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No one wants to see their hard-earned cash sitting in the bank and earning a miniscule amount of interest. Instead, most people want their money to work hard and churn out even more moolah at a healthy rate.

Achieving that may be as simple as switching banks or even just swapping account types. Or trying a couple of other smart financial moves that can help your wealth grow.

Read on to learn smart strategies that can help you earn more interest than you are currently.

What Is Interest?

Interest is the percentage paid when money is borrowed or loaned out. Here are a couple of examples.

•  When you deposit your money into an account at a financial institution, the bank may pay you interest. This is your reward for keeping your cash there, where they can lend some of it out or otherwise use it as part of their operations.

•  When you borrow money (like a mortgage or car loan) or open a line of credit (say, for a credit card), you pay interest to your lender. You are paying for the privilege of using their money.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do You Earn Interest?

When you deposit money into a bank account, you are in effect loaning them the money. They pay you interest in return.

The financial institution can use that money in any number of ways, including lending it out to others. Say you deposit $10,000 in a savings account that earns a 3% interest rate. The bank could then use some of your money and that of other depositors to make a $100,000 mortgage loan at 7% to a borrower.

The difference between the 7% they are charging the person with the home loan and the 3% they are paying you and other savings account holders is one of the ways banks make money. And it’s also a good example of how and why you earn interest on your deposit.

How Does Interest Work?

Interest can work in a couple of different ways.

•  With simple interest, interest is earned only on the principal, or the amount of money you deposited.

•  With compound interest, interest is generated on the principal and the interest as it accrues. This makes your money grow more quickly. Interest can be compounded at different intervals, such as quarterly, monthly, or daily.

Here’s an example of what a $10,000 savings account would look like at the end of a year if you earned 3% simple interest:

$10,000 principal +$300 interest = $10,300 at the end of the year.

However, if that interest was compounded daily, by the end of the year, you would have:

$10,000 principal + $304.53 interest = $10,304.53 at the end of the year.

While it doesn’t sound like much, over time, the difference is amplified. If you’re wondering how to make money with interest, consider what the numbers would look like after 10 years:

Simple interest: $13,000
Compound interest: $13,498.48

It can be wise to check with financial institutions and see how often interest is compounded. The more frequent the compounding, the more your money will grow.

Recommended: How to Get Your Money to Work Harder

7 Ways to Gain Interest on Your Money

Now that you understand what interest is, consider these seven ways you might help your money grow faster thanks to the power of interest.

1. High-Interest Savings Accounts

Want to earn more interest on savings? Some banks offer high-interest or high-yield savings accounts that can pay higher rates than traditional savings accounts, while still providing fairly easy access to your money.

How big a difference can this make? In mid 2023, regular savings accounts were paying as little as .01% to .15% annual percentage yield (APY) while high-yield accounts were in the 4.25% to 4.75% zone. When looking for a good interest rate for a savings account, most people would rather snag the latter.

Typically, these high-interest accounts limit you to six withdrawals or transfers per month per Federal Reserve requirements. While this Regulation D rule has been suspended since the coronavirus pandemic, some banks will still charge fees or have other penalties for more than six withdrawals, so be sure to check.

You are more likely to find high-interest savings accounts at online-only banks. Because these institutions tend to have lower operating costs than brick-and-mortar banks, they often offer higher rates than traditional banks. They may also be less likely to charge monthly fees.

A high-yield savings account can be a great place to build an emergency fund or save for a vacation or home repair while providing safety and liquidity.

2. Rewards Checking Accounts

Checking accounts are traditionally used for storing money that you use frequently, and they typically don’t pay interest. However, some banks offer rewards checking accounts. These may pay higher interest rates than traditional checking and savings accounts. For instance, as of mid 2023, while some standard checking accounts paid zero interest, rewards accounts offered up to 3.30% APY.

However, there may be some restrictions. For instance, the balance that earns the elevated rate may be limited. In addition, you may have to meet certain direct deposit or debit card transaction requirements each month to earn the higher rate.

Like other checking accounts, rewards checking accounts are highly liquid and typically come with check-writing privileges, ATM access, and debit cards. Plus, deposits can be withdrawn at any time.

If you’re considering a rewards checking account, however, you may want to first make sure you can meet any requirements.

💡 Quick Tip: Your money deserves a higher rate. You earned it! Consider opening a high-yield checking account online and earn 0.50% APY.

3. Credit Unions

Another of the best ways to earn interest on your money is to consider joining a credit union.

Unlike banks, credit unions are owned by the people (or members) who hold accounts at the credit union. Because of this, these financial institutions work for the benefit of account holders instead of shareholders.

In some cases, that can translate into lower fees, better account perks, and higher interest rates. To join a credit union, you typically need to live or work in a certain geographic area or work for a certain employer.

If you have a credit union near you, you may want to check the rates it offers and see if you can get a good deal.

4. Money Market Accounts

A money market account is a type of deposit account that usually combines the features of both checking and savings accounts. This kind of account often requires a higher minimum balance to open than a standard savings account and typically earns a higher interest rate.

Some money market accounts also come with a debit card or checks (which you generally won’t find with savings accounts), but financial institutions may require that they not be used more than six times per month. Some will charge a fee if you go over that number.

It can also be a good idea to ask about other fees, such as monthly account fees and penalties, before opening one of these accounts.

Recommended: Guide to Deposit Interest Rates

5. Certificates of Deposit

Certificates of deposit (CDs), which are a kind of time deposit, typically offer higher interest rates than traditional savings accounts in exchange for reduced withdrawal flexibility.

One benefit of CDs is that you lock in the interest rate when you open the CD.

When you put money in a CD, you agree to leave the money in the account for a set period of time, known as the term. If you withdraw your deposit before the term expires, you’ll usually have to pay an early withdrawal penalty.

One benefit of CDs is that you lock in the interest rate when you open the CD. Even if market rates drop, you’ll keep earning the same rate. On the other hand, if rates rise, you’ll be stuck earning the lower rate until the CD matures.

One way to work around this is to open several CDs that mature at different times, a technique known as CD laddering. Having a mix of short- and long-term CDs allows you to take advantage of higher interest rates, if they bump up, but still have the flexibility to take advantage of higher rates in the future.

A CD ladder also helps with the lack of liquidity that comes with CDs. Because of the staggered terms of the certificates, one is likely to be coming due (or available) if you need to use the cash.

6. Bank Bonuses

Many banks offer special bonuses from time to time; these can be a way to boost the earnings on your money. You may want to keep your eyes open for high-yield savings accounts that offer a sign-up bonus or an interest rate bonus. These incentives can boost your earnings, though you may have to maintain a high minimum balance in the account to earn the higher rate.

You may want to keep your eyes open for high-yield savings accounts that offer a sign-up bonus.

Some banks also offer cash bonuses to customers who open new checking accounts. While this may also come with some requirements, such as setting up direct deposit and/or keeping your account open for a certain number of months to earn the bonus, it can be another good way to increase the income you earn on your bank deposits.

7. Bonds or Bond Funds

Another way to gain interest on your money could be with bonds, which are loans that the government or companies issue. These pay investors interest on a regular basis until the bond hits its maturity date.

These investments, however, aren’t insured the way an account is at a bank or credit union by the FDIC or NCUA. U.S. Savings Bonds are backed by the government, but other bonds may carry risk.

Type of Account	Pros	Cons
High-Interest Savings	Higher interest	May have withdrawal limits
Rewards Checking	Higher interest, unlimited withdrawals, checks, and a debit card	May have requirements such as certain number of debit card or ATM transactions
Credit Union	Higher interest	May need to live in a certain area or work in a certain profession to open an account
Money Market	Higher interest; checking account privileges such as a debit card and checks	May charge fees and/or limit number of transactions
Certificates of Deposit	Higher interest, guaranteed interest rate	Money must be kept on deposit for a specific time period or else penalties can be assessed
Bank Bonuses	Higher interest and/or cash to add to your account	Not offered by all banks; may be minimum deposit requirements or rate may decrease after introductory period
Bonds	Pay interest to grow your investment	May not be insured

Other Ways to Make Your Money Work For You

If you’re planning to park your cash for at least five years or so and you are willing to take some risk, you may want to consider investing your money in the market.

While an investment might generate a higher return, all investments come with the risk that you could lose some or all of your money.

You can better weather this risk by investing for the long term, which essentially means only investing savings that you would not likely need to touch when the market is down.

There are a variety of ways to start investing. If your employer offers a 401(k), that can be one of the easiest ways to start investing. Another option for retirement is an individual retirement account (IRA).

You could also open a brokerage account for financial goals outside of retirement. This is a taxed account, typically opened with a brokerage firm, that allows you to buy and sell investments like stocks, bonds, and mutual funds.

If you’re ready to start investing, you may want to speak with a qualified financial advisor who can help you establish your savings goals and risk tolerance and help you develop a personalized investment strategy.

💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.

Creating a SoFi Savings Account Today

If you’re looking to make more interest on your money, you may be able to increase returns by opening a high-yield account at SoFi.

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 does it mean to “gain interest”?

Gaining interest is similar to earning interest. It means that your money (the principal) is growing over time thanks to the interest rate being paid. The exact amount it grows will be determined by the interest rate, how long it sits, and how frequently (if at all) the interest is compounded.

Where can you get 7% interest on your money?

As of mid 2023, only one financial institution offered an account with 7% interest: Landmark Credit Union. It was paying 7.50% annual percentage yield (APY) on its Premium Checking Account, which had requirements for e-statements and direct deposits in order to earn that amount of interest.

How much interest does $10,000 earn in a year?

How much interest $10,000 will earn in one year will depend on the interest rate and how often the interest is compounded, if at all. If the interest rate is 3%, without compounding, it would earn $300. With daily compounding, it would earn $304.53. If the interest rate were 7%, the account holder would have $700 in interest at the end of the year with simple interest, and $725.01 with daily compounding.

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

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

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

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

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

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

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

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

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Personal loans are borrowed lump sums that you pay back, with interest, to the lender. Though the money can be used for almost anything, some common uses for personal loans include covering medical bills, paying for home repairs, and consolidating debt.

When you don’t have the savings to cover an important purchase or bill, a personal loan is usually a better alternative to credit cards. We’ll take a closer look at what personal loans can be used for, their drawbacks and benefits, and alternative ways to pay for unexpected expenses.

What Can I Use a Personal Loan For?

Personal loans may be used for just about anything “personal,” meaning it’s not a business-related expense. Here are some of the most popular reasons people take out different types of personal loans.

Debt Management and Consolidation

Refinancing or high-interest debt consolidation into better loan terms is one of the most common uses for a personal loan — and one of the most financially savvy. Credit card debt carries some of the highest interest rates out there. Credit cards also typically have variable rates, making it challenging to create a predictable budget to pay down outstanding debt.

Rates for personal loans, on the other hand, tend to be lower than credit card APRs. This can save borrowers a lot of money in interest over the long term. And the fixed payback schedule of a personal installment loan may help borrowers avoid falling into a vicious cycle of revolving debt that can continue indefinitely.

You don’t have to be drowning in credit card debt to benefit from consolidation. For borrowers with multiple loans, consolidating debt with one personal loan can be a useful financial tactic — if the borrower qualifies for good loan terms.

Bottom line: Personal loans can help streamline multiple high-interest debt payments into one payment. Plus, loans tend to have lower rates than credit cards. This could help borrowers save money in interest over time.

Recommended: Where to Get a Personal Loan

Wedding Expenses

According to Zola, an online wedding planning site, the average cost of a wedding in 2023 is around $29,000. Unfortunately, many young couples have not saved up enough to pay for their entire wedding themselves. (In many cases, the days when a bride’s parents footed the entire wedding bill are over.)

A personal loan, sometimes referred to as a wedding loan when used for this purpose, can cover some or all of a well-budgeted wedding. Personal loans tend to offer much lower interest rates than credit cards, which some newlyweds may use to fund their big day.

However, before you go this route, think long and hard about whether you really want to start out your married life in debt. Consider if you can actually afford to pay off the loan in a timely manner. If not, it might be better to cut back on your wedding budget, or take more time to save up for the big day.

Bottom line: A wedding loan can help pay for some or all of the wedding costs, which could help you avoid having to use a credit card or tap into your savings.

Unexpected Medical Expenses

When a medical emergency occurs, it’s important for your main focus to be on a healthy outcome. But the financial burden can’t be ignored. Being able to pay for out-of-pocket expenses with a low-rate personal loan may relieve some stress and give you time to heal.

It’s no secret that the cost of medical care in America can be sky-high, especially for the large portion of Americans who have high-deductible health plans. The situation is even more challenging for those who don’t have health insurance coverage at all. When paying out of pocket, even a seemingly simple procedure, like casting a broken leg, can cost a shocking $7,500, according to Healthcare.gov.

Bottom line: Medical emergencies happen. Using a personal loan to help pay for bills and expenses could provide peace of mind.

Recommended: How to Pay for Medical Bills You Can’t Afford

Moving Expenses

A low-interest personal loan (also known as a relocation loan) may help defray some out-of-pocket costs associated with moving. According to the American Moving & Storage Association, a local move can set you back $1,250 on average. Moving 1,000 miles or more typically costs $4,890.

And these figures only account for the move itself. As anyone who has relocated knows, hidden costs can and do often pop up, from boxes and storage space to cleaning fees and lost security deposits.

There are also expenses that come with a new home. Most new rentals require upfront cash for a deposit, sometimes totaling three times the monthly rent (first, last, and security). Opening new utility accounts may also require a deposit.

And don’t forget about replacing household items left behind. Even basics like soap, light bulbs, shower curtains, and ketchup can easily total a few hundred dollars.

Lastly, miscellaneous costs can arise during the move itself, such as replacing broken items. Even with insurance, there’s usually a deductible to pay.

Bottom line: Whether you’re relocating across town or across the country, expenses can pile up quickly. A relocation loan can help you pay to move and set up your new home.


💡 Quick Tip: SoFi lets you apply for a personal loan online in 60 seconds, without affecting your credit score.

Funeral Expenses

Many people have life insurance to cover their own funeral. But what if Mom, Dad, or Grandpa didn’t plan ahead? If the deceased did not plan appropriately to finance their death, and life insurance doesn’t cover the bill, a personal loan can be a quick, easy solution for the family.

Basic costs for a funeral include the service, burial or cremation, and a memorial gathering of friends and family. The median cost of a funeral service with a viewing and burial is $7,848, while the cost of a funeral with cremation is $6,971.

Bottom line: When a loved one passes away, paying for the funeral may be the last thing on your mind. If you need help financing the arrangements, a personal loan could provide a fast and simple solution.

Home Improvement Expenses

Many renters and homeowners feel that annual or biannual itch to spruce up their living space. That might mean a fresh coat of paint, upgraded appliances, or a kitchen remodel. Depending on the level of your project, the cost of home remodel can come in anywhere from a few hundred to tens of thousands of dollars.

If you’re making upgrades that will improve a home’s value, the cost may be made up when selling the house later. Using a personal home improvement loan can help you focus on the renovation instead of fretting about costs. Plus, if you get an unsecured loan, you won’t have to worry about putting your home equity on the line as collateral.

Bottom line: Taking out a home improvement loan is one way to help fund a home improvement project.

Family Planning

Whether your plans involve pregnancy, adoption, in vitro fertilization (IVF), or surrogacy, growing a family can be expensive.

The average cost of a complete IVF cycle, for example, starts around $15,000 and can go up from there, depending on the center and your medication needs. Meanwhile, giving birth costs an average of $18,865, and insured women typically pay $2,854 of that amount.

Once your baby arrives, you’ll need money to pay for diapers, clothing, formula, and other supplies. A personal loan can help you cover the expenses without having to dip into your savings or emergency fund.

Bottom line: When you’re looking to add a new member to the family, a personal loan can provide peace-of-mind financing.

Car Repairs

You get a flat tire. The transmission fails. The brakes go out. When your car breaks, chances are you can’t afford to wait to have it fixed while you pull together the necessary funds. A personal loan can help you cover the cost of the repair, which can be significant.

On average, consumers spend around $548 per year fixing their cars, according to Cox Automotive, which owns Kelley Blue Book. Of course, you could spend much more, depending on the work being done. If you’re replacing a failed transmission, for instance, you can expect to pay between $2,900 and $7,100 for a new one.

Bottom line: Car repairs are rarely planned. If you need money quickly to fix your car, you may want to consider a personal loan. Depending on the lender, you may be able to get same-day funding, but it could also take up to one week to get the money.

Vacation

Ready to take the plunge and book that bucket list trip? A personal loan is one way to help finance a dream vacation, and the interest rate could be lower than a credit card’s.

Bottom line: If you’re planning an expensive getaway and don’t have the cash you need at the ready, a personal loan can help you pay for the trip. Note that you may be paying off the loan long after the trip.

What Personal Loans Can’t Be Used For

While personal loans can be used for almost anything, there are some restrictions. In general, here are things you should not use a personal loan for:

•   A down payment on a home. Buying a home? In general, you’re not allowed to use personal loans for down payments on conventional home loans and FHA loans.

•   College tuition. Most lenders won’t allow you to use personal loans to pay college tuition and fees, and many prohibit you from using the money to pay down student loans.

•   Business expenses. Typically, you are not allowed to use personal loan funds to cover business expenses.

•   Investing. Some lenders prohibit using a personal loan to invest. But even if your lender allows it, there may be risks involved that you’ll want to be aware of.

Recommended: Personal Loan Glossary

Pros and Cons of Taking Out a Personal Loan

As you’re weighing your decision, it may help to take a look at the overall pros and cons of personal loans:

Pros	Cons
Fast access to cash	Increases debt
Can be used a variety of purposes	Potential fees and penalties
Lower interest rates compared to credit cards	Credit and income requirements to qualify
No collateral required for unsecured personal loans	Applying might ding your credit score

Deciding Whether to Take Out a Personal Loan

Wondering whether a personal loan makes sense for your situation? Here are a few things to keep in mind as you make your decision.

•   Figure out how much you’ll need to borrow. Remember, you’ll be on the hook for repaying a significant amount of money including interest. There might be hidden fees, too.

•   Make a repayment plan. Going into debt should never be taken lightly, so it’s important to set a realistic strategy to repay the debt.

•   Check your credit score. Your credit history and score will have a significant impact on the loan terms, and interest rates and qualifying criteria will vary from lender to lender.

•   Explore your options. Before applying with a lender, shop around for the interest rate and terms that best fit your needs.

Keep in mind that there may be situations when taking out a personal loan might not make sense. Here are a few instances:

•   You can’t afford your current monthly payments. If making the monthly payments on your existing debt is a challenge, you may want to reconsider whether it’s a good idea to take on any more debt right now.

•   You have a high amount of debt. Shouldering a high amount of debt? Taking out a personal loan could put a strain on your finances and make it more difficult for you to make ends meet or put money away for savings. Plus, carrying a lot of debt could increase your debt-to-income ratio (DTI), which lenders look at in addition to your credit score and credit report when reviewing your loan application.

•   You have a “bad” credit score. A less-than-stellar credit score could reduce your chance of getting approved for a personal loan. If your credit score is considered “bad,” which FICO defines as 579 or below, then you may want to hold off on taking out a personal loan and instead work on your credit. You can help raise your score by paying your bills on time, paying attention to revolving debt, checking credit reports and scores and addressing any errors, and being mindful about opening and closing credit cards.

Recommended: Can a Personal Loans Hurt Your Credit?

Alternatives to Personal Loans

Considering alternative ways to pay for expenses or big-ticket items that don’t involve personal loans? Here are three to keep in mind:

Credit cards

Credit cards offer a line of credit that you can use for a variety of purposes. This includes making purchases, balance transfers, and cash advances. You can borrow up to your credit limit, and you’ll owe at least the minimum payment each month.

A credit card may make sense for smaller expenses that you can pay off fairly quickly, ideally in full each month.


💡 Quick Tip: If you’ve got high-interest credit card debt, a personal loan is one way to get control of it. But you’ll want to make sure the loan’s interest rate is much lower than the credit cards’ rates — and that you can make the monthly payments.

Home equity line of credit

If you have at least 20% equity — the home’s market value minus what is owed — you may be able to secure a home equity line of credit (HELOC). HELOCs commonly come with a 10-year draw period, generally offer lower interest rates than those offered by a personal loan, and you can borrow as much as you need, up to an approved credit limit. However, you may be required to use your home as collateral, and there’s a chance your rate might rise.

HELOCs might be an option to consider if you plan on borrowing a significant amount of money or if you expect to have ongoing expenses, like with a remodeling project.

401(k) loan

If you need money — and no other form of borrowing is available — then you may want to consider withdrawing funds from your retirement plan. A 401(k) loan doesn’t come with lender requirements and doesn’t require a credit check. However, you may face taxes and penalties for taking out the money. Each employer’s plan has different rules around withdrawals and loans, so make sure you understand what your plan allows.

Borrowing from your 401(k) could be a smart idea in certain situations, like if you need a substantial amount of cash in the short term or are using the money to pay off a high-interest debt.

The Takeaway

When it comes to weddings, funerals, cross-country moves, and other big-ticket items, a personal loan is typically a better alternative to high-interest credit cards. Other common uses for personal loans include debt consolidation, medical bills, home improvement, family planning, and vacation.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What is interest?

Interest is the money you’re charged when you take out a loan from a bank or earn for leaving your money in a bank to grow. It’s expressed as a percentage of the total amount of the loan or account balance, usually as APR (Annual Percentage Rate) or APY (Annual Percentage Yield). These figures estimate how much of the loan or account balance you could expect to pay or receive over the course of one year.

How important is credit score in a loan application?

Credit score is one of the key metrics lenders look at when considering a loan applicant. Generally, the higher the credit score, the more likely lenders are to approve a loan and give the borrower a more favorable interest rate. Many lenders consider a score of 670 or above to indicate solid creditworthiness.

Can I pay off a personal loan early?

Most lenders would likely welcome an early loan payoff, so chances are you can pay off a personal loan early. However, if an early payoff results in a prepayment penalty, it may not make financial sense to pay off the loan ahead of schedule.

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Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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While you may be established in your career once you reach your 30s, it’s still not that easy to build wealth. Suddenly you’ve often got a host of other financial priorities like paying down debt, saving for your first home, and paying for childcare.

However, making sure your money is working for you now matters, especially when it comes to building wealth over the long term. Saving money is a good start, but more importantly, your 30s are a prime time to develop a consistent investing habit.

Think of this decade as a great opportunity to learn new money skills and establish better money habits.

What Does Wealth Mean to You?

One way to motivate yourself to build wealth in your 30s is by thinking about the opportunities that it can create. Retiring early or being able to enjoy bucket-list vacations with your family, for example, are the kinds of things you’ll need to build up wealth to enjoy.

Beyond that, building wealth means that you don’t have to stress about covering unexpected expenses or how you’ll pay the bills if you’re unable to work for a period of time.

Investing in your 30s, even if you have to start small, can help create financial security. The more thought you give to how you manage your money in your 30s, the better when it comes to improving your financial health.

So if you haven’t selected a target savings number for your retirement goals yet, run the numbers through a retirement calculator to get a ballpark figure. Then you can formulate a plan for reaching that goal.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

6 Tips For Building Wealth in Your 30s

Curious about how to build wealth in your 30s? These tips can help you figure out how to save money in your 30s, even if you’re starting from zero.

1. Set up a Rainy Day Fund

Life doesn’t always go as planned. It’s important to have a nice cushion of cash to land on, should any bad news come your way, such as a job loss, a medical emergency, or a car repair.

Not having the money for these unexpected expenses can threaten your financial security. To prevent such shocks, sock away at least three-to-six months’ worth of savings that can budget for your everyday living expenses, from rent on down.

2. Pump Up Your 401(k)

If your company offers a 401(k) plan, consider it an opportunity for investing in your 30s while potentially reducing your current taxes. This is especially true if your employer offers a match (though matching is typically only offered if you contribute a certain amount). The match is essentially free money, so you should take full advantage of it, if possible.

Aim to increase your contributions on a regular basis. This could be once a year or twice a year, and especially whenever you get a bonus or a raise. Some plans allow you to do this automatically at certain pre-decided intervals.

3. Consider Other Retirement Funds

If you don’t have access to a 401(k), there are other options that can help fund your future and help you with building wealth in your 30s.

And even if you contribute to a 401(k), you may benefit from these additional options. For example, if you’re already maxing out your 401(k), you might continue saving for retirement with an Individual Retirement Account (IRA)

Recommended: IRA vs. 401(k): What’s the Difference?

Depending on your income, you may qualify to contribute to a Roth IRA, which lets you contribute after-tax income (that means you can’t write it off) up to a certain amount each year. You can withdraw IRA and 401(k) funds without penalty starting at 59 ½.

In addition to tax-advantaged accounts, you might consider opening a taxable investment account to make the most of your money in your 30s. With taxable accounts, you don’t get the same tax breaks that you would with a 401(k) or IRA. But you’re not restricted by annual contribution limits or restrictions around withdrawals, so you can continue growing wealth in your 30s at your own pace as your income allows.

4. Open a Health Savings Account (HSA)

If you have access to a Health Savings Account this could be a valuable resource for building wealth in your 30s. For those who qualify, this is a personal savings account where you can sock away tax-advantaged money to pay for out-of-pocket medical costs. These could include doctor’s office visits, buying glasses, dental care, and prescriptions.

The money you save is pre-tax, and it grows tax-free. Also, you don’t have to pay taxes on any money you withdraw from your HSA, as long as it’s for a qualified medical expense.

You’ll need to be enrolled in a high deductible health plan to be eligible for an HSA. If your company offers health insurance, talk to your plan administrator or benefits coordinator to find out whether an HSA is an option.

5. Give Yourself Goals

One of the best ways to build wealth in your 30s involves setting clear financial goals. For example, you might use the S.M.A.R.T. method to create money goals that are specific, measurable, achievable, timely and realistic.

Then, start working toward those goals, whether it’s sticking to a budget or paying down your credit card or auto loan. Once you experience the satisfaction of meeting these goals, you’ll be able to think bigger or longer term for your next goal.

💡 Quick Tip: Distributing your money across a range of assets — also known as diversification — can be beneficial for long-term investors. When you put your eggs in many baskets, it may be beneficial if a single asset class goes down.

6. Check Your Risk Level

Investing is about understanding risk, knowing how much risk you’re prepared to take, and choosing the types of investments that are right for you.

If you’re working out how to build wealth in your 30s, consider two things: Risk tolerance and risk capacity. Your risk tolerance reflects the amount of risk you’re comfortable taking. Risk capacity, meanwhile, is a measure of how much risk you need to take to meet your investment goals.

As a general rule of thumb, the younger you are the more risk you can take on. That’s because you have more time until retirement to smooth out market highs and lows. Investing consistently through the ups and downs using dollar-cost averaging can help you generate steady returns over time.

If you’re not sure what level of risk you’re comfortable with, taking a free risk assessment or investing risk questionnaire can help. This can give you a starting point for determining which type of asset allocation will work best for your needs, based on your age and appetite for risk.

The Takeaway

Investing in your 30s to build wealth can seem intimidating, but once you set clear goals for yourself and start taking steps to reach them, it can get easier.

Watching your savings grow through budgeting, paying down debt, and investing for retirement can motivate you to keep working toward financial security and success.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

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

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

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