgeting with a credit card, such as earning rewards, gaining access to credit card perks like travel insurance, and improving your credit score if you use your card responsibly. By setting up a credit card budget, you can better prevent yourself from spending more than you can afford and ending up owing interest when you can’t pay off your statement balance in full.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

How can I manage my budget with credit cards?

Budgeting with a credit card isn’t different from budgeting without one. The key to budgeting credit cards is not to spend more on a credit card than you can afford to pay off at the end of the month.

Should I budget with a credit card?

If someone can stick to a traditional budget, then budgeting with a credit card might make sense. The difference is remembering to stay up to date with payments, as missing a credit card payment can negatively impact a credit score.

How much of a hold does the budget put on your credit card?

Budget should have a pretty serious hold on a credit card. When people can’t pay their credit card bill in full, they’ll incur interest charges, which can cause them to fall into debt over time and potentially drag down their credit score.

How do credit cards affect my personal budget?

If a budgeter isn’t paying attention when using a credit card, it’s easy to overspend. This can result in putting more on a credit card than you have available in cash to pay it off. As a result, you may end up paying more than the sticker price for your purchases due to interest, leaving you less money leftover for your other needs and savings goals.

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Photo credit: iStock/Mirel Kipioro

¹See Rewards Details at SoFi.com/card/rewards.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

The SoFi Credit Card 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.

New and existing Checking and Savings members who have not previously enrolled in direct deposit with SoFi are eligible to earn a cash bonus when they set up direct deposits of at least $1,000 over a consecutive 25-day period. Cash bonus will be based on the total amount of direct deposit. The Program will be available through 12/31/23. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC.

SoFi members with direct deposit can earn up to 4.00% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 3/17/2023. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet
¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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Many Americans struggle to save money but it’s worth the effort since there are serious downsides to not stashing away cash. These can range from going into debt, facing financial hardship after losing your job, and not being able to achieve your aspirations, like homeownership.

To help you get motivated to put money in the bank, here are twelve dangers of not saving money. They may help you understand why it’s best to put away cash and motivate you to tuck some into a savings account. Not only will you be better prepared for the twists and turns of life, you’ll be better equipped to reach your financial and lifestyle goals.

The Importance of Saving Money

1. Going Into Debt

Without a savings cushion, any expense—from an unexpected car repair to paying for your child’s college education—can put you in debt. In addition, while credit cards and loans are convenient ways to afford more than your bank account, you pay more in the long run because of interest and loan fees.

Since debt often costs more than the actual expense, you can essentially save a considerable amount of money by plumping up your piggy bank.You can try easy ways to save, such as creating a simple budget or automating savings, to put aside a few dollars a month before you can spend it. These moves can ensure that you’ll be using savings instead of debt to pay for your upcoming expenses.

2. Having a Social Life Can Be Nonexistent

Your friends and family are likely on the list of things you enjoy most in life. Being able to afford a dinner out with loved ones can really boost your mood. Heading to a concert with friends can create memories that last a lifetime. But a full social calendar may put you in a sticky financial situation if you haven’t saved anything. From movie dates to happy hours to ball games, these expenses can add up.

No matter your income level, how much money you save each paycheck can make the difference between having a nonexistent social life and a happening one.

3. Life Being More Stressful

According to the Stress in America survey , 65% of respondents say money is a big stressor in their lives, which is the highest percentage since 2015. When you think about it, failing to save can make you feel stuck or overwhelmed. Your personal, financial, and professional life can suffer because a lack of savings has cut off your options.

Achieving your goals, financial and otherwise, may be a struggle without savings to propel you forward. The importance of saving money goes beyond paying an unexpected bill; it can affect your daily quality of life.

4. Not Having the Money for an Emergency

You’ll find many articles, resources, and financial professionals advising you to set aside an emergency fund. Life is expensive and doesn’t always go as planned. So, saving in advance helps you manage life’s unexpected costs.

For example, building an emergency fund might be a better choice than splurging if you get a raise. You’ll thank yourself later when, say, your furnace goes out or you wind up with a major medical bill. Typically, money experts recommend having at least three to six months’ worth of basic expenses salted away in an emergency or rainy day fund.

5. Not Being Able to Celebrate Events

Life is full of amazing milestones like getting married, having a baby, or graduating from college. Unfortunately, celebrating these life events with your family often takes substantial cash. Not being able to recognize these events the way you’d like to is another one of the many dangers of not saving money. The lack of a financial cushion could also lead you to skip, say, a friend’s destination wedding.

Although you could put your celebration on your credit card, you run the risk of going into debt. This will likely cost more over the long run since you have to pay for interest. In other words, you might still be paying it off for years to come.

6. Not Having a Viable Option if You Are Fired

No one plans on getting fired; however, it’s always possible to lose your job unexpectedly. Financial emergencies like this are an important reason to save. Saving can give you security during this kind of a crisis. If you don’t have some cash available, you might have to look into financially downsizing.

This underscores the importance of saving money from your salary when you are employed. You might consider having a small amount automatically transferred from your checking account into savings on payday.

As mentioned above, you should save at least three months of your expenses in an emergency fund. This way, you can have a solid safety net if you get laid off or are temporarily disabled and can’t work for an extended period.

7. Not Having an Inheritance for Your Children

If you’re a parent or plan to be one, you likely want to give your kids a leg up in life. An inheritance can help your children or heirs to build their nest eggs and meet life’s expenses without stress. Having both savings and an estate plan can be a lasting, life-changing gift to those who matter to you most. These assets can serve to eliminate the possibility of financial legal challenges for your family. That said, being unable to leave a legacy is a consequence of not saving money.

8.Not Being Able to Buy a Home

About three-quarters of Americans believe that homeownership is still a core component of the American Dream, according to one recent study . If you don’t save, the dream of homeownership may never become your relativity.

You traditionally need a 20% down payment to qualify for most conventional mortgages. Buying a home also usually involves other expenses, such as closing costs, repairs, moving costs, and more. Not having savings can make it almost impossible to afford the home of your dreams.

9. Not Being Able to Go on Vacation

Without savings, it’s challenging or even sometimes impossible to take time off for some rest. When you don’t set money aside, you can get sucked into the never-ending cycle of living paycheck-to-paycheck. Since you need to work to support yourself, vacations may become less frequent or disappear altogether.

While you may think you can put a vacation on credit, that can perpetuate the “can’t save” situation, because you’ll have debt to wrangle. You could wind up coming home from your getaway to face more bills…ones you may struggle to afford.

10. Not Having Much Financial Freedom

One of the most potent limiting factors in life can be a lack of savings. With a robust bank account to fall back on, you increase your options and flexibility. Moving to a city or state with more opportunity, taking a professional course or college classes, and starting a business can all be possibilities if you’ve saved money.

Of course money can’t solve every problem life throws at you. However, it is a powerful tool that allows you to access opportunities. Remembering this can help you get serious about saving money.

11. Not Being Able to Invest

Investing your money is a superpowered version of saving. For example, if you begin saving $100 at age 25, you will save $12,000 more by age 65 than someone who starts putting $100 away at age 35.

If you save or invest, you can capitalize on compound interest and/or compounding returns. This means your gains are reinvested, so your money can grow faster over time. Consider that an incentive to start saving as early as possible. For example, if you receive a 7% annual rate of return and begin contributing $100 toward saving at age 25, you will amass $120,000 more by age 65 than someone who began contributing at age 35.

If you are Investing your savings vs. keeping them in an insured bank or credit union, you may get higher returns, but this can also mean taking on risk. To balance those forces, educate yourself with an investing guide or seek professional advice.

12. Not Being Able to Help Others

When someone is in financial need, lending money can help them get back on their feet. Whether it’s through providing a micro-loan, donating to a charity, or contributing to a scholarship, you can make a difference in the lives of others no matter how much you give.

But, if you don’t have savings, you may not be able to afford a helping hand.

Why Saving Money Is Very Important

Since money touches almost every area of your life, saving it for what matters most can be essential. Reining in your spending habits can be hard, no doubt, but the payoff quite literally is being able to afford your needs and your goals.

​​Online Banking With SoFi

Affording an enjoyable, stress-free life doesn’t just happen; it requires saving. While this can be difficult in the moment (saying no to splurges, for instance), it can set you up for years of financial wellness. Whether you want to be able to celebrate big moments with friends, start your own business, own a home, or take a major vacation, saving money can help put you on the right path.

Here’s one way to save smarter: with a SoFi bank account. When you use our mobile banking app with direct deposit, you’ll earn a stellar APY and pay zero account fees. Those two moves can help your money grow faster.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Can I get by without saving money?

While it’s possible to get by without savings, there may come a day when you run into an unexpected expense that causes financial hardship. If you live paycheck to paycheck without an emergency fund, an unforeseen cost could set you back and make it challenging to recover.

Is debt inevitable if you do not save?

Without savings to fall back on, it’s quite possible to go into debt when unforeseen expenses arise. Contributing to a savings account, even a small amount monthly, can make unexpected costs more manageable so you can sidestep debt.

When is the best time to start saving?

It’s best to start saving now to give yourself time to build a cushion. Remember, everyone has to start somewhere. Even if you can only save $20 per month, your future self will likely thank you.

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Photo credit: iStock/nicoletaionescu

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% 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 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 4.60% 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 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 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.

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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At some point, you may need to become involved with your aging parents’ care, which may include immersing yourself in your parents’ finances. Taking over elderly parents’ finances can be a sensitive issue that needs to be undertaken with a great deal of care, patience, and regular (clear and honest) communication.

Your loved ones’ finances can be complicated by a number of issues, including the cost of any care they might need. According to a 2021 survey by Genworth , the median cost of an in-home health aid is $5,148 per month, while an assisted living facility can run around $4,500 per month, depending on where you live.

While healthcare costs will likely only continue to climb, seniors are typically living on a fixed income. This makes careful money management and living on a budget particularly important for older adults. Read on to learn what you can do to help your parents (or other elderly loved ones) manage their money and ensure they don’t outlive their funds.

Tips for Budgeting for an Elderly Parent

Figuring out how to take care of your elderly parents’ finances – without putting a strain on your relationship – comes with a bit of a learning curve. Here are some tips that can help ease the process.

1. Starting With Small, Gradual Changes

It can be a good idea to offer support in small, gradual steps in the beginning. You may want to sit with your parents while they make a budget or offer to set up automatic bill pay with them. If you need to offer financial support, consider starting small, such as paying for a prescription. Ideally, you’ll want to give as much independence to your parents as they can handle.

2. Making a List of Their Financial Documents

It can be very helpful to create a document that lists all of your loved ones’ financial and legal documents, including where they are located, along with contact information for any professionals they use, such as doctors, lawyers, and accountants. Some documents you may want to look for include:

•  Bank statements

•  Mortgage statements

•  401K, IRA, stock certificates, or pension records

•  Income tax records

•  Property deeds

•  Outstanding loans

•  Automobile registration and insurance

•  Homeowners insurance

•  Health insurance

•  Life and disability insurance

•  Will and or trust documents

•  Passport, driver’s license, and social security information

•  Birth and marriage certificates, divorce decree

•  Contact info for doctor, lawyer, investment banker, accountant, clergy, etc.

•  Military service records

•  Medical papers, such as advance directives, DNR

•  Final wishes regarding burial arrangements, cemetery, and funeral home

Recommended: How To Organize Your Finances & Keep Them Organized

3. Creating an Organized Budget

Budgeting for elderly parents is similar to budgeting for yourself, except that the budget line items and amounts will likely look different from your own. Retirees may also have significantly less income coming in than when they were employed.

When helping them set up a budget, here are some monthly budgeting categories you may want to include:

•  Mortgage or rent

•  Utilities

•  Credit card payments

•  Health insurance payments

•  Phone bills

•  Medical bills

•  Food

•  Transportation

Recommended: How to Make a Budget

4. Setting up Automatic Bill Payment for Simplicity

Automatic bill payments can be a big help when it comes to taking care of elderly parents’ finances. If you’re handing the payments, it will eliminate the mental energy it’ll take for you to pay another set of bills each month. Plus, you’ll worry less about things like having their utilities unexpectedly cut off or their insurance canceled.

5. Communicating Changes With Them

There may come a time where you need to make changes that will affect their lives. If you need to switch care providers, for example, it’ll disrupt their routine and expectations. To make the adjustment process easier, you’ll want to communicate any changes early, often, and honestly.

6. Looking at Senior Programs

When budgeting for eldercare, it can be wise to look for senior programs in your area. Not only can they be a tremendous relief on the budget, but they can also enhance the quality of life for your elderly parents. They may be able to qualify for housing, food, or energy assistance. Eldercare services can also include transportation, meals, health insurance counseling, caregiver support, and in-home services You can learn about programs in your area at Eldercare.gov .

7. Reducing Costs Where You Deem Fit

Be sensitive as you approach budget cuts with your parents. You may be able to see things that don’t make sense to pay for anymore, but your parents may view things differently. Keep communication lines open and respect their wishes as much as you can.

Recommended: Typical Retirement Expenses to Prepare For

8. Researching Options for Insurance Plans

Medicare, the healthcare insurance program for those over 65, isn’t as simple as you might expect. There are four parts of Medicare: Part A, Part B, Part C, and Part D. Each has their own benefits, deductibles, and copays. To browse medicare options in your area, you may want to take a look at Medicare.gov .

Depending on their financial situation, your parents may qualify for Medicaid (the public health insurance program for people with low income) as well as Medicare. In addition, you may want to look into supplemental health insurance (called Medigap). Medigap is sold by private companies and can help fill in “gaps” in Medicare, such as copays, coinsurance, and deductibles.

9. Separating Finances From Yours

Whatever help you’re able to give an aging parent, it can be a good idea to keep your finances separate from theirs. This is generally the easiest and most ethical way to keep a record of what is happening in your parents’ accounts.

When you’re in control of someone else’s finances, it puts you in the role of a fiduciary, which means you must act in their best interests, rather than your own. If you want to learn more about the different types of financial caregiving, you can look at the guides from the Consumer Financial Protection Bureau .

10. Staying Aware of Any Unplanned Charges

Financial exploitation of elderly persons is on the rise. In 2021, financial institutions filed 72,000 suspicious activity reports related to elderly financial exploitation, which was 10,000 more than 2020, according to the U.S. Consumer Financial Protection Bureau.

It’s concerning how often elderly persons’ are taken advantage of, especially when it comes to their finances. Being aware can help prevent financial abuse of an elderly parent. Some red flags you may want to watch out for:

•  Large, frequent withdrawals

•  Withdraws made from an ATM not typical of your parent’s behavior

•  Transfers between bank accounts your parent cannot explain

•  Insufficient funds fees or unpaid bills

•  Attempts to wire large sums of money

•  A new friend accompanying them to the bank

•  Suspicious or forged signatures on checks

•  Reluctance to talk about transactions or shame surrounding their money

•  Altered wills or trusts

If you suspect your parents have been the victim of financial exploitation, you can report it to their bank and ask for their help to investigate and stop it. Your town or state Adult Protective Services department may also be able to help. If you strongly suspect fraud, it’s also a good idea to notify your local police.

The Takeaway

Taking care of your elderly parents’ finances is a big step that often requires time, patience, sensitivity, and maintaining open and clear lines of communication. But it can be well worth the effort. By coming up with a financial plan and helping older loved ones better manage their income, savings, and spending, you can ensure that they live as well as possible during their golden yeast.

If you need a partner to help you through this season of life, you may want to consider opening a bank account with SoFi Bank. We offer a competitive APY, plus a number of handy features that can make banking with elderly parents easier, including direct person-to-person transfer service and an easy option for adding a joint account holder.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How do you financially help elderly parents?

You can help your parents financially by going over their finances with them, helping them set up a budget, and connecting them with any senior financial support services offered in your area. Helping elderly parents financially doesn’t have to mean giving them money. However, if that’s necessary (and you are able), you may want to start slowly by covering a few expenses here and there and, if needed, gradually increase.

What do you do if you have an elderly parent with no money?

You can help by looking for senior support programs that may be able to help them meet their needs. Beyond Medicare and Social Security, there are a host of other programs your elderly parents may qualify for, including assistance for housing, energy, and food. Eldercare.gov is a good place to start your research.

How do you make a budget for the elderly?

Making a budget for the elderly is similar to making a budget for yourself, except the expenses and allocations will be very different. A good first step is to go through their monthly bank and credit card statements to determine how much is coming in each month and how much is going out. You can then look for places where they may need to cut back.

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Photo credit: iStock/Ridofranz

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 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 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% 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 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 4.60% 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 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Do you feel like your spending is out of control? It’s a common experience. It can be easy to blow your budget when you succumb to the allure of some shiny new thing (like the latest mobile phone), have an unexpected expense (a car repair, for instance), or say yes to a weekend away with friends when you don’t really have the cash. Whether you’re struggling to stick to a budget or want to be more organized with your money, there’s never a wrong time to get your finances back on track.

Many of us can respond quickly in the one-off, urgent money crisis. It’s akin to going on a crash diet prior to a big event. But if you are regularly feeling strapped for cash and as if you can’t get your money act together, it’s time for a fresh look.

Making permanent lifestyle changes requires time, dedication, and training in new skills. By applying this perspective to budgeting, you’ll be able to diagnose the problems and practice new habits. That can help show you how you can get back on track financially.

Here, you’ll learn:

•   Why it’s so difficult to stick to a budget?

•   Why you typically go off your budget?

•   Ways to stick to a budget.

Why Is It So Hard to Stick to Money Goals?

Even when we create a monthly budget with the best intentions, we might get off track along the way. Life can be expensive! Whether it’s an emergency medical bill or a seemingly irresistible sale, obstacles pop up with regularity for anyone trying to control their finances.

Additionally, establishing new habits is always a challenge. For example, discipline is vital to eat out less or reduce other expenses. It’s easy to slip back into something familiar and comfortable, even if it hurts your wallet.

Remember, too, that everyone is dealing with a pandemic and inflation. The average American household is spending more on necessities like food and fuel. That takes a bite out of your budget. And, as pandemic restrictions lift, many of us want to get back to doing things like going to concerts and traveling. Those can be pricey to begin with, and inflation just intensifies how such expenses can impact your budget.

Recommended: How to Protect Your Money from Inflation

Common Reasons Why People Break Their Budget

Many factors can cause a budget to go sideways. Here are some other common reasons why people break their budgets.

•   An unexpected bill, like a car repair or emergency room bill

•   The budget felt too stringent and was abandoned after one splurge purchase

•   Your income fluctuate too much for a budget to account for, whether that’s because you are a freelance worker or were laid off recently

•   The temptation of a sale, peer pressure, or shopping to satisfy one’s emotions

Tips for Recovering and Getting Back on Track With Your Finances

Even folks who closely track their spending go over their budget now and then. It happens, but diverging from your budget isn’t the main issue — how you recover is more important. So, if you’re wondering how to start getting your finances back on track, these strategies can help speed up the process.

Evaluating and Pinpointing the Damages

You’re not alone if you get to the end of the month wondering where all your money went. When faced with unexpected expenses, most families will experience financial hardship. According to the Federal Reserve, roughly 35% of Americans would struggle to pay $400 in unexpected expenses. That means many of us don’t have emergency funds in place, or at least not adequate ones.

Overspending can mount quickly, putting any budget out of balance. A few additions to the grocery cart, a few extra visits to the coffee shop, or a home repair can wreak havoc on the most carefully planned budget.

For this reason, looking at recent bills and credit card statements can help identify where you spent your money. For example, dinner with your friends at your favorite (and somewhat pricey) restaurant or back-to-school shopping for your children may have thrown off your spending plan. Identifying budget lapses can help you plan for or avoid them in the future.

Adjusting Your Budget Numbers and Goals

Conventional budgeting advises that you look at your expenses at the end of each month. However, reviewing your account balances and statements once a week is more advantageous for keeping track of money coming in and going out. A weekly check-in allows you the time to change course and maintain your budget, even if the first week of the month didn’t do your budget any favors.

You might have zero experience with budgeting, and that’s okay. However, creating a budget for beginners is an excellent way to start working on getting your finances on track. Watching your cash flow can help you tweak your budget to better suit real life.

Being Kind to Yourself

Don’t beat yourself up if you make your budget with the best intentions and fall woefully short the first month. Progress is more realistic than perfection. Moreover, someone trying to build a new skill rarely gets it right the first time.

Cut yourself some slack if you’re months into following a budget and realize you overindulged this week. Your budget is there as a guide, so update it if you see the need and realign your spending the following month. Practice some financial selfcare and get back on track.

Finding a Financial Accountability Partner

Reaching out for help is an effective way to stay disciplined. A financial coach or financial therapist can play a positive role in modifying your spending habits. In addition, spending issues may be rooted in an unhealthy relationship with money. Finding someone who provides accountability and encouragement can be a real support as you learn smarter cash management. It can be the difference between managing your finances successfully and giving up just when you start to get serious.

Even seasoned budgeters can benefit from professional help. Those with budgeting down pat can work with a financial advisor to create a financial plan and achieve their goals, whether that’s building up an even bigger emergency fund or investing for retirement.

Recommended: Are you financially healthy? Take this 2 minute quiz.💊

Identifying a Budgeting Method for Your Needs

Another strategy to get back on track financially is to pinpoint a budgeting method. There is no one-size-fits-all budgeting solution since everyone has a unique financial situation and personality type. So, here are a few common methods to explore.

•   50/30/20 budget. The 50/30/20 budgeting rule requires budgeters to spend 50% of their income on needs (mortgage, insurance, and car payments), 30% on wants (entertainment, shopping, and personal care items), 20% on savings (investments and emergency fund contributions).

•   Envelope budget. With this method, you divide your spending categories into cash envelopes with a certain amount of cash in each. When the envelope runs out, you can no longer spend in the category until the next month or else you can take money from another envelope.

•   Zero-sum budget. This method requires that you give each dollar you have coming in a job or specific purpose. Therefore, at the end of the month, you will have zero dollars left over.

•   Paying yourself first. With this method, you pay yourself first before you pay other expenses. So, if you plan on saving 20% of your income, you put that away before using the rest of your income as you wish.

•   Line item budget. Usually, when people think of budgeting, a line item budget is the technique that comes to mind. With this method, you place your income and expenses on an Excel spreadsheet to track all the money you have coming in and going out. You learn and adjust as you go.

The Takeaway

If only sticking to a budget were a straightforward and effortless process. But the truth is, many of us lose our focus, have fun spending our hard-earned money, or encounter emergencies and blow our budgets. However, you can get back on track. You may need to diligently track your spending, keep a positive perspective, employ some new strategies, and connect with experts for additional ideas. But by investing some time and energy, you can learn how to get your finances back on track.

A SoFi bank account can help you streamline your budgeting efforts. Not only does our Checking and Savings offer automatic saving features, you’ll also enjoy features that can help your money grow faster. For instance, sign up with direct deposit and you’ll enjoy a fantastic APY and pay no account fees.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What is the easiest way to track finances?

Budgeting apps that track your spending can help you understand your finances down to the last detail. For example, you can integrate your credit and debit cards, bank accounts, and investment accounts into one app that provides spending alerts and expense reports.

How can I straighten out my finances?

Some solutions for getting your finances straightened out include making and following a realistic budget, regularly checking your credit reports and scores, and automating transfers to savings and investment accounts. This way, you can begin building good monthly spending habits.

How can I grow financially?

Some strategies for growing your money include using cash instead of credit, avoiding debt, paying bills on time, and eating more meals at home. Look for a financial institution that pays high interest and doesn’t charge fees (it’s likely to be an online bank). Then, apply your savings to investment accounts such as an IRA or employer-sponsored 401(k), which will grow your money over time.

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Photo credit: iStock/Eoneren

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 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 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% 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 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 4.60% 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 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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Niche banks offer financial products and services that are targeted toward a particular niche or audience, whether they are Native Americans, the LGBTQ+ community, or entrepreneurs. The objective of niche banking, also referred to as affinity banking or vertical banking, is to better meet the needs of a specific group of customers.

You might choose to open accounts with a niche bank if you’re looking for a banking experience that reflects your lifestyle. These banks typically operate on a smaller scale than larger commercial banks and can offer highly personalized services.

Understanding how niche banks work can help you to decide if using one is right for you. Here, you can learn:

•   What is a niche bank?

•   How does a niche bank work?

•   What do niche banks offer?

•   What are the pros and cons of a niche bank?

What Is a Niche Bank?

A niche bank is a bank that focuses on a certain market or audience, such as people in a certain profession or with a shared background. It offers products and services that are designed to meet the specific needs of that audience. Niche banks are alternatives to traditional banks. They clearly understand who they want to help and they tailor their banking approach to serving their target market.

Niche banks may have branches or they may be online-only. They can be insured by the Federal Deposit Insurance Corporation (FDIC) in the same way that other banks are. Again, the main difference between a niche bank and any other bank is where it concentrates its efforts and how it focuses its services. For instance:

•   Murphy Bank, which has branches in Fresno and San Luis Obispo, CA, is an FDIC-insured institution that primarily services farmers, small business owners, and mobile home owners. It can help them to obtain loans for the purchase of equipment or property.

•   Laurel Road focuses on customers who are healthcare and business professionals managing a sizable amount of student loan debt.

How Do Niche Banks Work?

Niche banks work much the same as other banks, in terms of how transactions are processed and the kinds of products and services they offer. Where they diverge from other banks lies in the audience they are established to serve.

As mentioned, Murphy Bank operates primarily as a lender to help farmers, small business owners, and mobile home owners in the Fresno and San Luis Obispo areas. The bank also offers certificate of deposit accounts.

Other niche banks, meanwhile, can serve an entirely different population. For example, niche banks may offer services to customers based on their:

•   Geographic location

•   Military affiliation

•   Racial, ethnic, or gender identity

•   Religious affiliation

•   Sexual orientation

•   Occupation

•   Disability status

•   Immigrant status

Here’s one perspective on the value of niche banks: An estimated 5.4 million households or 7.1 million Americans are unbanked, meaning they have no bank account, according to the Federal Trade Commission (FTC). Twenty-nine percent of the unbanked said they didn’t have enough money to open an account, while 16% said they didn’t trust banks enough to open an account. Niche banking can help fill gaps that may exist in traditional banking by catering to a smaller group of people. In this way, they may contribute to shrinking the ranks of the unbanked.

How Do Niche Banks Meet the Needs of Customers?

Niche banks can meet the needs of their customers in a number of ways. That can include offering specialized products or honing their services to fit a particular needs. Here are some of the ways in which niche banks help the people who use them.

Financial Wellness Tools for Those With Financial Struggles

Financial wellness or wellbeing has several components. Two to consider: freedom of choice in how you manage money and a sense of security that you’re making good decisions with your finances. Niche banks can recognize that financial wellness looks different for everyone. They likely know that what may not be a struggle for one segment of the population is for another.

Niche banking institutions can offer specific tools to help their customers overcome obstacles to achieving wellness. For example, that might include a mobile banking app for people with disabilities that’s specifically designed to help them manage Supplemental Security Income (SSI) or disability income benefits.

Recommended: Is Mobile Banking Safe?

Tax Management Tools for Those With Financial Struggles

Niche banks can also offer tools to help make income tracking and tax filing easier for certain customers. For instance, freelancers, gig workers, and entrepreneurs can get a boost from the niche bank Lili. When income is irregular because you’re working as an independent contractor or you’re a sole proprietor, having built-in banking tools like expense tracking can make doing taxes less stressful.

Lending for Native American Tribal Members

Certain niche banks exclusively serve Native American populations with the goal of helping them to finance their personal or business goals. That can be very beneficial for someone who may not know how to apply for a home loan or how to get a business bank account so they can apply for a business loan. These banks can review the borrower’s financial situation and needs to help them find the right personal or business loan option.

Banking for Immigrants

Immigrants often face numerous financial hurdles, including opening a bank account. Undocumented individuals who have an Individual Taxpayer Identification Number (ITIN) can open a bank account in the U.S. However, a lack of familiarity with banking regulations or a language barrier could be barriers to access. Niche banks can offer solutions to those issues in the form of bilingual banking, Shariah-compliant bank accounts, and other services that reflect the unique financial needs of immigrants.

Banking for Freelance Workers

The number of freelancers is growing. There are approximately 59 million freelance workers in the U.S. and they collectively contribute $1.3 trillion to the economy. Niche banks understand that freelancers may face certain challenges with things like billing customers and getting paid. So they can offer banking tools that can make managing those challenges easier. For example, you might be able to send invoices through your mobile banking app, track ones that have been paid, and see those deposits in your checking account.

Why Are Niche Banks Gaining Steam?

The rise of niche banking may be attributed to a few things. For one thing, people may be increasingly tired of paying high banking fees, such as monthly maintenance fees, overdraft fees, non-sufficient funds fees, and excess withdrawal fees. The expense of keeping your money at a traditional bank can really add up. That’s how banks make profit.

Niche banks that operate as online-only institutions can offer a fee-friendly alternative. Generally speaking, online banks tend to be less expensive for their customers because the bank isn’t passing on high overhead costs. Online banks may also offer better interest rates to savers.

Another reason for niche banks’ growth may simply be the desire for a more personalized banking experience. A major bank may not understand the types of financial challenges a customer faces on a daily basis. Niche banks pride themselves on being able to understand those challenges, whether it’s Greenwood, for the Black and Latino customers, or Ando, which is dedicated to sustainability for eco-conscious clients. Working with a niche bank can help you feel more connected to the institution itself and to your money.

Advantages of a Niche Bank

Niche banks have their pros and cons like any other type of bank. If you’re interested in what’s good about niche banking, here are some of the main advantages.

Niche Banks Know What You Need

Niche banking is all about figuring out what the members of a specific population need most from their bank. When you open an account with a niche bank you can be fairly certain that the bank has studied the most common challenges its customers face and understands what kind of solutions are needed.

They’re Technologically-Inclined

Once upon a time, you might have gone to a branch to do your banking. But thanks to online and mobile banking apps, you can probably manage your money from just about anywhere. Niche banks typically recognize that customers want tech tools that can make keeping track of their finances easier. They often deliver them in the form of user-friendly apps and features, making it fast and simple to pay bills, transfer funds between bank accounts, and more.

They’re Not One-Size-Fits-All

Niche banking aims to encompass a wide variety of customers, which means it can be easier to find the right banking option for you. You’re not necessarily limited to banking in your geographic location. Instead, you may open accounts online based on factors like gender identity, ethnic background, or disability status. And as more niche banks open, they will likely serve an even more audience segments.

Disadvantages of a Niche Bank

There’s a lot to like about niche banks but there are some potential drawbacks. If you’re considering a niche bank, here are a few things to keep in mind.

Products and Services May Be Limited

While some niche banks offer the same products and services you’d find at any other bank (say, checking accounts, savings accounts, credit cards, and loans), not all of them have a full spectrum of services. Murphy Bank, for instance, does not offer checking accounts or money market accounts. So in some instances, a niche bank may not be an all-in-one-banking solution.

Finding the Right Bank May Be Difficult

Having multiple niche banks to choose among can be a good thing, as it allows you to find the best banking option for you. That said, the process can be a challenge if you find that no single niche bank meets all of your needs. Perhaps you are both Black and an entrepreneur, and are considering niche banks that speak to each facet of your identity. It may be hard to know which financial institution will best suit your needs.

Recommended: Can I Have More Than One Bank Account?

The Takeaway

Niche banking offers a personalized perspective, serving the specific needs of certain consumers. For instance, some niche banks are designed to uplift the disabled; others are there to understand and serve the needs of Native Americans. For some account holders, switching to a niche bank will allow for a more personalized, satisfying experience. Account holders can enjoy services and an outlook that really meshes with their identity and aspirations.

If you’re looking for ways to bank smarter, see what SoFi offers. While we aren’t an affinity bank, we do understand what our customers want. Namely, high interest, no fees, and convenience. So when you open our high yield bank account with direct deposit, you’ll enjoy a competitive APY and no fees. Plus, eligible account holders can get paid up to two days early. Those are good reasons to open a SoFi bank account online.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What is vertical banking?

Vertical banking is banking that targets a specific vertical or segment of the population. It’s the same thing as niche banking or affinity banking.

Are niche banks a fad or a long-term option?

Whether niche banks will stick around for the long haul is anyone’s guess. The increasing number of niche bank offerings suggests that banking customers are looking for alternatives beyond the traditional big banks, regional banks, and credit unions.

What is niche market strategy?

Niche market strategy is all about targeting a specific niche to sell products or services. Banks can apply a niche market strategy to narrow down the area of the population they’d like to serve.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% 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 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 4.60% 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 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 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.

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