Money Management for College Students

As a student, you may be primarily focused on studying and getting a great education.

But college is also an opportunity to develop money management skills that can help set you up for financial success after you graduate.

You may be living on your own for the first time, holding down a part-time job, and also handling bills, along with college loans and/or financial aid.

Setting up some good financial habits now can help ease the financial stress of student life, and also help ensure you leave college in solid financial shape.

Here are 10 money management tips that help you spend less and save more both during and after college.

1. Setting up a Basic Budget

Budgeting may sound complicated, but making a budget is simply a matter of figuring how much is coming into your bank account each month and how much is going out, and making sure the latter doesn’t exceed the former.

To get started, you’ll want to list all of your sources of income, such as from a job or family contributions.

If you are going to be living off a fixed amount of money for each semester, say from summer earnings or money from your family, you may want to divide this lump sum by the number of months you need to make this money last.

Once you know how much you have to live on each month, you’ll want to make a list of fixed expenses that you will be responsible for paying, such as cell phone or car payment, or maybe even rent if you live off campus.

Next, you’ll want to subtract your fixed expense from your monthly spending allotment. This will give you the amount you have left over to cover variable expenses, such as eating out, buying clothes, and entertainment. You can then come up with target spending amounts for each category.

Doing your best to stay within these spending limits can help ensure that your money lasts until the end of the semester, and help you avoid running up costly credit card debt.

2. Opening up a Savings Account

You might feel like you don’t have enough income to start saving money yet, but even just putting a small amount away each month can add up over time.

For example, if you’re able to set aside $50 a month now, you may soon have a decent nest egg that can help pay for something fun, like a road trip over the next school break.

What’s more, being diligent about saving money each month can help cultivate a habit that will serve you later when you can afford to save more in your nest egg and also for retirement.

3. Buying Used Textbooks (and Selling Yours When Done)

Textbooks can be so expensive! Fortunately, there are a number of ways to save money here.

One option is to buy used whenever you can. You’ll want to be sure, however, that you are getting the version the professor wants. If you have an earlier edition, you might struggle to find the content if the book has since been modified. Getting the digital version of a book can also yield savings.

Another option is to rent what you need from a third-party bookseller, such as Amazon or Chegg. You can often rent textbooks for an entire semester for significantly less than buying new, and may even be able to highlight them.

For books that you purchase (new or used) that you won’t need to refer to in the future, consider selling them when you’re done to recoup some of the expense.

4. Using Credit Cards Sparingly

Credit card companies love college students, and many may try to lure you into applying for cards. You’ll want to proceed with caution, however.

While having a credit card as a student can be a good idea–for convenience, as a backup for emergencies, and to start building credit history (more on that below), you’ll want to be careful that you don’t run up credit card debt.

If you charge more than you can afford to pay off at the end of the month, you can end up paying a high-interest rate on the balance, which can make it even hard to pay off.

As a result, it can be easy for college students to find themselves digging a debt hole that can be hard to climb out of.

If you choose to sign up for a new card, you may want to look for a rewards credit card that will let you rack up points you can use to get products or travel perks–and only charge what you can afford to pay back quickly.

5. Building Your Credit Score

A credit score is a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time.

Building credit might not seem like a priority when you’re still in school, but you’ll need it in the future if you want to finance a car, buy a house, or qualify for the best credit card offers. Your credit can even affect your job prospects and your ability to rent an apartment

One strategy you can use to build up your credit is to use your credit card judiciously. If you make small purchases and regularly pay the balance off in full, you can avoid racking up interest charges but still get that boost to your credit score.

If you have student loans, you may also want to consider making small payments (even just $25 to $50) while you’re still in school to start paying down interest and have some positive repayment history on record.

If you start building your credit score now, you will likely be able to get better deals on lending products like mortgages, car loans, and credit cards in the future.

6. Finding Free Stuff

One highly effective way to stretch your money is to find freebies.

Facebook has groups where people can post items they no longer want. You might be able to score free clothes, furniture, or room decor.

Freecycle and NextDoor also have listings for things that people are giving away. You can also find free items on Craigslist (you’ll find the “Free” section under the “For Sale” heading on the main page for your city).

7. Learning to Cook–and Eating out Less

You may find you get tired of cafeteria fare and ramen. At the same time, you may not want to don’t blow your budget on eating in restaurants every weekend.

If you have access to a kitchen, you might want to consider purchasing ingredients from your local supermarket and putting together some simple, tasty meals, instead of eating out. This can be a major cost-saver.

If you’re not much of a cook, you may want to go to some food blogs and recipe sites like Allrecipes or Serious Eats to find some easy recipes and watch a few how-to videos. You could also find tons of cooking videos on YouTube.

Having some go-to recipes in your arsenal can pay off now, and also down the line when you’re working and living on your own (and don’t have to rely on expensive take-out or unhealthy fast food for dinner every night).

8. Starting an Emergency Fund

Starting an emergency fund or back-up savings fund is an important part of anyone’s long-term financial health.

Life can be unpredictable, and your emergency fund serves as a safety net that you can fall back on for those “rainy days” where you find yourself facing an unexpected expense or other financial setbacks.

Having an emergency fund can also help keep you from having to rely on credit cards to get through a financial challenge.

How much you should put aside for emergencies each month is up to you and your financial situation. The key is to start saving something each month–no matter how small the amount may initially seem.

When starting your emergency fund, it’s a good idea to fund the account regularly. Consider setting up an automatic transfer to your savings so you do not have to think about it.

Ideally, your emergency fund should also be set up in a separate savings account so you won’t be tempted to spend the money on something else.

9. Getting the Most out of Your Student ID

You may only think of your ID card as a form of identification and a way to get into college sporting events. But there are actually a number of additional benefits that come with a student ID, and many can help you save money.

You may find that businesses, especially those near universities, will offer students discounts when they show a student ID card.

Next time you go to the movies, shop for school supplies, or get a new haircut, it can be a good idea to ask if they offer any discounts for local college students.

In addition, many national and online retailers–including major clothing, sneaker, and computer brands–offer discounts to college students.

You may also be able to use your student ID to get a better deal on your cell phone plan and streaming services.

10. Getting Started with Investing

Investing when you’re young is one of the best ways to help your money grow over time.

That’s thanks to compound earnings, which means that any returns you earn are reinvested to earn additional returns. The earlier you start investing, the more benefit you gain from compounding.

Investing in the stock market also isn’t as complicated as you may think. You can open a retirement account, like a traditional or ROTH IRA, or a brokerage account (for nonretirement investing) online, often with a minimal amount of money.

You may also be able to schedule automatic withdrawals from your bank account to your investment account each month.

It’s important to keep in mind, however, that all investments have some level of risk because the market moves up and down over time.

The Takeaway

College can provide a great opportunity to develop the money skills you’ll need after you graduate.
By learning some basic money management techniques now, you can feel confident about your ability to handle your finances well after graduation.
In 10 years, you will likely thank yourself for putting in the effort to learn how to set–and stick to–a monthly budget, use credit cards wisely, save money, and build your credit score.

Heading off to college soon? SoFi Money® can help you start off on the right foot. This cash management account allows you to earn competitive interest, spend and save–all in one account.

And, SoFi money doesn’t charge any account fees, monthly fees, or many other common fees.

Get your financial life off to a great start with SoFi Money.



Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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How to Make a Will: 7 Steps

It’s easy to put off writing a will. The process can seem complicated, not to mention expensive. And, if you’re single and don’t own a house, you may also feel like a will is unnecessary.

But writing a will actually doesn’t have to take a lot of time, or money. And, even if you don’t have a lot of assets, having a will can give you peace of mind that your preferences will be followed.

Here’s what you need to know to write your own will.

What Is A Will?

Simply speaking, a will (also known as a last will and testament) is a legal document that details what you want to be done with your possessions after your death.

Your will may also identify a guardian if you have young children, as well as an executor, the person who will carry out the terms of your will.

What a will doesn’t cover is any asset in which you’ve designated beneficiaries. Named beneficiaries override a will.

For example, if you designate all your property to go to your parents, but you have a life insurance policy in which your brother is listed as a beneficiary, your brother will get the life insurance payout while your parents would get the rest of your assets

There are other important documents people may create at the same time as they create a will, and are all a part of an estate plan. These include:

•   Living will If you were to become incapacitated, what are your preferences as far as medical treatments? This document legally outlines your wishes.
•   Power of attorney If you are unable to make decisions for yourself, who has the authority to make those decisions on your behalf? Power of attorney may be divided into medical power of attorney–the person who has power to make medical decisions for you–and financial power of attorney. Both can be the same person.
•   Do Not Resuscitate (DNR) order This document communicates that, in the event of your heart no longer beating or you no longer being able to breathe independently, that you do not want doctors to perform any life-saving action.
•   Organ and tissue donation If you were to die, would you want your organs and tissue to be donated? Having a form explicitly stating your wishes can make it easier for loved ones to fulfill your desires, instead of guessing what they think you would have wanted.

Not all documents need to be filled out at once. For example, some people may only fill out a DNR order if they have a terminal illness or are unlikely to recover.

Recommended: Estate Planning 101

Dying Without a Will

Even if you think you own nothing of great value and you’re still working on money management, chances are you do your own things that matter to your family.

And if you die without a will, your loved ones may become involved in a complicated court process that will freeze your assets until state inheritance laws are followed.

If you’re single and die without a will, your assets will likely go to your closest blood relatives, which may be your parents or siblings.

While this may be the preferred choice for some people, having a will allows you to earmark certain assets (or pets) for a charity or close friends.

It’s also a final chance to communicate your wishes to your loved ones and allows your loved ones to avoid a potentially drawn-out court process.

Dying without a will can become even more problematic if you have children. If you die without a will, the court will appoint a guardian. And while the court attempts to choose a guardian with the best interest of children in mind, that choice may not be the same choice you would make.

Recommended: What Happens If You Die Without A Will?

How To Create a Will

Below are simple steps that can help you make a will.

1. Choosing How You’ll Create Your Will

For people who own a lot of property or assets and may want to set up trusts as a way to minimize taxes and ensure their heirs follow their wishes, it can be well worth the investment to hire an attorney who can walk them through the basics of estate planning.

However, online templates and will-creating platforms can be sufficient for many people. These DIY options can be much less expensive than working directly with an attorney and are legal and binding provided they are signed appropriately.

Some of these online options are even free, such as SoFi’s Estate Planning Will Package, which is offered free to SoFi members through Ladder.

2. Making a List of Your Assets

In order to leave property to your loved ones, you need to know exactly what you have. So it can be a good idea to start by making a list of all your significant assets, including jewelry, artwork, real estate, and land, cars, and bank accounts that don’t name a beneficiary.

If you have retirement funds and/or life insurance, you don’t need to write out who is going to receive the proceeds, as these require naming beneficiaries within the account or policy.

3. Being Specific About Who Gets What

Once you have a list of all your assets, you can decide who you would like to get what. Here, it’s helpful to be as specific as possible, such as using full names and being detailed in describing the assets.

4. Considering Guardianship

For many parents, including pet parents, guardianship can be the most fraught element of their will. This can be a decision that takes time.

For example, some parents love the bond their children have with their grandparents but worry about how aging parents would handle the physical stressors of raising young kids.

Other parents may wish to appoint a sister or brother who already has children, so their own kids can be brought up alongside other children. There is no wrong answer, but thinking through contingencies and what-ifs can be helpful in making the most informed decision.

It can also be a good idea to discuss the idea of guardianship with the intended recipient. Maybe a single uncle loves your kids but is uncomfortable taking on the role of parent, or maybe grandparents have similar reservations as to their fitness for taking on the role.

5. Choosing an Executor

Naming an executor for your will is an important choice. This is the person who will make sure that the wishes laid out in your will are followed.

The duties of an executor include paying any remaining bills and debts, distributing your assets, and handling probate (transferring the titling of assets).

If you wish, you can name more than one person as an executor of your will.

6. Signing Your Will and Storing it in a Safe Place

A will is only legal when it is made legal–that is, printed and signed according to instructions.

You generally need to sign a will in the presence of at least two witnesses. In some cases (such as if you’re using a document called a “self-proving affidavit” to simplify the process of going through probate court), your signature must be notarized as well.

You’ll also want to make sure you keep copies as directed. Many people keep a physical copy in a safe place, as well as a digital copy.

Some might also share their will with their executor, or tell them where it is so it can be easily and quickly accessed if you were to die unexpectedly.

7. Updating Your Will as Appropriate

As your life changes, you may need to return to your will and update it. This could be due to:

•   Asset changes. Buying a house, opening an investment portfolio, and other financial moves may lead you to revisit your will.
•   Relationship changes. If you get married or have a serious partner, you may want to change your will to reflect that.
•   The addition of children or pets to your family.
•   The death or incapacitation of an appointed guardian.

It can also be good practice to assess your will after every life change, or every year or so. To update a will, you can either write what’s called a codicil (essentially a document stating any updates, written and signed by witnesses) or create a new will, depending on the extent of the changes.

The Takeaway

While the topic of death and end-of-life wishes can seem overwhelming, creating a will can be relatively straightforward.

And, thanks to the many online templates now available, you can often make your own will for a relatively low flat fee, or even for free.

The process of writing a will typically includes coming up with a list of assets, choosing where you’d like each asset to go, as well as choosing a guardian (if you have children) and an executor of your will.

Having a will, and updating it as appropriate, can be a gift to your loved ones when they may need it most.

As you get your affairs in order, you may also want to get your financial life organized.

SoFi Money® makes it easy to manage your money by allowing you to earn competitive interest, save, and spend, all in one account.

Check out everything a SoFi Money cash management account has to offer today.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
Ladder policies are issued in New York by Allianz Life Insurance Company of New York, New York, NY (Policy form # MN-26) and in all other states and DC by Allianz Life Insurance Company of North America, Minneapolis, MN (Policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to offer life insurance in the state of New York. Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

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How to Save Money From Your Salary

When times are tight, it can feel as though putting even a few dollars away every month is next to impossible. How can you save money when you have a low salary and so many expenses?

There are ways to get that arrow moving in the right direction—even for those who are new to working full time and living on their own.

Taking Advantage of the Employer Match

According to the National Institute on Retirement Security four in five , Americans have saved less than their annual salary in retirement accounts. Thankfully, it’s never too early, or too late, to invest for retirement. Enrolling in your company’s 401(k) plan could be a place to start, and they may even offer matching contributions.

Not every employer offers a match—or a 401(k), for that matter—but if it’s a perk that you can take advantage of, getting more information about how your plan works could open up an avenue for retirement savings.

Employers differ in their plan contributions. Some employers might contribute a dollar for every dollar or a percentage of every dollar an employee puts into the plan, up to a designated percentage of the employee’s salary.

Plans are frequently set up so that employee contributions are taken directly from their paycheck, so the decision to contribute is automated instead of being something to think about each month.

Recommended: How an Employer 401(k) Match Works

Preparing a Budget and Following It

If the idea of a budget seems daunting—or past attempts have been less than successful—it might be because the chosen process is too complicated. It’s not necessary to create a complex set of spreadsheets. When you’re new to budgeting, it might help to start with something simple.

The 50/30/20 rule for budgeting streamlines expenses into three categories so you don’t have to monitor every single expenditure to make it work. Instead, this method recommends dividing take-home pay—what you make after taxes—into three main categories: needs, wants, and savings.

•   Put 50% of your money toward needs: housing, utilities, groceries, transportation, insurance, prescription medications and any other payments you have to make such as credit card or student debt, alimony or child support, for example. If you require a cell phone or other equipment for work, that might be a need, but if it’s the newest, most expensive model, you may be slipping into the wants category.

•   Put 30% toward wants. Here’s where everything from vacations to vending machine snacks can come in. If it isn’t essential, it goes into this chunk of your budget, so consider each expense carefully. This is where many people go wrong financially. Do you have to go to a gym to work out? Do you need Netflix and a weekly movie night? It’s all your call—but these costs all must fit into the allotted amount of money.

•   Put 20% toward savings or toward paying extra on your debt. This category could include your emergency fund, a savings account where you stash away extra cash for short- and long-term goals and your investment savings or retirement account. Keep in mind that some or all of these amounts may already be automatically deducted from your paychecks, so those amounts wouldn’t need to be included here. If you’re planning to pay more than the minimum each month toward credit card and student loan debt, include those expenses in this category, as well.

•   Feel free to tweak. If you want to save more than 20%, or you’re in a hurry to pay down debt, you can cut back on your wants to make it work. The key to budget success is to stick with your plan, though, so don’t make it so tough you can’t maintain it.

Automating Your Savings and Payments

Being paid by direct deposit is common these days,, so you might consider it an opportunity to eliminate at least some temptation when payday rolls around. You may be able to split your direct deposit into multiple accounts—a cash savings account and a Roth IRA or traditional IRA, for example—so you won’t be tempted to spend those dollars.

If a payroll split isn’t an option, you might consider setting up an automatic transfer from a checking account to a savings account. In today’s internet age it’s possible to set up automatic payments for a variety of expenses.

The Takeaway

A savings plan doesn’t have to be complicated. By starting small and keeping things simple and steady, budgeting and saving may just become a habit. While that first goal could be as basic as just getting started, it might not take long to realize where the budget can be adjusted to maximize savings.

SoFi Money® is a cash management account that lets you save, spend and earn all in the same place without spending your money on account fees. In addition to earning higher-than-average interest, SoFi members get discounts, offers and rewards at various companies.

Learn more about how SoFi Money® could help you start saving.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
As of 6/9/2020, accounts with recurring monthly deposits of $500 or more each month, will earn interest at 0.25%. All other accounts will earn interest at 0.01%. Interest rates are variable and subject to change at our discretion at any time. Accounts opened prior to June 8, 2020, will continue to earn interest at 0.25% irrespective of deposit activity. SoFi’s Securities reserves the right to change this policy at our discretion at any time. Accounts which are eligible to earn interest at 0.25% (including accounts opened prior to June 8, 2020) will also be eligible to participate in the SoFi Money Cashback Rewards Program.
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.
Third Party Brand Mentions: No brands or products 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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What Is A Slush Fund?

Today the term refers to a fund that contains dollars set aside for wants—for spending freely as desired.

Before exploring that idea further, though, a history lesson.

The word “slush” was created in the 17th century to describe half-melted snow, according to www.phrases.org.uk. By the following century, “slush” was also used to describe the fat from meat that was boiled on a ship for sailors to eat.

When the meat fat was sold at ports, the proceeds became the crew’s “slush fund.” When a military publication suggested that the money be used to buy books of the men’s choice, the phrase began to take on one of today’s meanings: as extra cash to spend on wants, rather than needs.

In modern business accounting, a slush fund is an account on a general ledger that doesn’t have a designated purpose and so is treated as a reserve of funds.

In its most negative meaning in the business world, a slush fund is kept off a company’s books for nefarious purposes. In the political arena, the term can be used to describe money, perhaps raised secretly, to be used for illegal activities.

For our purposes though, let’s talk about a slush fund as fun money.

Including Slush Money in the Budget

So do you need a slush fund? It may make sense to have one.

First, it can help people to not overspend on wants. If someone uses (or has at least heard of) the 50/30/20 rule of budgeting, the slush money can be what goes into the 30% category.

For those who haven’t heard of this budgeting strategy, here’s an overview.

A person takes their after-tax income and divides it into three buckets:

•   50% to needs: This comprises rent or mortgage payments, car payments, groceries, insurance, student loan payments, minimum credit card payments, and so forth.
•   30% to wants: From eating out to buying a piece of jewelry or tickets to a game or concert, this is the discretionary spending category.
•   20% to savings: From emergency savings account to retirement account contributions, this money is for future spending, including but also going beyond rainy-day needs.

Here’s another reason why some people may want a slush fund: They are part of a couple and have a joint account for bill-paying and other practical purposes. Each partner may also want to have an account of their own, though.

Prioritizing What Matters

The way people organize how their money is spent, putting funds where they matter to them, is at the heart of budgeting (whether using the 50/30/20 or other budget method).

When their savings and spending are monitored, people can adjust their budgets for even more effective prioritization.

How to set money goals? A review of the budget can indicate, for some, that paying down high-interest credit card debt (and then paying it off) can free up money for more enjoyable pursuits.

Some people may focus on paying off student loan debt more quickly, again to free up cash in the monthly budget, while still others may prioritize building up their emergency savings account.

Each situation is unique. This trifecta might be a good place to start: a budget that meets your needs, helps you reach financial goals, and includes some room for discretionary spending.

Reaching Savings Goals

If you want to create a fund just for fun, good for you. Enjoying hard-earned money may be a nice counterbalance to responsible bill-paying. To help reach your savings goals, here is a six-step process to consider:

Identify goals: In this case, the goal is to set aside slush money, but priorities come into play. If, for example, an emergency fund is at the ready and retirement contributions are regularly being made, it may be time to focus on the slush fund. If one or both still need some attention, the slush fund may be third on the list for savings. Again, each situation is unique.

Select a monthly deposit amount for the account: Perhaps there’s a specific goal (like creating a travel fund) or an amount can comfortably be budgeted. For a specific goal, such as a trip, it can help to figure out the time frame available to save and then divide the cost of a trip by the number of months available to save for it. That’s the monthly deposit amount required to reach the goal. For the second, saving as much as is reasonable to enjoy in the future can be key.

Write down goals: Writing down what you want to achieve can boost the chances of reaching those goals. These jottings can be an ongoing reminder of what you want to achieve, keeping it front of mind. And because slush money is used for pleasurable purposes, it can be fun to write about plans.

Monitor progress: By tracking daily spending habits and long-term savings habits, the process can be further refined. Some people like to rely on pen and paper, while others use an Excel spreadsheet or Google Docs. Still others use an app to track spending and set monthly budget targets. At the risk of sounding like a broken record (do people use that phrase anymore?), do what works best.

Celebrate successes: For longer-term goals, savings fatigue can set it. To combat that, celebrate even the smallest of successes. Able to save $50 more this week than expected? If planning a trip to the ocean, picture yourself lounging by the beach and imagine the refreshing fruity drinks that can be enjoyed with that extra deposit.
Automate the process: Make the savings process easier through automation. A certain dollar amount out of each paycheck can automatically be deposited into the savings account, or an automatic transfer can be set up from a checking account.

Recommended: How to Save Money From Your Salary

A Few More Tips

First, consistency is key. So keep moving forward.

If a windfall comes your way— a bonus, a raise, an inheritance—you may want to see how much can be earmarked as slush money.

You might also consider launching a side hustle. Think of what hobbies can be turned into income earners and consider putting those extra dollars into the fund.

The Takeaway

All business and no pleasure can sap a budgeter’s will to … budget. A slush fund, a term with fatty origins, can be a fun and meaty part of a savings plan.

You can track saving and spending with a SoFi Money® cash management account and create financial vaults for specific goals.

Giving a vault a name, whether Slush Money, Caribbean Vacation, Dream House, or Hair and Clothes Fund, may put a little fun into budgeting.

Create a slush fund with SoFi Money.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
As of 6/9/2020, accounts with recurring monthly deposits of $500 or more each month, will earn interest at 0.25%. All other accounts will earn interest at 0.01%. Interest rates are variable and subject to change at our discretion at any time. Accounts opened prior to June 8, 2020, will continue to earn interest at 0.25% irrespective of deposit activity. SoFi’s Securities reserves the right to change this policy at our discretion at any time. Accounts which are eligible to earn interest at 0.25% (including accounts opened prior to June 8, 2020) will also be eligible to participate in the SoFi Money Cashback Rewards Program.
SoFi’s Relay tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
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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How Do Banks Make Money?

At first glance, it may seem like banks offer their key services, like checking and saving accounts, at a low (or even no) cost to their customers. Which begs the question, how do banks make money?

A bank is a business. And, similar to any other profit-driven business, banks do charge money for the services and financial products they provide. The two main offerings banks profit from are interest on loans and fees associated with their banking services.

Read on for a basic breakdown of these services and find out exactly how banks make money from them. You may be surprised to learn how banks are making money off of you.

What Exactly is a Bank?

In general, a bank is a financial institution licensed to receive deposits and make loans. Some banks also offer financial services, such as safe deposit boxes and currency exchange.

There are several different types of banks, and though they all generally provide similar services, each type has a few unique traits that can make it especially useful for certain types of customers and goals. Here are some of the most common types of banks.

Retail Banks

Traditional banks that serve the general public, such as Wells Fargo, Bank of America and Chase, are retail banks. Their focus is to help people manage their personal wealth.

Retail banks are generally easily accessible, often having hundreds of branches across the country and they provide the most basic of financial services for regular use.

Commercial or Corporate Banks

These banks specialize in providing financial support and assistance to small and large-scale businesses. Many also have retail divisions as well.

Where a standard retail bank might only be able to provide small personal loans, commercial banks often have the capacity to provide larger and more substantial loans, as well as other services, to help support new and expanding business ventures.

Online Banks

These are institutions that provide financial services just like any other bank, except they do not maintain any actual storefronts. To apply for an account with an online bank, such as Ally, Wealthfront, or Synchrony, applications must be submitted online and the entire banking experience is primarily conducted remotely via an internet browser or app.

Because online banks generally don’t have the expenses that come with maintaining a storefront, they can often offer higher interest rates and lower fees than many brick-and-mortar banks.

However, because they don’t have storefronts, you typically can’t make cash deposits.

Central Banks

In many countries, banks are regulated by the national government or central bank. In the U.S., the Federal Reserve System is the central bank of the U.S. It consists of 12 Federal Reserve banks that stretch across the country.

These central banks are responsible for implementing monetary policy, maintaining the stability of the financial system, controlling inflation, and providing financial services to banks and credit unions. The Federal Reserve banks are essentially banks for other banks, as well as the government.

Investment Banks

Morgan Stanley and Goldman Sachs are examples of investment banks. These banks specialize in managing some of the largest and most complex types of commercial transactions, such as merger and acquisition activity, initial public offerings, or financing large infrastructure projects like building bridges.

Recommended: Alternatives to Traditional Banking

How do Banks Make Their Profits?

With the wide variety of financial products and services that banks offer, they create many opportunities for revenue. Those revenue streams generally fall into one of three categories:

Interest

One of the primary sources of income for banks and financial institutions comes from interest collected on the various loans that they offer.

Banks use the money from their clients’ checking and saving accounts to offer loan services. They then charge interest on these loans (based on the credit history of the borrower and the current federal funds rate). Banks then profit from the net interest margin–which is the difference between the higher interest income charged for their loans and the lower interest paid out to clients on their bank accounts.

Interchange Fees

When people use their bank-issued credit and debit cards at a store, that store typically pays a processing fee–known as an interchange fee.

These fees are paid by the merchant’s bank to the consumer’s bank for processing a card payment. This fee is to help ensure security, payment, fraud protection and a speedy transfer of funds, and is typically a small flat fee plus a percentage of the total purchase.

Interchange fees help explain why some establishments maintain minimum purchase amounts for credit or debit card purchases.

Banking Fees

Banks typically bring in a significant amount of their money by charging customers fees to use their products and services. Banks may charge fees to create and maintain a bank account, as well as to execute a transaction. They may be recurring or one-time only charges.

All banks should be upfront about all of their fees and disclose them somewhere accessible to their customers. You can often find a bank’s fee schedule online or in the documents you received when you opened your account.

It can be a good idea to learn about the types of fees that your bank charges in order to avoid or minimize fees, and also catch any errors. If fees seem unreasonably high, you might also decide to switch to a different bank or financial institution that charges less.

Some of the more common bank fees include:

Service fee: A monthly fee charged for keeping an account open.
Account maintenance fee: A monthly fee charged for managing an account.
Withdrawal limit fee: Charged when a customer exceeds the maximum number of monthly withdrawals allowed on a savings account.
ATM fee: Charged when withdrawing funds from an ATM terminal outside of your bank’s network.
Card replacement fee: Charged when a lost or stolen debit or credit card is reissued.
Overdraft fee: Applied when a customer’s bank balance falls below zero. Interest can also accrue on the overdrawn amount, as the bank may see this as a short-term loan.
Non-sufficient funds (NSF) fee: Charged when a customer makes a transaction but doesn’t have enough money in their account to cover it. The transaction “returns” or “bounces,” and the bank charges the customer an NSF fee.
International transaction fee: Charged when making a debit card purchase in a foreign currency or withdrawing foreign currency from an ATM.
Cashier’s check fee: A fee for purchasing an official check from your bank.
Stop payment fee: Applied when requesting that a bank stop payment on a pre-written check from your account.
Wire transfer fee: Charged for electronically transferring funds from one bank to another.
Paper statement fee: A fee for providing monthly bank statements in the mail rather than digital statements online.

Credit Unions Vs. Banks

A credit union is a nonprofit, member-owned financial institution that, like a bank, makes loans and offers checking and savings accounts.

Members purchase shares in the credit union, and that money is pooled together to provide a credit union’s services. Individuals interested in banking with a credit union must fit specific eligibility requirements (sometimes regional, employment-related, or requiring direct relation to an existing member) and apply for membership.

Unlike a bank (which is a for-profit business), a credit union returns its profits to members, which means it may have lower fees and better interest rates on savings accounts and loans than traditional retail banks.

Because they are often smaller entities, however, credit unions tend to provide a limited range of services compared to banks. They may also have fewer locations and ATMs.

Recommended: Credit Unions Vs. Banks

The Takeaway

To make a profit and cover their operating expenses, banks typically charge for the services they provide.

When a bank lends you money, for example, it charges interest on the loan. When you open a deposit account, such as a checking or savings account, there are typically fees for that as well. Even fee-free checking and savings accounts often come with some fees.

It can be wise to take a second look at the fees outlined in your banking contract in order to get ahead of any surprise charges down the line.

If you’d rather steer clear of fees and excess charges, SoFi Money® can be a great option.

SoFi Money is a cash management account that doesn’t charge any account fees, monthly fees, or overdraft fees. Plus, members have access to 55,000+ fee-free ATMs.

Check out everything SoFi Money has to offer today.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.

Any SoFi member who receives $1,000 or more in qualifying direct deposits into their SoFi Money account over the preceding 30 days will be eligible for Overdraft Coverage. Overdraft coverage only applies to SoFi Money accounts and is currently unavailable for Samsung Money by SoFi accounts. Members with a prior history of non-repayment of negative balances for SoFi Money are also ineligible for Overdraft Coverage.

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