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Tips for Where to Store Your Mortgage Down Payment?

“Location. Location. Location.”

Real estate agents say when you’re searching for a new home, it can be one of the keys to success.

Location also can be a crucial consideration for homebuyers who are looking for just the right place to store their money for a down payment.

Where you decide to keep the money you save for a down payment can have an important role in your ability to reach your goal amount. And that means finding an account that has the right balance of security, growth, and accessibility to fit your desired timeline.

Tips for Determining a Timeline?

It starts with having some idea of how much you’ll need for the down payment and then estimating how long it will take to save it.

You may have heard that traditionally 20% was the must-have magic number for a down payment, but that amount isn’t by any means set in stone. According to Zillow ’s 2018 Consumer Housing Trends Report, more than half of the buyers surveyed (52%) put less than 20% down.

And younger buyers put down less than older buyers: 60% of millennials put down less than 20% compared with 48% of Gen Xers, 43% of baby boomers, and 38% of silent generation buyers.

Borrowers can find a range of down payment options based on the lender or type of loan they choose, as well as other factors.

A homebuyer might be looking to save anywhere from 3% down for a conventional loan or 3.5% of their expected home price (for the down payment on an FHA loan , for example) to more than 20% for unique properties or other eligibility scenarios.

For those who anticipate buying a home priced at $300,000 (the current median price in the U.S.), that could mean coming up with $10,500 … or more than $60,000. And it could take months or possibly several years to accumulate either amount depending upon circumstances.

Does Timeline have an Effect on Savings ‘Location’?

Depending on how long you may have to save, there are a few possible places to consider when you are ready to stash that down payment money.

Those who are looking at three years or fewer to save may want to focus on security and easy accessibility—getting the money in as conveniently as possible and, ultimately, getting the money out quickly when they need it.

Those who are looking at a longer timeline may wish to invest their money, even though it may mean immediate access can prove to be a bit more complicated.

While investing has it’s risk, those saving for a down payment over a longer time frame might find it a suitable option since there is some time to weather the fluctuation of the market. And those who find themselves somewhere in the middle may want to consider a little of both.

With those factors in mind, options for a shorter timeline may include:

Traditional Savings Account:

Storing money in a savings account at the brick-and-mortar bank where you do your checking (and, perhaps, other business) can be a convenient choice. You may have the choice to make deposits in person, online, or through automatic paycheck withdrawals.

And, because the funds are likely guaranteed by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA) , it’s considered a safe option. But there’s a trade-off—because these types of accounts typically pay comparatively low interest , the money may not grow much while it’s sitting there.

Money Market Account:

A money market account (MMA) is considered another safe place to put down payment savings, and these accounts can also be insured by the FDIC or NCUA. Just as with a traditional savings account, there’s the convenience of being able to open the account at your local bank branch.

Money market accounts are similar to checking accounts in some ways, and may come with a debit card and or checks, but there’s typically a limit on transactions , and if that limit is exceeded, there may be a fee. An MMA usually will offer a higher interest rate than a traditional savings account, but the bank could require a higher minimum balance.

High-Yield Cash Management Account:

High-yield deposit accounts can offer a balance between safety and growth—with a dash of convenience thrown in for good measure.

The interest rates on these types of accounts are typically higher than a traditional savings account, especially with online institutions, which have lower overhead costs than brick-and-mortar banks and can pass those savings on to customers.

The money is accessible with a debit card (and sometimes checks), and some companies (including SoFi) charge no fees and have no minimum balance requirements.

Some online accounts also come with an app that allows users to link other accounts and track their spending and saving—a benefit that can be particularly useful when you’re working to accumulate a down payment for a home.

Signing up is usually easy, and saving can be, too, thanks to automatic deposits. And though online banking lacks the facetime with your favorite teller that a branch bank offers, customer service is generally still available.

If you have a longer timeline to save for your down payment—maybe five or more years—you could also consider these options:

Market Investing:

Savers may look at investing in the market as a way to further grow their down payment money—but even with a diverse portfolio, it’s a risk. That’s because the value of investments tied to the markets—stocks, bonds, exchange-traded funds, mutual funds, etc.—can rise or fall on any given day.

If the market drops just as you’re ready to sell your holdings, you could lose money . Or you may have to push back your home purchase by months or even years until the account recovers. So market investing isn’t really built for short-term saving.

Taxes also could be an issue for those who hold investments outside of a tax-advantaged account. If your down payment savings timeline is longer, an alternative might be to open a Roth IRA specifically with home buying in mind.

Under certain special circumstances—including buying a first home—savers who have had a Roth for five years or more are allowed to withdraw up to $10,000 of their investment earnings with no tax or penalty.

But, it may be a good idea to consider other funding options before taking money from an IRA as it could set back retirement earnings, potentially by years.

It also may help to treat this down-payment-building investment account almost like a target-date fund, moving to safer investments as the time to make a home purchase draws nearer. Or you may wish to take a blended approach, investing a portion of your money in the market and putting the rest in a cash management account like SoFi Money®.

Certificate of Deposit:

From time to time, certificates of deposit are mentioned as a possible place to hold money for a home purchase—and like any other strategy, they have their pros and cons. CDs are considered “safe” investments because they’re insured by the FDIC.

They have a guaranteed interest rate, and investors won’t lose their principal unless they withdraw money from the account before the term is up.

But to get a competitive interest rate, an investor typically must sign up for a longer term. CDs offer different term lengths that can range from months to decades. And a CD owner usually can’t keep adding more money over time the way a savings account owner or market investor can.

Ready to Do Your ‘Home’ Work?

Buying a home can sometimes be a long, challenging process. It may take a sizable chunk of your income and your time. And the decisions you make at the start of the journey—even just finding the best account for mortgage savings—can possibly affect everything else down the road.

There are plenty of choices. If you’re looking for convenience and familiarity, a savings account at your local bank branch may do—but you’ll likely sacrifice growth.

If you shoot strictly for growth, you could risk losing the money you’ve worked hard to earn. With a cash management account like SoFi Money, you may be able to earn interest and grow your money without tying yourself to a long-term investment or market volatility.

Ready to start your home-buying journey? Start saving by downloading the SoFi app today.


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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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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Neither SoFi nor its affiliates is a bank.

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Envelope Budgeting Method

When you’re creating a budget for yourself, it can be helpful to put up some guardrails to help keep you on track. With the envelope budgeting method, those guardrails are physical, allowing you to spend only a set amount of cash on certain categories throughout the month.

This method makes spending money more tangible since you actually have to watch the cash leave your hands, and once the money in one category is gone, you have to stop spending.

How the Envelope Method of Budgeting Works

There are many methods to help you build a budget. The envelope method for budgeting money is a system that helps you track your spending by limiting it to cash transactions. In this way, an otherwise fairly abstract concept—your spending—is turned into something you must literally hold in your hands. Here’s a look at how it works.

1. Determining Your Discretionary Income

The envelope method usually works best when you use it to budget for discretionary spending. Your discretionary spending is the money you spend on things you may not really need, such as entertainment.

To determine your discretionary income, take your monthly income and subtract any necessary expenses, including things like housing costs, utilities, and insurance payments.

You may want to include debt payments and savings goals in this category as well. Anything you have left over is your discretionary income.

Budgeting rules of thumb, such as the 50/30/20 rule, can help you determine your discretionary spending as well.

2. Deciding on Budget Categories

Once you have a total for your discretionary income, you can begin to break it down by category. The spending categories you choose will depend on your own habits. You may want to pay special attention to areas where you already have trouble with overspending. Eat out too much?

Consider this an opportunity to put a cap on that spending. Other common areas to consider include groceries, entertainment, clothing, and gas money. You may want to build in a catch-all category that gives you some money to use for fun as well.

Assign a dollar amount to each category. Consider reviewing past bank statements to help you figure out what you normally spend.

Your bank or credit card may even break out your spending into categories for you, making it easy to tell where you typically spend. If you’re trying to cut back, assign dollar amount that are lower in the categories where you can.

3. Withdrawing Cash and Putting it into Envelopes

Get one envelope for each category. Write the name of the category on the envelope and the dollar amount you have assigned to it. At the beginning of the month, withdraw enough cash to fill each envelope.

Depending on your situation it may work better for you to spread your withdrawals out to align with your paycheck. If this is the case, you could take half the money out in the beginning of the month and the remaining half when you receive your next paycheck.

When you go to the bank, get the exact denominations that you need. For example, if you assigned $55 to your entertainment budget, make sure you get exactly $55 dollars. That way, you don’t have to do any extra work remembering where you need to shuffle dollars around.

If having a pile of envelopes feels too disorganized, consider using a coupon organizer. These look like little divided wallets or small accordion files. The idea here is the same as with the envelopes, and you should label each section with the category and dollar amount.

4. Spending Only Cash

When you need to buy something, take money from the appropriate envelope. You may not want to carry the envelope around with you, risking spending more that you need to, or risking losing it. If you only bring $50 to the grocery store make sure that your total doesn’t go beyond $50.

Try to avoid the temptation to spend with your credit card too. It might help to remove your credit card out of your wallet while you use the envelope method. If you choose to do this, consider storing the card in a secure place where you can access it when you absolutely need it.

5. Once Your Cash Is Gone…it’s Gone

Here’s where the real discipline comes in with the envelope method. Once you’ve used up the cash in a given envelope, it’s gone.

This means no more spending in that specific category for the rest of the month. Remember, you’re trying to control your spending, so avoid borrowing from other categories.

If you deplete your entertainment budget, try to find free alternatives like watching movies at home. If you run out of money for groceries, get creative with leftovers and try to use up whatever food you have left in your cupboards and fridge. These exercises should hopefully help you begin to spend more and more intentionally as time goes on.

The Advantages of the Envelope Method

One of the main pros when using the envelope method is that it makes spending tangible. How you pay for things can have a big effect on how much you’re willing to spend. According to a 2018 report published by Valuepenguin, consumers are willing to spend more money when using their credit cards.

Afterall, they don’t see the money leave their bank account. But, when spending cash they are forced to consider their spending and may spend less.

Sticking with the envelope method also makes it all but impossible to overspend, since you have a hard and fast budget limited by the cash in your envelopes.

So, when using this method you can most likely avoid worrying about issues like overdrawing your bank account or running up high credit card bills with your discretionary spending.

The envelope method can also force discipline into your budget. To maintain your budget you must think carefully about your spending, which may change your long-term spending habits.

Left with Extra Cash?

At the end of the month you may find that you have extra money in some of your envelopes. Depending on your budget and goals, you have a few options for how to use the remaining money.

One option is to roll the money over into the next month. Say you had $500 for groceries but only spent $450. You can take the extra $50 and put it toward your next month’s envelope, so your new budget would be $550.

Another alternative is to put that unspent cash toward a financial goal, such as paying off student loans or saving for a wedding.

What About Online Spending?

When using the envelope method, it can be easier to track your spending if you’re paying for most things in cash. But in the 21st century, online shopping can be unavoidable.

If you choose to purchase something on the internet, such as concert tickets, for example, note the purchase on your envelope immediately. You can then remove the cash you spent online from the envelope.

When using credit cards, pay off the balance by the due date to avoid accruing interest. In that case, the amount you actually pay for the item will be more than the amount you took from your cash budget, throwing your budget off.

When buying things online, continue to keep in mind the dollar amount you set for that category. Try your best to avoid overspending, based on the limits you set for each envelope at the beginning of the month.

Budgeting with a Partner

The envelope method does not have to be a solo endeavor. It can also work if you have a partner. The key is communication and deciding on the system that works best for the both of you. Try working together to set a joint budget, determining spending categories and cash amounts together.

Then work out how you will divide the money each month. Find a balance that works for you both. For some couples, that could mean a 50/50 split. In some cases, one person might do all the spending in a certain category, so they’ll hold that envelope by themselves.

Setting a regular check in with each other could be one way to make sure you are both on track for the month’s spending. These check-ins can be a time to address anything that isn’t running smoothly.

Consider tweaking how much cash each partner is carrying, making necessary changes to the spending categories, and adjusting cash amounts as necessary.

Planning for an Emergency

Life can always throw you a curveball. If it does, you may end up needing to reshuffle the cash in your envelopes to help cover unexpected expenses. Look for categories that are easy to forgo, like clothing or eating out and dip into these before touching more necessary expenses like gas or groceries.

To help avoid a situation like this, consider building an emergency fund. Start by making it a regular savings goal. Another option is allocating any unspent envelope money to the emergency fund at the end of the month.

A robust emergency fund can help you ensure that you don’t torpedo your budget should your transmission fail or you encounter an unexpected medical bill.

Even More Envelope Budgeting Tips

Here’s a look at other tips and tricks that could help you succeed if you choose to budget using the envelope method:

Creating sub-envelopes: Within certain categories, you can create sub-envelopes to help you be sure you don’t run out of cash at the beginning of the month. For example, you might divide your monthly eating out budget into four. That way you can be sure you can eat out at least once a week for the entire month, and you won’t be tempted to blow your entire budget on eating out for five days straight.

Leveraging lists: When you go shopping, consider planning ahead and making a list of what you need. With a list in hand, you can estimate costs before you even get to the store. Once there you can keep track of the cost of each item so you know whether you will come in on budget.

Reevaluating regularly: Your budget isn’t static. As you use the envelope method over a number of months, you may notice your spending change in certain categories. If you find that you no longer need the full amount you’ve been allocating to certain expenses, you can adjust it. You can shift excess cash to other categories, or bank it in the form of savings, debt repayment, or a financial goal of your choosing.

You may also discover as you continue, that you need to add new categories or that you can remove some entirely. As you get started using the envelope system, you will likely need to make adjustments until you find a system that works for you.

Using online tools: One of the nice things about the envelope methods is that it makes spending in your target categories extremely easy to keep track of. But that doesn’t mean that you shouldn’t keep your eye on your bigger financial picture, as well.

All budgets require discipline and sometimes a certain level of discomfort as you’re forced to make compromises. Yet the important thing is that you stick to it. Doing so gives you the opportunity to change your spending habits and to make financial moves that will help you accomplish your goals.

See How SoFi Money Can Help

With SoFi Money®, a cash management account, you can see your weekly spending all in one place in the app. Additionally, with the vaults feature you can easily create vaults within your SoFi Money account for different purposes and savings goals.

An account like SoFi Money can provide an additional way to help you keep tabs on your cash flow and spending.

Track your budgets by downloading the SoFi app today.


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.
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.

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Ways to Build Wealth at Any Age

A down payment on your first home? A beach house where you can spend your golden years with your grandkids? Whatever your financial goals may be, it takes careful planning at every age to build the wealth needed to achieve them. Here’s a look at some steps you can take at each stage of your life to help set you on the right track.

Setting Goals

Before we take a look at a generational breakdown of how to build wealth, it’s important to consider setting shorter-term and long-term goals.

Short-term goals might include things like buying a new car or a down payment on a house, while longer term goals might include sending a kid to college or having enough to retire. Setting realistic goals helps you determine how to invest and how much wealth you might need to achieve them.

Building Wealth in Your 20s

When you’re in your 20s, you are just out of school and likely making your first career moves. Even so, it may feel like long-term financial goals are a problem for your future self to work out.

After all, you’re young and it’s time to let loose, right? Well, yes and no. While you should certainly enjoy yourself, your very youth gives you a huge advantage in the form of time.

It is common knowledge that retirement savings and investments you make early on have more time to grow and to possibly take advantage of compound interest, which is the interest you earn on your returns, among other advantages. So this could also be a good time to start saving for your long-term goals. Here are some steps that may help you get your wealth building off on the right foot:

Making a Budget

This might feel like a drag, but it’s worth it. One good idea is to know how much you’re making and spending in order to have control over it.

To get started, try tallying your necessary expenses—housing, utilities, insurance, transportation—and subtract from your income. Some recommend dedicating a portion of the difference to savings. The leftovers can be used for things like discretionary spending.

Having an emergency fund

The general recommendation around the idea of an emergency fund is to build up savings of approximately three to six months worth of living expenses.

That way, if an unexpected event keeps you from working, you’re more likely to be covered until you get back on your feet. An emergency fund could help protect you from going into debt or dipping into your other dedicated savings.

Keeping your debt in check

Pay off any debts, such as student loans, or other high interest debt as fast as you can. Interest payments on these debts can add up and a drag on your ability to save. That is why it’s generally recommended to be thoughtful with credit card spending.

Credit cards can be a useful tool for some in building credit, and could even be a positive for perks such as points or rewards especially if you are able to pay the balance off each month and not get hit with interest charges.

Starting investing

Contributing to a 401(k) is one good place to start, if offered by your employer. These offer tax advantages that can help you supercharge your retirement savings.

If your employer offers a match, try to contribute at least that amount (usually 3% to 6%.) If your employer doesn’t offer retirement accounts, you can consider opening an IRA to get access to tax-advantage savings. You may also consider investing on your own in a brokerage account for other long-term goals that aren’t retirement.

Investing in mostly stocks

When you’re young, you can typically stand to take on a little bit of risk in your portfolio—particularly when you look at long-term financial goals, like retirement. This could mean your investment portfolio may be composed largely of stocks, as opposed to bonds and other fixed-income investments.

Stocks may offer a higher return than say bonds for instance, but they can also be more volatile. The idea is since you have a longer time left before retirement, you’re likely in a better position to ride out any possible downswings the stock market may experience.

Building Wealth in Your 30s

Once you’re in your 30s you’ve likely got a few milestones under your belt, perhaps you own a home or have kids. Your expenses may be higher than when you were in your 20s. In your 30s, you likely still have a few decades before retirement, so you can continue to invest in riskier assets that may offer higher returns, like stocks.

Starting saving for your children’s education

If you’ve got kids, you may also be considering ways to save for their education. One way to do this is through a 529 account. This is another tax-advantages savings plan, courtesy of the government, that helps you save faster for your child’s college education. As with other investing, the earlier you start, the more likely you can benefit from compounding growth.

That said, if choosing between funding a 529 savings account and saving for retirement, depending on individual circumstances, some may choose retirement all the way. Your children can borrow to pay for college, but the avenues of borrowing money to help with retirement are limited to avenues such as a reverse mortgage. .

Boosting your retirement savings

The slow march of time is bringing you closer to retirement age. Some advise that by age 35 it’s recommended to have twice your annual salary saved up for retirement. Think about increasing the amount you’re saving each month—even a 1% increase per year could help.

Building Wealth in Your 40s

At this point, you’re hopefully well underway to building your nest egg. You may own large assets like a home and have a family. You may now also find yourself in the peak of your earning years.

In your 40s, the drumbeat mantra of “increase your retirement savings” still applies here, hopefully made easier to achieve by a higher paycheck. There are some other steps you may want to consider as well.

Protecting your wealth

It could be a good idea to make sure you have adequate insurance to cover your property and your person, including health insurance, home insurance, and life insurance. Especially if you have a spouse or family, life insurance could help protect your investments and help ensure that your savings are used for their intended purpose should something happen to you.

Should your stock allocation decrease

In your 40s and depending upon market conditions, you may still want to invest most of your portfolio in stocks. However, as you near retirement age, you may want to consider shifting a greater portion of your assets toward bonds and other fixed income assets.

In your 40’s you may be nearing the time when you’ll need that money, and shifting it to less volatile investment options could help protect it from downward trends in the market.

Assessing all your accounts

Regularly going through all of your accounts—including retirement, investment and bank accounts—with a fine-toothed comb is recommended. This may help you identify which investments have things like high fees that may take a bite out of your savings growth.

Consider replacing them with low-fee investments like index funds. If you have retirement accounts from multiple employers consider rolling them over into one account to help you keep track of their performance better.

Dipping into your retirement accounts

It may be tempting at times, but it’s generally recommended to avoid withdrawing money from your retirement accounts before you reach age 59 ½. Doing so can trigger a 10% penalty in addition to a possible income tax assessment for the money withdrawal.

Beyond Your 40s

Once you hit 50, if you are like most people, you may only have fifteen or so more years before you hit retirement age.

As you enter the years just before you retire you’ll likely want to continue getting more conservative in how you structure your investments.

In your early 50s you’ll likely still be saving as much as you can, but the older you get, the more you may look toward working to conserve your wealth.

Making catch-up contributions

The IRA contribution limit is $6,000 for 2020, and if you’re 50 or older, you can contribute an extra $1,000 a year. That’s a total contribution of $7,000 per year. These catch-up contributions could help give you an extra push as you near retirement if you’ve fallen behind on your savings or you simply want to rev up your savings during your last decade or so of work.

Wait to take Social Security

You can start to take Social Security benefits as early as age 62. However, if you start them that early, your benefit will be 25% less than if you waited until full retirement age. SSA considers full retirement age to be 66 for those born between 1943 and 1954. The amount of your monthly benefit currently increases until you hit age 70, at which point you should receive 132% of your benefit each month.

It’s never too late to start building wealth. No matter your age, if you’re ready to put your money to work, SoFi Invest® could be a solution to help you start saving for your future.

SoFi Invest offers both active and automated investing, both with no transaction or SoFi management fees. Plus you’ll have access to a team of certified professionals you can help you create a wealth-building strategy at every age.

Get started by downloading the SoFi app today.


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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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Tips for Teaching Your Kids About Investing

People talk about improving financial literacy for kids, but few seem ready to do much about it.

According to the Council for Economic Education, only one-third of states require their students to take a personal finance class. And its most recent Survey of the States , performed in 2018, “reflects no growth in personal finance education in recent years and little improvement in economic education.”

While states and school districts are still struggling with the idea of adding financial literacy to the curriculum for middle- and high-school students, what are parents of younger children supposed to do?

If you’re thinking about taking matters into your own hands, here are a few ideas:

1. Forgetting the stuffed animals and giving kids stocks.

If you’re a parent (or grandparent), you know how hard it can be to find just the right gift for the child in your life—something that won’t be lost or quickly forgotten. Many of us turn to toys we hope will be fun and educational, but finding toys related to stock market investing for kids can be tough.

Which means you might have to move on to the real world and actually give your child control of some stocks.

If you want to make it official, you can open a custodial account and either make some picks yourself or let your child do the choosing.

One way to make the lesson more meaningful might be to think about the things that are important to the child at each stage of life and pick a stock that represents it. (The company that makes your child’s diapers, for example, a favorite toy brand or toy store.

As the child ages, they can have more input, and you can talk about dividends, compounding, diversification, and what it means to buy and hold. If your kiddo can’t make up their mind between two companies you can work together to do some research.

Older kids also can look for news stories that summarize analysts’ reports on Google Finance , Yahoo Finance , or MarketWatch , where the writers typically decipher analysts’ jargon.

It’s important to note that there are pros and cons to the different types of investing accounts available to minors, so you’ll likely want to check out any consequences related to future taxes and when the child applies for financial aid for college.

Another, more personal, consequence is that the child you love might not be thrilled with a share of stock when what they really want is the latest game. But if your child is truly intrigued, you might even find them eventually investing money of their own.

2. Making a game of it.

Not quite ready to put real money into a kid-centric portfolio? You and your children can still follow the markets together and track how they’d do if they were invested.

You could even make it a bit of a competition between siblings. (Kind of like making picks at a horse race without placing any bets.) You can do it on your own or sign up for an online game.

Either way, you can teach your child about how the markets work without any actual losses (or crushing disappointments).

3. Buying the book.

This might sound like an old-school, boring way to explain investing for kids, but there are books out there that include plenty of illustrations, fun language, and important lessons, including these highly-rated offerings from Amazon.

What All Kids (and adults too) Should Know About … Savings and Investing, by Rob Pivnick, covers saving, budgeting and investing.

Go! Stock! Go!: A Stock Market Guide for Enterprising Children and Their Curious Parents, by Bennett Zimmerman, follows the Johnson family as they learn the fundamentals of stocks and bonds, the mechanics of investing, and the ups and downs of risk and reward.

How the World REALLY Works: Asset Management 2018: A Children’s Guide to Investing, published by the Guy Fox History Project Limited, takes a big topic and breaks it down into terms kids can understand.

I’m a Shareholder Kit: The Basics About Stocks—For Kids/Teens, by Rick Roman, is a spiral-bound book that was recently updated (May 2018) and designed to appeal to kids who want to know about investing and managing their money.

4. Getting some help from the Web (and Warren Buffett!).

If your child is more into screen time than reading books, you might want to check out Warren Buffett’s Secret Millionaires Club to inspire the investing and entrepreneurial spirit.

This animated series includes 26 four- to five-minute webisodes, and there are parent guides to download for each one (in English and Spanish). Sorry, there are no stock tips, but an animated version of the “Oracle of Omaha” does serve as a mentor on the show.

Want to teach your child about the magic of compounding interest? It’s missing the bells and whistles that generally appeal to kids, but the Compound Interest Calculator on the U.S. Securities and Exchange Commission’s investor.gov website is easy to use and understand.

Just plug in an initial investment, how much you expect to add each month, and the interest rate you expect to earn. The calculator will chart out an estimate of how much your child’s initial savings would grow over time.

5. Sharing your own family’s adventures in investing.

Whether it’s a success story or a cautionary tale, kids can learn a lot from their own family history.

For example, you could talk about how your parents and grandparents made and saved their money vs. how it’s done today in a conversation about the value of investing and goal-setting.

You can focus on storytelling instead of lecturing and encourage questions, which may keep them more involved.

6. Keeping lessons uncomplicated

No matter which platform you choose to teach your kids about investing, consider trying to make it as pain-free and uncomplicated as possible.

If you decide you’re ready to do some real-world investing, for example, you could look for an account that makes it easier—and as hands-on or hands-off as you want it to be.

SoFi Invest® offers both options. And to make things even simpler for beginners, SoFi has a low minimum deposit and no transaction or management fees.

You can handle your account completely on your own online, but if you want help, you can have one-on-one access to SoFi’s team of financial advisors.

Keep it fun and keep the effort going, and someday your adult children might be telling tales around the dinner table about how your lessons helped advance their financial savvy.

Want to help your kids get a handle on investing? Get started by downloading the SoFi app today.


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.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
SoFi Invest®
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.

Advisory services are offered through SoFi Wealth, LLC an SEC-registered Investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at adviserinfo.sec.gov .

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A Guide To Investing in International Stocks

Why venture outside if everything is fine at home? The U.S. stock markets offer over 4,000 publicly traded stocks , so is there any reason to look beyond our borders for investment opportunities?

If you follow the rule that diversification helps reduce your risk and propel your gains — a philosophy that we agree with — then adding international stocks may be a strategy to include in your overall investment plan.

When you feel a reluctance to invest in international stocks, you’re not alone among your fellow Americans. There is a term for this: home-market bias. Nationwide Financial found that “the optimal allocation to international stocks — when returns are maximized and portfolio volatility minimized — is 40% of U.S. investors, on average, only allocate about 22% to foreign stocks.”

Bloomberg reports that the U.S. comprises about 50 percent of global stock market capitalization.

In fact, CNBC reports that, in the coming decade, international stocks have the potential to outperform domestic equities (the report states that The Vanguard Group recommends that better value equations should not be measured in trader’s days, or months, but over a full decade.).

The prediction: “international stocks will outperform U.S. stocks over the next ten years by a margin of 3%-3.5%.” Vanguard says that U.S. stockholders may actually be holding too many U.S. stocks and may need to consider asset-allocation changes.” While anything could happen over the next ten years, international stocks seem like a better bargain than US stocks at current valuations.

Investing in International Stocks the U.S-Registered Way

Adding international stocks to your portfolio does not have to bring on hassle and complication.

Simply look to exchange-traded funds (ETFs) that are “U.S. Registered ,” meaning that they include foreign markets in their tracking but trade on US stock exchanges.

ETFs contain groups of stocks, which could help minimize your risk. Compare this to investing in only one stock. When you spread out your investments over many stocks, it’s called diversification.

ETFs are popular because they are a simpler way to build a portfolio than building and managing a portfolio with dozens or hundreds of individual stocks. If you’re interested including international stocks in your mix, many ETFs offer them. This may eliminate your need to have to search far and wide for international stocks.

ETFs are not all created the same, so make sure to investigate the ETF’s investment strategy, expense ratio, and track record to make sure it aligns with your goals.

U.S.-registered funds can track different types of international markets like developed, emerging or frontier.

Developed Markeds

Developed Markets have the capital markets and economies that are most like ours: developed. Think England, Australia, and Japan.

Emerged Markets

Emerging Markets are usually markets that are in the process of modernizing, often from an agricultural economy to a more industrial or technological-driven economy.

They usually want to adopt a free-market system and compete in the global economy but may have more volatile political climates or judicial systems that are not as robust as developed nations.

Frontier Markets

Frontier Markets are also known as pre-emerging markets, and are located in the developing world. You may imagine that markets like these are high risk, due to political and currency instability, and unestablished regulation. However, there are many investors who think a risk like this is worth taking.

We’re giving away thousands in free stock.
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The main advantage of international stocks is opportunity. “By ignoring investment opportunities outside of the U.S., you’re missing out on approximately half of the investable developed stock market opportunities in the world,” Elle Kaplan of LexION Capital writes in Forbes.

“International equities can provide an additional layer of diversification for investors’ profiles and can reduce risk while providing similar or greater returns. While U.S. equities are up, international ones can be down, and vice versa.”

The Risks of Investing in International Stocks

Instability

Countries undergoing transition, revolution, war or economic uncertainty may also be experiencing adverse economic effects and companies within those countries may be impacted. These days, news can change by the minute, and it’s difficult to keep on top of what’s happening when so much news is happening all at once.

Lack of financial information

Not every country practices and requires transparency in its investment markets. You may not always get the full story of what’s happening in a certain area, or receive the most accurate and up-to-date financial data, especially the way you come to expect it from American stock markets.

Limited trading

Not every stock exchange rivals the U.S. which is the largest stock exchange in the world. Certain international markets may lack a large amount of buyers and sellers that could make the market more efficient and active.

No equivalent of our SEC

Our SEC was created specifically to protect investors from criminal activity and fraud. However, most of its jurisdiction is in the U.S. market. Not all foreign countries have an equivalent watchdog.

Related Costs of Investing in International Stocks

International stock investing may cost a little more. This is due to possible foreign taxes on dividends earned outside the U.S., as well as transaction costs, brokers’ commissions and currency conversions.

A Well-Balanced Portfolio

A well-balanced portfolio includes both domestic and international equities, according to Justin Goodbread of Heritage Investors. The U.S. markets may have a different rhythm than international markets; investing in both hav the potential to give you the best of both worlds if one rises while the other falls.

A Word About Risk

Risks are a part of life. You can’t grow, change or improve without taking chances. What’s safe isn’t always what’s best. Sometimes if you want what’s best, you have to take some risks.

Just like in life, there are no guarantees when you take an investment risk, but if you can consider informed risks — based on research and experience — you may be able to better reach your financial goals.

Investing In International Stocks Through SoFi Invest

Our SoFi Financial Planners can help you sort out the questions and concerns you have about investing in international stocks. Our advisors make sense of the different types of investments available to you, including investing in international stocks.

That’s right, you’ll interact with an actual human being who provides personalized advice at no charge. It’s all based on your own unique financial situation and goals.

The ultimate goal is to invest so that your financial goals will be met, through strategic timelines and handy, easy-to-use tools that help you stay on track.

We believe the way to do that is to invest in thousands of stocks, so that your risk is minimized. We also regularly check up on and rebalance your portfolio, so that you don’t fall off track.

Become a SoFi member and pay absolutely no management fees. You’ll also get unlimited access to our SoFi Financial Planners, who help you create a workable plan and stick to it.

Set up an appointment with a SoFi Financial Planner to start on your way to conquering the world.


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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
SoFi Invest®
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.

Advisory services are offered through SoFi Wealth, LLC an SEC-registered Investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at adviserinfo.sec.gov .

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