Oct
03
2023
Questions to Ask Before You Buy Something

9 Questions To Ask Yourself To Prevent Impulse Purchase

By | Budgeting & Goals, Financial Independence, money | Comments Off on 9 Questions To Ask Yourself To Prevent Impulse Purchase

You’ve likely made some impulse purchases in your life — or at least purchases you later realized weren’t all that wise or well thought out. It can be easy to get caught up in the excitement of buying something new or “just marked down,” that you lose sight of your better instincts — not to mention your budget.

One way to avoid making impulsive or bad buying decisions is to hit pause just before you make a purchase to ask yourself a series of simple questions. This extra step forces you to step back and honestly consider how the potential purchase fits into your life. You might ultimately decide you don’t want the item after all. And, if you do decide to buy it, you can feel confident that you’re doing it for the right reasons.

9 Questions To Ask Yourself Before Buying Something

Knowing some key questions to ask yourself before you buy something can help ensure that you spend according to your values and cut down on purchases you’ll regret later. After all, the last thing you want is to spend money on things that don’t really enhance your life — and may add to your debt (especially if you’re already paying off some debt).

Here are some key pre-purchase questions to consider.

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1. Is This a Want or a Need?

A great first question to ask is whether your prospective purchase fulfills a need or is just something you want. If it’s an item you need — and you can afford it — then you might just go ahead and buy it. If, on the other hand, it fills a want, it’s a good idea to continue vetting the purchase with the questions that follow.

2. What Do You Gain From Buying This?

Consider what you hope to gain from making the purchase. Is it the admiration or approval from other people? Does someone you know or follow on social media have it? Is this something that will genuinely improve your quality of life?

Research suggests that people feel more satisfied when they spend money on things or experiences that mean something to them and reflect their values.

Recommended: What Is FOMO Spending?

3. Is This Something That Will Actually Sell Out?

Though retailers will often make you think you need to act quickly (due to low stock), there’s a good chance that the items that you’re thinking of buying will still be available at a later date. If you’re feeling pressured to buy due to a limited-time sale, keep in mind that sales pop up all the time. Waiting for the next one could save you even more money, as you may decide you don’t really want it that much.

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4. Can You Get It Used or for a Better Price

If you’re thinking of pulling the trigger on a full-price item you don’t need right away, consider whether you may be able to find a better deal. For example, you might:

Buy Used

If you’re looking at a piece of equipment (like sports, exercise, or baby gear) or furniture, keep in mind that you may be able to find it in great condition on a second-hand marketplace online or even a yard sale.

Find Discounts

While buying used is not everyone’s cup of tea, buying on sale should be. These days, there are websites and apps that can help you do quick price comparisons to find the best deals. Some apps will even alert you when the price for a wanted item drops.

5. Do You Own Something Similar?

If you were to look at what you already own, you might be surprised to find how often you purchase nearly the same items over and over again. Buying similar items is totally understandable. We all know what makes us comfortable and what we tend to wear or like, so we gravitate to similar-looking clothes, shoes, home decor, and so on.

If you already have several coffee mugs, jean jackets, baskets, whatever that are similar to your prospective purchase, you may want to pass.

Recommended: 7 Strategies to Stop Spending Money

6. Why Do You Want to Buy This Now?

Sometimes there is a clearcut reason to make a purchase, even an impulse purchase. You might be at a store and remember you need hand soap or a certain tool to make a repair. But if there isn’t a clear reason for making this purchase right now, you may want to pass.

Recommended: How to Stop Overspending: 9 Tips

7. How Often Will You Use It, Really?

If you will only use or wear the item you’re thinking about buying once, or even a handful of times, you may want to rethink the purchase. It’s possible you can get by with something you have, can rent the item, or can borrow it from a friend or neighbor. This can end up saving you money — and potential buyer’s remorse.

8. If the Item Was Full Price Would You Still Buy It?

A sale price can make an item look particularly appealing. You might even think you’d be a fool to pass it by. But it’s important to put the price tag to the side for a moment and consider whether or not you really want and love the item. Would you even be considering it if it were full price? If the answer is no, it’s likely you can forgo it.

9. Would It Be Better To Put the Money Elsewhere?

If you can ask yourself this question, then you’ve arrived. You’re thinking of the big picture and wondering whether there may be other things that are more important than what’s in front of you. This involves delaying gratification and knowing how to control your spending habits.

The Psychology Behind Reflecting Before Purchasing

One common reason why we shop for new (and often similar) things is because we don’t fully appreciate the things we already possess. But there is a way you can turn this psychology around.

Before you make a purchase, consider whether or not you already own something that can fulfill the same purpose. If you do, next think about whether there is a reason you need something similar. If you can’t, you can probably easily pass on the purchase. The process of reflection not only avoids an unneeded expense but allows you to re-focus on the item you already have and appreciate it more.

How Budgeting Can Curb Compulsive Spending

Creating a budget involves looking at where your money is currently going and making sure that your spending aligns with your priorities. There are many different kinds of budgets but one simple framework is the 50/30/20 rule.

The idea is to divide your monthly income into three categories, spending 50% on needs, 30% on wants, and 20% on savings (and debt payments beyond the minimum). This set-up helps curb compulsive spending because you only have so much “fun” money to spend each month. It also allows you to spend money without feeling guilty, since it’s baked into the budget.

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FAQ

How do you determine if you should buy something?

A good first step is to determine whether a prospective purchase fulfills a need or is simply something you want. If it fills a need, you can go ahead buy it, as long as you can afford it. If it’s a want, you might next consider why you want to buy it. Also think about whether you may already have something similar, and whether the money might be better spent on something else.

Should a budget include flexibility for impulse purchases?

Yes. A budget will typically allot a certain amount of money just for “fun” each month. This frees you up to make the occasional impulse purchase without feeling guilty or worrying that it will hurt your long-term financial health. In fact, building in flexibility to your spending plan can help you stick with it.

What questions should you ask yourself before buying something?

Some key questions to ask yourself before you make a purchase include:

•  Do I need it?

•  What do I gain from buying this?

•  Do I own something similar?

•  If the item was full price would I still buy it?

•  How often will I use it, really?

•  Could I get it used or for a better price elsewhere?

•  Is there a better way I could use this money?

How do you stop impulse buying psychology?

One effective strategy is to establish a waiting time before you make any discretionary purchases. If you see something you want to buy, put the purchase on pause for a week (or more). Tell yourself that if, at the end of the waiting period, you still want the item and can afford it, then you can go ahead and buy it. You may find, however, that by delaying gratification (and the purchase), you lose interest in the item and opt not to buy it after all.

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SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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Oct
03
2023
What Is Spoofing In Financial Markets?

What Is Spoofing in Trading?

By | Growing Wealth, invest, Investing, Terminology | Comments Off on What Is Spoofing in Trading?

In the financial space, the term “spoofing” refers to an illegal form of stock market and exchange trickery that is often used to change asset prices. Given that the stock markets are a wild place, and everyone is trying to gain an advantage, spoofing is one way in which some traders bend the rules to try and gain an advantage.

Spoofing is also something that traders and investors should be aware of. This tactic is sometimes used to change asset prices — whether stocks, bonds, or cryptocurrencies.

What Is Spoofing?

Spoofing is when traders place market orders — either buying or selling securities — and then cancel them before the order is ever fulfilled. In a sense, it’s the practice of initiating fake orders, with no intention of ever seeing them executed.

Spoofing means that someone or something is effectively spamming the markets with orders, in an attempt to move security prices.

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What’s the Point of Spoofing?

Because stock market prices are determined by supply and demand — for instance, the more demand there is for Stock A, the higher Stock A’s price is likely to go, and vice versa — they can be manipulated to gain an advantage. That’s where spoofing comes in.

By using bots or an algorithm to make a high number of trades and then cancel them before they go through, it’s possible for spoofers to manipulate security prices. For a trader looking to buy or sell a certain security, those valuations may be moved enough to increase the profitability of a trade.

Spamming the markets with orders creates the illusion that demand for a security is either up or down, which is then reflected in the security’s price. Because it would require an awful lot of “spoofed” orders to move valuations, spoofers might rely on an algorithm to place and cancel orders for them, rather than handle it manually. For that reason, spoofing is typically associated with high-frequency trading (HFT).

Is Spoofing Illegal?

If it sounds like spoofing is essentially cheating the system, that’s because it is. In the United States, spoofing is illegal, and is a criminal offense. Spoofing was made illegal as a part of the Dodd-Frank Act, which was signed into law in 2010. Specifically, spoofing is described as a “disruptive practice” in the legislation, straight from the U.S. Commodity Futures Trading Commission (CFTC), which is the independent agency responsible for overseeing and policing spoofing on the markets:

Dodd-Frank section 747 amends section 4c(a) of the CEA to make it unlawful for any person to engage in any trading, practice, or conduct on or subject to the rules of a registered entity that —

(A) violates bids or offers;

(B) demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or

(C) is, is of the character of, or is commonly known to the trade as ‘spoofing’ (bidding or offering with the intent to cancel the bid or offer before execution).

Additionally, there are laws and rules related to spoofing under rules from the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA), too.

Example of Spoofing

A hypothetical spoofing scenario isn’t too difficult to dream up. For instance, let’s say Mike, a trader, has 100,000 shares of Firm Y stock, and he wants to sell it. Mike uses an algorithm to place hundreds of “buy” orders for Firm Y shares — an algorithm that will also cancel those orders before they’re executed, so that no money is actually spent.

The influx of orders is read by the market as an increase in demand for Firm Y stock, and the price starts to increase. Mike then sells his 100,000 shares at an inflated price — an artificially inflated price, since Mike effectively manipulated the market to increase his profits.

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Consequences of Spoofing

Because spoofing is a relatively easy way to manipulate markets and potentially increase profits, it’s also a fairly common practice for some traders and firms, despite being against the law. That transgression can cost spoofers if and when they’re caught.

For example, one financial institution was fined nearly $1 billion by the SEC during the fall of 2020 after the company was caught conducting spoofing activity in the precious metals market.

But it’s not just the big players that can be on the receiving end of a smack down by the authorities. During August of 2020, an individual day trader was caught manipulating the markets through spoofing activity — actions that netted the trader roughly $140,000 in profits. The trader was ultimately ordered by the CFTC to pay a fine of more than $200,000.

Despite the cases that make headlines, it’s generally hard to identify and catch spoofers. With so many orders being placed and executed at once (especially with algorithmic or computer aid) it’s difficult to identify fake market orders in real time.

How to Protect Against Spoofing

There are a number of parties that are constantly and consistently trying to gain an edge in the markets, be it through spoofing or other means. For investors, it’s worth keeping that in mind while sticking to an investing strategy that works for you, rather than investing with your emotions or getting caught up in the news cycle.

In a time when a single social media post or errant comment on TV can send stock prices soaring or into the gutter, it’s critical for investors to understand what’s driving market activity.

The Takeaway

Spoofing is meant to gain advantage in the markets, but as such it’s illegal and penalties can be steep. Beyond the spoofers trying to manipulate the market, spoofing has the potential to affect all investors.

If spoofers are manipulating prices for their own gain, that can cause traders and investors to react, not realizing what is going on behind the scenes. While this is more of an issue for active investors or day traders, it’s something to be aware of.

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

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03
2023
teenager with backpack

Investing And Financial Literacy For Teens

By | Budgeting & Goals, Financial Independence | No Comments

It’s never too early to start learning smart strategies for managing one’s money. Most teens don’t get a formal education in topics like budgeting, investing, and choosing the right financial institution for their money, which is a missed opportunity.

That’s why it can be especially important for young people to take steps to build their own financial insights and skills. That can mean understanding the right amount to save and spend when earning a salary; what the challenges of managing credit can be; and how to invest money wisely.

This guide covers these aspects of financial literacy and more. Consider it a smart starting point as you build your money knowledge and know-how. Whether you’re thinking about buying your first car, affording college, or starting your own business someday, you’ll learn some of the key steps to bring your financial life into focus.

Why Is Financial Literacy Important for Teens?

Sad but true: Most people are launched into adulthood without being educated on personal finance. What’s more, in many households, money isn’t a topic that’s freely discussed, so kids don’t grow up hearing about how much their parents earn, spend, or save.

These are factors that can make it a challenge to gain financial knowledge and money management skills. However, learning about how to budget, save, invest, and spend wisely when young can set you up on the path to achieve your short- and long-term goals. That’s why you’ll learn some financial tips for teenagers right here.

The sooner you understand your way around money, the earlier you can get on the path to, say, travel around Europe for a summer, manage student loan debt, or even start saving for your dream house.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

5 Key Financial Tips for Teens

Making the most of your money as you start on the path to your independent life doesn’t need to be complicated. Here are five important financial literacy concepts for teens.

1. Opening a Bank Account

Financial planning for teens often starts with having a bank account. Not only will a bank account make it easier to cash those birthday checks from Grandma, it also provides a place to monitor money and start saving.

Most bank accounts billed as “teen accounts” are really just joint bank accounts, because teenagers under 18 typically need a parent or guardian to also be an account holder. This makes it possible to open a bank account for a minor.

Although it’s sometimes easier for teens to open an account at the same place their parents bank, it may be worth researching which banks in the area have the best benefits for teenagers specifically. Some points to know:

•   The age for opening up an account varies from bank to bank, so make sure to check specifications on the bank’s website beforehand.

•   Valid identification like a student ID, driver’s license, passport, birth certificate, and/or social security card is also required for account owners when opening a teen checking account.

•   In some cases, a parent or guardian must be present to open the account, but some banks do offer the opportunity to open an account online. This will often require uploading the same documents to prove your identity.

•   Some banks also offer parental controls, setting withdrawal and debit card limits, or even text alerts about account activity. Before opening an account, it may be worth considering what is most important and beneficial — definitely talk it over with a parent or legal guardian.

•   Learning about any fees or minimum balances from the bank is also important step in personal finance for teens. Make sure to ask the right questions in person or check out the bank’s fee structure on their website. Ideally, you might want an account with no fees and the ability to earn a bit of interest (many checking accounts pay no interest). You are typically more likely to find such offers at online vs. traditional banks.

•   Having a bank account means access to making deposits and withdrawals, plus online banking tools that can help with money management.

A word about debit cards: A teen checking account typically offers access to a debit card, which allows account holders to take out cash from ATMs and use the card for purchases in stores or online.

And since a debit card takes money directly out of the checking account for payments, it may help to download the bank’s mobile app, if available. This can help with checking account balances and, at some banks, setting up alerts if the account falls below a certain balance.

A bank account is a great first step in learning money management, whether it’s using a debit card, checking balances, transferring money, or setting up a direct deposit for paychecks. Especially with a new job, a weekly or bi-weekly paycheck comes with learning more financial responsibility. With a personal bank account, teens can pick up crucial financial skills before turning 18.

And, at many banks, once someone does turn 18, the account can turn into a standard checking account, which they can either choose to keep or leave for a new banking institution. (Important note: There may be new fees, so it’s important to keep an eye on what those might be.)

2. Budgeting For Teens

Another financial tip for teenagers involves learning how to balance income and expenses. Making a simple budget can help keep things on track. Whether it’s keeping tabs on a monthly allowance or income from a part-time job, knowing how much money is spent versus how much money gets made is a key part of money management. Plus, a budget can show how much money is available to save every month.

Many banks with mobile or online banking offer simple budgeting tools, such as categorizing money into simple buckets like “spendable” or “set aside.” One pretty practical budget suggestion is the 50/30/20 method. This helps to simplify spending categories: rather than trying to decipher every transaction and having hundreds of small budgets for individual items, the 50/30/20 method just divides monthly income into thirds.

•   50% of income would be put toward necessities, such as bills and other regular spending that’s hard to do without. For teens, this might mean car-related expenses, like insurance and gas, or a monthly cellphone bill. If 50% seems like a lot — especially if parents are still paying for big expenses like groceries and housing — consider putting an extra 10% into savings or other financial goals for now.

•   30% would be allocated for day-to-day spending, like going out to eat with friends, entertainment, shopping, and other fun activities.

•   The remaining 20% would be allocated for financial goals, usually savings or debt payoff. Maybe this can be the start of a college fund, or saving up for a big purchase in the future?

3. Smart Savings

In tandem with having a budget, learning how to save money is an important part of financial planning. Opening both a checking and savings account may make it simpler to put money away.

Since a debit card is only tied to a checking account, that’s like an added buffer from the money in a savings account. Plus, learning to regularly transfer money into a savings account can help create healthy money habits.

When you have a regular paycheck, one of the simplest ways to save more is to set up direct deposit to divide the funds between a checking and savings account. If 20% automatically goes directly into savings, it requires little extra thought each pay period.

Automating your savings in this way takes away the need to manually transfer money. This can help eliminate any mental gymnastics surrounding the desire to spend money in your checking account immediately — it’s like it was never there in the first place.

Plus, in an emergency, a connected savings account can help prevent overdraft fees. If college is in the plans, saving now could mean taking out fewer loans in the future.

In fact, this thinking can be applied to any money goal, whether it’s a new phone, car, or a big post-graduation trip. Saving now can make it easier to achieve later.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

4. Being Cautious With Credit

Financial tips for teens are full of dire warnings about the perils of credit cards. But learning early on how credit cards work and how to manage credit is also part of mastering money management. Building credit now may open more doors in the long run.

For example, establishing a positive credit history can help make it more likely to successfully secure a loan for a car or rent an apartment down the road.

One way for teens to start is to get added as an authorized user on a parent’s credit card. The authorized user gets the benefits of the credit card and building credit history without the responsibility of being the primary cardholder and making payments.

However, since late payments may impact both credit scores, teens can also set up an arrangement to pay off any debt incurred using the card each month.

In fact, it’s getting harder for people under the age of 21 to get a credit card, because federal law under the Credit CARD Act of 2009 requires credit card issuers to verify that the applicant has the following before a credit card is issued:

•  A cosigner’s signature. The cosigner can be a parent, guardian, etc. as long as they are able to pay the applicant’s debt from the card.

•  Official financial information proving that the applicant can repay the debt on their own.

The submitted application must be written. And if a person under 21 is approved for a card, they can’t get a credit limit increase without written approval from the cosigner.

Eventually opening an individual credit card without a cosigner, of course, means a lot more financial responsibility. Paying a credit card in full each month, as opposed to carrying a balance, is an important financial habit to get the hang of, as paying in full each billing cycle means the cardholder won’t pay interest on a balance and it can help build credit score.

Until then, an authorized user receives a separate credit card in his or her name, but there may be no need to even use the card. Just having it issued can help build credit if the main cardholder is keeping up with their payments. As credit builds, it’s smart to monitor credit reports and scores for errors or fraud. It might be a good idea to start monitoring credit through a free site like FreeCreditReport.com .

5. Setting Up a Side Hustle

If a part-time job or summer gig isn’t an option just yet, whether due to age, school work, or other restrictions, there are other options for earning extra cash. One of the benefits of a side hustle is being able to bring in income. And any income, however small, could help build good personal finance habits like budgeting and saving.

For ideas, look to needs in the community, such as assisting older adults with technology, babysitting, tutoring, or lawn care. Helping on a moving day, walking dogs, or washing cars are also great ways to step up from a beginner’s lemonade stand.

You might also consider your hobbies: Do you paint landscapes in your free time? Make jewelry? You could possibly sell your work to bring in some cash.

For those nearing college and looking for a part-time or entry-level job, it may be worth considering a company that offers tuition support or reimbursement for their employees.

Building smart financial planning skills now may make it even easier down the road when starting a full-time job — with budgeting and saving.

Can You Invest as a Teenager?

Many teenagers are curious about investing and how they might build wealth that way. Here are a few things to know if you’re wondering how to invest as a teenager:

•   If you are under age 18, you cannot be the sole owner of a standard brokerage account.

•   With adult supervision, you may open what is known as a custodial account. This means that the adult oversees the account while you are under 18. When you turn 18, you can likely take over control of the account with the adult’s approval.

By collaborating with an adult in this way on investments, you can learn the basics and begin to experiment. The conventional wisdom is that, the younger you are, the more risk you can afford to take with investing, since you have time to recoup any losses and ride out the ups and downs of the market.

Just do keep in mind that investment does have inherent risk, as your portfolio isn’t insured the same way money in the bank is.

Once You Are Old Enough to Invest, Where Do You Start?

If you are old enough, here’s how to invest as a teenager. Keep these tips in mind:

•  Do your research. There is plenty of information about investing available online, via apps and classes, in books, on podcasts, and beyond. Find reputable resources and educate yourself on how to invest money as a teen. This can include both principles of investing as well as different kinds of investments to consider.

•  Set goals. When you begin investing, it’s wise to figure out your goals, and you may indeed have more than one. Perhaps you want to invest in the short-term to help generate money to pay back student loans. And maybe you also want to begin saving to start a business when you are 35. Those different goals and timeframes can influence how you invest.

•  Opening a brokerage account. Once you are old enough, you will have a choice about the sort of account you open and how it is managed. Whether you want to work with a financial professional or try robo advising, spend time understanding the pros and cons of your options.

When you make a decision, you’ll be ready to invest money as a teenager, but it doesn’t have to be set in stone. You can shift gears and try other methods as well.

Making Smart Money Moves With SoFi as a Teen

While SoFi doesn’t offer bank accounts for minors, take a look at what we offer for when you are of legal age to open an account. Or, if you are age 15 or older, see if you might be added as an authorized user to an adult’s account.

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


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

FAQ

What should high school students know about financial literacy?

It is important for high school students to learn about opening bank accounts, budgeting, saving, managing credit wisely, and bringing in income.

How can a 16-year-old invest money?

A 16-year-old typically cannot open their own brokerage account. However, they can open a custodial account with a trusted adult.

How would you invest $1,000 as a teenager?

A teenager typically cannot invest money on their own; they would have to open a custodial account with a trusted adult. Then, they would have to identify a goal for the funds (to generate income ASAP? To grow slowly for use later in life?) and select the right kind of investments.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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

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Law School Loan Forgiveness and Repayment Options

By | Fresh Out of School, Student Loans, student_loan | No Comments
Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

In June 2023, the Supreme Court announced its decision to reject the Biden-Harris Administration’s Student Debt Relief Program on the grounds that it required Congressional approval. Additionally, the debt ceiling bill officially ended the payment pause, requiring interest accrual to resume Sept. 1 and payments to resume Oct 1.

Fortunately, there are still some forgiveness and repayment options available to law school debt holders. Here’s what’s available.

Loan Repayment Assistance Programs

A Loan Repayment Assistance Program (LRAP) is one type of financial assistance provided to law school graduates in government and lower paying legal fields. LRAPs may be run by the state, state bar, federal government, or individual law schools.

In many cases, funds are provided via a forgivable loan that is canceled when the recipient’s service obligation is completed. These loans are structured in a way that they are not taxable income, unlike grants. If you receive loan repayment assistance, it’s important to find out if your funds are taxable. (Learn how to find your student loan tax form.)

An LRAP shouldn’t be confused with the repayment plan borrowers agree to when they first sign for their loans. Most people with federal student loans are on the Standard Repayment Plan, meaning they pay a fixed amount every month for up to 10 years.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

5 Law School Loan Forgiveness and Repayment Programs

Below are the five most widely used law school student loan forgiveness and repayment programs. If you’re already receiving one or more of these benefits, remember that you may have to reapply each year.

You may apply to as many law school debt forgiveness programs as you qualify for. In some cases, you may even accept more than one grant or loan at a time, but check the fine print on your program applications.

Recommended: Can Private Student Loans Be Forgiven?

Public Service Loan Forgiveness (PSLF)

Best for: Lawyers who plan to work for the government or in the nonprofit sector.

The Public Service Loan Forgiveness program may be the most well-known option in terms of loan forgiveness for lawyers. The premise is simple: If you work in a qualifying public service field, then the remainder of your direct student loans can be forgiven after you make 120 consecutive qualifying monthly payments over 10 years. However, many people attempting to meet those requirements can find the process confusing and difficult.

The first step to qualifying for public service loan forgiveness is filling out the employment certification form.

In order to earn loan forgiveness, you must work for a qualifying government organization or tax-exempt non-profit organization, and you must be enrolled in a qualifying repayment plan — generally a federal income-driven repayment plan.

The next step is to make your monthly loan payments promptly. If you meet all those requirements and payments, then at the end of 10 years, the remainder of your debt could be forgiven.

Obviously, if you put all that time and money in and then it doesn’t pay off, it could cost you. Since the original Public Service Loan Forgiveness program went into effect in 2007, the first students eligible were set to have their loans discharged in October 2017.

However, the PSLF program was overhauled in Oct. 2021, and since then, $42 billion was approved for more than 615,000 borrowers. Additionally, borrowers who are still awaiting approval can now track their application’s status under the My Activity section of their StudentAid.gov account. This recently implemented feature can allow borrowers to see if their employers digitally signed their PSLF form and view when it was actually processed

Income-driven Repayment Plans (IDR)

Best for: Lawyers with low incomes.

An income-driven repayment plan sets your monthly student loan payment based on your income and family size. Most federal student loans are eligible for at least one income-driven repayment plan. If your income is low enough, your payment could be $0 per month. There are four income-driven repayment plans:

•   Saving on a Valuable Education (SAVE Plan)

•   Pay As You Earn Repayment Plan (PAYE Plan)

•   Income-Based Repayment Plan (IBR Plan)

•   Income-Contingent Repayment Plan (ICR Plan)

The Federal Student Aid website breaks down the eligibility for each program. If you have Parent PLUS loans, you must consolidate your loans to become eligible for an IDR plan.

Recommended: How To Avoid Student Loan Forgiveness Scams

State Loan Repayment Assistance Programs

Best for: Lawyers who qualify for their state’s program.

Most states have LRAPs providing a type of law school loan forgiveness if you work in that state — often in the public sector, for a qualifying nonprofit, or in underserved communities. Repayment assistance varies, so check the guidelines for your state. For instance, the District of Columbia offers one-year interest-free forgivable loans up to $12,000; in New York, forgivable loans of up to $10,000 per year are available for a maximum of three years or $30,000.

Law School-Based Loan Repayment Assistance Programs

Best for: Lawyers with low incomes or those who work in high-need areas.

Many schools offer their own LRAPs for lawyers. Applicants for the 2023 funding cycle must have had at least $75,000 in eligible law school loans and a maximum income of $62,500 in most states.

The specifics of the loan repayment assistance programs vary from school to school, so you’ll have to check with your law school’s financial aid office. Here is a comprehensive list of law schools with LRAPs.

Up to $5,600 each is awarded to each of around 125 attorneys annually through an application process that opens in August.

Department of Justice Attorney Student Loan Repayment Program

Best for: Lawyers who work for the Department of Justice.

The Department of Justice Attorney Student Loan Repayment program is a type of law school loan forgiveness aimed at encouraging newly minted attorneys to work for the Department of Justice. Applications for the program open in the spring (typically on March 1).

In return, you can receive up to $6,000 per year (for a maximum of $60,000 total) paid toward your student loans. It’s not exactly law school loan forgiveness, but it is law school loan repayment.

The fine print: You must commit to three years of full-time employment for the Department of Justice, and if you don’t fulfill your commitment then you could be on the hook for any loan payments made on your behalf. You must have at least $10,000 in eligible student loans, which includes Stafford Loans, PLUS loans, Perkins Loans, and a few other types of student loans. (All criteria information is available on the Department of Justice’s program website.)

Payments are made directly to the loan servicer and all loan repayments made by the Department of Justice ASLRP are considered taxable income. It’s also a highly competitive program, but if you’re looking at a career working for the DOJ, then it could be a great way to get your start and wipe out some debt.

The Takeaway

Law school loan forgiveness sounds great, but it can cost you money in the long run if you end up paying higher interest rates or don’t pursue the career you want in the hope of securing loan forgiveness. Consolidating federal student loans is an option, but it can be complicated. Through the Direct Loan Consolidation program, your new interest rate is the weighted average of your existing loans’ rates.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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.

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03
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Should I Use the Standard 10-Year Repayment Plan?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments
Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

When it comes time to repay your federal student loans, you have to decide what kind of payment plan you want to be on. All borrowers qualify for the Standard Repayment Plan, which ensures you pay off your loan within 10 years.

But that’s not the only option available, and it might not be the best choice for your financial needs.

By learning more about the Standard Repayment Plan, you can decide if it’s the right choice for you or you want to go a different route.

What Is the Standard Repayment Plan for Student Loans?

Upon graduation from college or if you drop below half-time enrollment, you have a six-month grace period for a Direct Loan program loan (nine months for a federal Perkins Loan) when you don’t have to make payments.

Once that ends, you’ll begin the Standard Repayment Plan, the default for all federal student loan borrowers once they have left school. That’s unless you choose a different plan – perhaps one where you make lower monthly payments, extend your repayment period, or both.

Let’s start by looking at the standard plan, which sets your monthly payments at a certain amount so that you will have your loans paid off within 10 years.

Recommended: Getting to Know Your Student Loan Repayment Options

Standard Repayment Plan Eligibility

Unlike some other federal student loan repayment plans, all borrowers are eligible for the standard plan.

Loans That Are Eligible

Federal Family Education Loan (FFEL) Program loans and Direct Loans qualify for the Standard Repayment Plan. They include:

•   Direct Subsidized and Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   FFEL consolidation loans

•   FFEL PLUS loans

Keep in mind that you will only be able to use the Standard Repayment Plan if you have federal student loans, not private student loans.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

How Does the Standard Repayment Plan Work?

With the Standard Repayment Plan, borrowers pay fixed monthly payments for up to 10 years. Because the plan offers a relatively short repayment period and monthly payments don’t change, you will save more money in interest than longer repayment plans.

For example, if you just graduated with the average student loan debt of $37,718 at 5.8% interest, you’ll pay $12,078.27 in total interest. Expanding to 25 years at the same rate will lower your monthly payment by almost half, but you’ll end up paying nearly $33,810.20 in total interest.

There’s a variation on the 10-year plan: the graduated repayment plan. Under this plan, repayments start low, and every two years, your payments increase. This is a good option for recent graduates who may have lower starting salaries but expect to see their pay increase substantially over 10 years.

Recommended: Student Loan Payment Calculator

Payments on the Standard Plan

What may make the Standard Repayment Plan less appealing to some borrowers is that payments will likely be higher than on any other federal repayment plan because of the short loan term.

For people with a large amount of student debt or high interest rates, the monthly payments can be daunting or unmanageable. You might face sticker shock when you receive your first bill after your grace period, so don’t let it come as a surprise.

To determine if the Standard Repayment Plan is a good option for you, you can use the federal Loan Simulator to calculate student loan payments. Or contact your loan servicer before your first payment is due to see how much you will owe each month.

Changing Your Repayment Schedule

If you want to change your repayment schedule or plan, call your loan servicer and see what they can do.

You’ll need to contact each loan servicer if you took out more than one loan and want to change repayment schedules.

You can change your federal student loan repayment plan at any time, free of charge.

What Are the Pros and Cons of the Standard Repayment Plan?

There are upsides and downsides to weigh when considering the Standard Repayment Plan.

Pros

You will pay off your loans in less time than you would with other types of federal repayment plans, which may allow you to set aside money for things like purchasing a home.

You’ll save money on interest, since you’re paying your loan back faster than you would on other federal plans.

The plan offers predictability. Payments are the same amount every month.

You don’t need to recertify your loan every year to prove your eligibility.

Cons

Your monthly payments will probably be higher than payments made under other student loan repayment plans with extended repayment periods.

Your monthly payments are based on the number of years it will take you to repay the loan, not on how much you can afford, as with income-based repayment plans.

With some federal income-driven repayment plans, like SAVE or PAYE, your remaining balance will be forgiven after you make a certain number of eligible payments over 20 to 25 years.

The Takeaway

The federal Standard Repayment Plan of 10 years could be right for you if you’re able to keep up with payments and you want to pay off your debt quickly.

Another option is to refinance your student loans to improve your interest rate and possibly change your loan term. Just realize that refinancing federal student loans into a private student loan means giving up federal benefits like income-driven repayment and loan forgiveness.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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.

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

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