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One of the most popular benefits the U.S. military offers is the GI Bill, which helps current and former service members pay for college or vocational school.

This federal benefit can help veterans transition to civilian life and achieve their educational and career goals. But because a veteran’s eligibility for education assistance can vary based on when and how long they served, their branch of service, and other factors, understanding and maximizing these generous benefits can be a challenge.

If you’ve been wondering how — and how much — the military pays for college, here’s a look at some GI Bill basics.

What Is the GI Bill?

The GI Bill, formally known as the Servicemen’s Readjustment Act of 1944, was signed into law by President Franklin D. Roosevelt at the end of World War II. The program was originally designed to offer various financial and social benefits to World War II veterans after they returned home. Those benefits included small business loans, mortgages, and education grants.

Today, the GI Bill specifically refers to any U.S. Department of Veterans Affairs (VA) education benefit offered to active-duty service members, veterans, and their families. The Post-9/11 GI Bill is the most frequently used VA education benefit program. Depending on how long you were in the military, it provides up to 100% of your tuition, money for housing, and a stipend for books and supplies.

Besides the GI Bill, serving in the military can give you access to other education-related benefits. As a service member on active duty, for example, you may qualify for certain perks or special repayment options for any federal or private student loans you’ve already taken out.

Types of GI Bills

Since it was enacted in 1944, the GI Bill has been extended — and expanded — several times. As a result, there are multiple parts and programs that can be used to pay for college. Here’s a closer look.

Post-9/11 GI Bill

This current version of the GI Bill is designed to support the latest generation of service members and veterans. If you have served on active duty for at least 90 days since Sept. 10, 2001, you are likely eligible for Post-9/11 GI Bill benefits. This is the case if you’re still in the military, or if you have already separated with an honorable discharge.

The Post-9/11 GI Bill can help cover the cost of college or an advanced degree, technical training, on-the-job training, or licensing/certification. Eligible service members can also transfer unused education benefits to their spouse and children.

Recommended: What Are Student Loans for Military Dependents?

Montgomery GI Bill

The Montgomery GI Bill (MGIB) is an older GI Bill program that provides up to 36 months of education benefits to those who have served on active duty and meet the requirements.

The Active Duty Montgomery GI Bill (MGIB-AD) is for veterans and current members of the military who have served at least two years on active duty. It provides a monthly benefit payment to use for education and training costs.

The Selected Reserve and Guard Montgomery GI Bill (MGIB-SR) provides educational assistance to eligible members of the Selected Reserve, including National Guard members. Similar to the MGIB-AD, the MGIB-SR provides a monthly payment based on the type of education or training a recipient is getting.

Recommended: What Is a Trade School and Is It Right for You?

Other GI Bill Programs

The GI Bill also includes other education programs available to service members both during and after service, as well as their families. These include:

Veterans Readiness and Employment (VR&E)

If you have a disability connected to your military service that limits your ability to work or prevents you from working, the VR&E program can help. This GI Bill program can help you explore employment options and get the education or job training you might need to work. In some cases, your family members may also qualify for certain benefits.

Survivors’ and Dependents’ Educational Assistance (DEA)

The DEA program is for eligible spouses and children of veterans who were disabled, died, went missing in action (MIA), or were held as a prisoner of war (POW) during their service. It provides monthly payment to help cover the cost of education or job training for these family members.

Recommended: Guide to Military Student Loan Forgiveness

GI Bill Eligibility for Veterans

GI Bill veterans’ benefits are generally based on when you served, how long you served on active duty, and other factors. You also have to have been honorably discharged.

Though you may qualify for more than one type of GI Bill educational benefit, you can generally use only one benefit for a period of service; so you may have to decide which one is the best fit for your needs. (You can call the VA at 888-442-4551 if you need help making a choice.) Here are the eligibility requirements for different GI Bill programs.

Post-9/11 GI Bill Eligibility

If you served in the military after Sept. 10, 2001, you may be eligible for Post-9/11 GI Bill benefits. The amount you receive (which could range from 50% to 100% of the full benefit) will be based on how long you served on active duty and other criteria.

To be eligible for Post-9/11 GI Bill Benefits, you must meet one of these qualifications:

•   You have served at least 30 days of continuous active-duty service after Sept. 10, 2001, and have been discharged due to a service-connected disability. Or:

•   You have served an aggregate of 90 days of active-duty or federal service after Sept. 10, 2001, and received an honorable discharge.

Recommended: Finding Free Money for College

Montgomery GI Bill Eligibility

You may be eligible for the MGIB-AD if you:

•   Served between two and four years after June 30, 1985.

•   Have a high school diploma, GED, or 12 hours of college credit.

•   Had your military pay reduced by $100 a month for the first 12 months of service.

You can find a full list of eligibility criteria here.

You may be eligible for MGIB-SR benefits if you:

•   Agreed to serve for a period after June 30, 1985 (or for some types of training, after Sept. 30, 1990)

And either:

•   Agreed to serve six years in the Selected Reserve, or:

•   You’re an officer in the Selected Reserve and you agreed to serve six years in addition to your initial service obligation.

You can find a full list of eligibility requirements here.

Benefits Provided

Here’s a breakdown of the benefits offered by the Post-9/11 GI Bill.

Tuition/Fee Coverage

If you’re a veteran who qualifies for full benefits and you attend a public school as a state resident, the Post-9/11 GI Bill will pay all of your tuition and any mandatory fees directly to your school. You also may be eligible to receive the in-state tuition rate for an out-of-state school.

If you choose to attend a private or foreign institution of higher learning, or a qualifying non-college degree program, a predetermined maximum amount (currently up to $27,120.05) will be paid to your school annually. Benefits for flight training and virtual/online schools, which have their own maximums, also may be available.

Monthly Housing Allowance

The Post-9/11 GI Bill also pays a monthly college housing allowance. The program will pay you a percentage of the full monthly housing allowance based on the percentage of Post-9/11 GI Bill benefits you’re eligible for, as well as how many credits you’re taking.

If you are taking 100% of your classes online, you may be eligible for a monthly stipend equal to half of the national average stipend, which is currently $967.40.

Book and Supplies

Under the Post-9/11 GI Bill, you may be able to receive an annual stipend of up to $1,000 per year to pay for books and supplies. This stipend is paid out at the beginning of each term and is based on the percentage of benefits you’re eligible for and the number of courses you’re enrolled in for the year.

Recommended: How to Pay for College Textbooks

Applying for GI Bill Benefits

If you’re a veteran and interested in getting the military to pay for college, you’ll need to apply for GI Bill benefits. Here’s a look at what’s involved.

Required Documents

Some of the information you’ll be asked for when you apply may include:

•   Your Social Security number

•   Direct deposit bank account information

•   Education history

•   Military history

•   Basic information about the educational institution or training facility you want to attend

Application Process

You can apply for benefits online at the VA’s website. Alternatively, you can apply by mail. Simply call 888-442-4551 to request an application. Once you receive the application and fill it out, you can send it to the VA regional processing office that’s right for you (you can use this online VA locator). You can also apply by visiting your nearest VA regional office.

It takes the VA an average of 30 days to process an application. If the VA determines you are eligible for educational benefits, you’ll receive a Certificate of Eligibility (COE) that you can provide to the school you’ve chosen.

Military Tuition Assistance

The U.S. Department of Defense (DOD) also offers education benefits to current active-duty, National Guard, and Reserve Component service members who wish to pursue post-secondary education in their off-duty time. This is one of the many ways you can save money while serving in the military.

Called the Military Tuition Assistance program, it will pay up to 100% of tuition and course-specific fees, with a limit of $250 per semester credit hour and an annual limit up to $4,500. Degrees and programs of study covered include undergraduate and graduate programs, vocational/technical, distance learning, and independent studies. (Housing, books, and other expenses aren’t covered.) Details are available through each service branch’s website.

State Benefits for Veterans

Many states offer education benefits that veterans can use along with, or as an alternative to, their federal GI Bill benefits. To find out about these benefits — which may include tuition waivers, scholarships, grants, and other programs — you can visit the Department of Veterans Affairs or Department of Education website for your state. Your military branch also may have information about the various benefits available in your state.

Local and regional veterans service organizations also offer scholarship opportunities to qualified candidates. And your employer may provide help with tuition or student loan repayment as part of their veteran financial well-being programs.

The Takeaway

If you’re hoping to further your education when your military service is complete, the GI Bill can help you pay for college, graduate school, and a variety of training and certification programs. Depending on when you served, how long you served, and some other factors, you may receive help paying for a large portion of your education expenses, including tuition and fees, education-related supplies, and housing costs.

Beyond the GI Bill, you also may qualify to receive assistance through state resources, local and regional organizations, your employer, and federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

Can the GI Bill be transferred to dependents?

If you meet certain service requirements, you may be able to transfer your Post-9/11 GI Bill benefits to an eligible dependent. You can apply for a Transfer of Education Benefits (TEB) through the Department of Defense.

Do GI Bill education benefits expire for veterans?

It depends. If you were discharged from active duty on or after Jan. 1, 2013, your benefits won’t ever expire. But if you were discharged before Jan. 1, 2013, your Post-9/11 GI Bill benefits will expire 15 years after you separate from the military.

Montgomery GI Bill benefits must be used within 10 years after your separation date. After that, you could lose any benefits you haven’t used, although the Department of Veteran Affairs (VA) may grant an extension under certain circumstances.

What education benefits can I get if I’m still in the military?

If you’re still serving in the military, you may be eligible for education benefits through the GI Bill, the Department of Defense’s Military Tuition Assistance, and other programs. You can get information at the Department of Veteran Affairs (VA) website or through your military branch.

Photo credit: iStock/Drazen Zigic

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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The income needed for a $450,000 mortgage varies based on a few factors, but generally speaking, an income of $130,000 would put you in the position to afford a $450,000 mortgage. You can estimate how much you need to make by focusing on principal and interest. Together, these two factors account for a majority of a home’s monthly mortgage payment and reveal an approximate income you’ll want to bring in.

For a more accurate monthly payment estimate, you’ll need to know the home’s property taxes, home insurance costs, as well as which type of home loan you plan on using. Certain loans come with monthly fees that will increase your monthly housing costs.

If you’re thinking about borrowing $450,000 to buy a home, here’s what you need to know.

Income Needed for a $450,000 Mortgage

The income needed to qualify for a $450,000 mortgage varies on a few factors. However, the principal and interest (P&I) payment for a $450,000 mortgage would be $2,996 for a 30-year term with a 7.00% interest rate. For a 15-year term, the payment is $4,047. Keep in mind that these calculations do not include other fees that will increase how much you actually pay.

Many lenders want borrowers to stick to a 28% housing cost, meaning that they will not approve loans that take up more than 28% of the borrower’s gross monthly income. A mortgage calculator can do the math for you, but for a payment of $2,996 each month to equal 28% of your monthly income, you would need to earn about $10,800 per month, or about $130,000 per year. However, these calculations do not factor in other fees that contribute to your monthly mortgage payment.

To get a more accurate monthly payment, use a mortgage calculator with taxes and insurance included.

Recommended: First-Time Homebuyer Guide

How Much Do You Need to Make to Get a $450K Mortgage?

The income needed for a $450,000 mortgage varies based on:

•   Loan term

•   Interest rate

•   Property taxes

•   Home insurance

•   Loan-specific fees

However, the loan term and interest rate determine a majority of the costs for any monthly mortgage payment.

What Is a Good Debt-to-Income Ratio?

The maximum debt-to-income (DTI) ratio lenders often accept is 36%, with a maximum of 28% going toward housing costs. Some lenders have higher margins, and some are willing to work with borrowers who have unusually high incomes and amounts of debts.

What Determines How Much House You Can Afford?

The two biggest factors that determine how much house you can afford are your income and DTI ratio. Regardless of your debts, the mortgage payment cap is often 28% of the borrower’s gross income.

What Mortgage Lenders Look For

Mortgage lenders typically look for a low DTI ratio, a strong credit score, a history of stable employment, and a high income. All of these factors suggest you are not only responsible enough to take on a mortgage but are financially capable of repaying your debts.

$450,000 Mortgage Breakdown Examples

When determining a home’s affordability, compare loan terms. A 30-year loan may enable you to buy a more expensive home, but increases the amount you pay in interest. For example, if you borrow $450,000 with a 30-year mortgage at 7.00%, over the life of the loan you will pay about $628,208 in interest in addition to the $450,000 principal. Borrow the same amount at the same rate but pay it back over 15 years and your interest charges shrink to around $278,236.

Remember, the above calculations do not include property taxes, home insurance, and loan-specific fees.

Pros and Cons of a $450,000 Mortgage

A $450,000 mortgage loan comes with its share of pros and cons. Here are a few things to consider:

Pros:

•   You build equity with each monthly payment

•   Equity can be used to secure a low rate loan

•   Fixed housing costs

•   Freedom to make changes to the property

Cons:

•   Yearly home maintenance costs

•   Large down payment

•   Large closing costs

How Much Will You Need for a Down Payment?

The minimum down payment a buyer can make for a conventional loan is 3%, and this low rate is often only available to first-time buyers. Assuming your mortgage is for $450,000, this means the purchase price must be $463,918. A 3% down payment would be $13,918.

Can You Buy a $450K Home With No Money Down?

It’s possible to buy a $450,000 home with no money down using a loan from the U.S. Department of Agriculture or the U.S. Veterans Administration (a VA loan). All other traditional mortgages require a down payment. However, other options do exist.

Can You Buy a $450K Home With a Small Down Payment?

USDA and VA loans do not have down payment requirements. The lowest amount needed for a conventional loan for some buyers is 3% of the purchase price. FHA loans require a 3.5% down payment.

Is a $450K Mortgage with No Down Payment a Good Idea?

It certainly can be. For example, if you use a loan that doesn’t require a down payment, such as a USDA loan, you could use the money for something else. If you were to fix up the home and sell it after a few years, those renovations might bring in a good return on your investment.

Ultimately, however, it depends on the monthly payment. As long as you can comfortably afford the monthly payment, whether the mortgage requires a down payment or not doesn’t matter too much.

Can’t Afford a $450,000 Mortgage With No Down Payment?

You may want to consider lowering your maximum purchase price if you can’t afford the P&I payment.

If housing prices are high where you live, another thing you may want to consider is looking in another area. Consider looking at the cost of living by state with data that rates the most affordable states. You may find moving to a new location deserves some consideration.

You may also consider the following tips.

Pay Off Debt

Debts like student loans, credit cards, and car loans eat up your monthly income. As they are paid off, three things happen:

•   You free up cash

•   You lower your DTI ratio

•   You cultivate a better credit score

Once you do this, you may be approved for a higher loan amount or the monthly payment on a $450K mortgage will become more manageable.

Look into First-Time Homebuyer Programs

First-time homebuyer programs help homebuyers with down payments and closing costs. They often come in the form of grants, forgivable loans, or low interest loans. Many programs can be found through HUD and are first-come-first-served. Apply early if you’re interested.

Build Up Credit

The stronger your credit score, the more confidence lenders have in you. This will likely result in a lower rate, and may also result in a higher loan limit. However, your lender will still likely want you to stick to a 28% DTI for housing costs.

Start Budgeting

Create a monthly budget to intentionally track how much you spend and save. See if there are places where you can cut back to help save up for a larger down payment.

Alternatives to Conventional Mortgage Loans

There are alternatives to conventional mortgage loans, but they involve working with a seller who is open to nontraditional financing methods. Some nontraditional methods include seller financing and lease-to-own options.

Another option is a portfolio loan, which some banking institutions offer. A portfolio loan is a loan lenders don’t sell to another institution. Instead, they keep it in their own books, which enables them to allow for looser eligibility requirements.

Recommended: Home Loan Help Center

Mortgage Tips

Here are a few quick tips to qualify for a mortgage:

1.    Get preapproved as early as possible: The mortgage preapproval process helps with a lot of things, and it will tell you how much house you can afford.

2.    Use a mortgage calculator when shopping online: This will help you quickly crunch some numbers. There are many types of mortgage calculators online, including home affordability calculators.

3.    Compare loan types: There are many different types of mortgage loans, each of which comes with different requirements and different fees.

4.    Pay down your debts: The fewer debts you have, the more room in your budget you’ll have for a higher mortgage.

5.    Know that you can always refinance in the future: A mortgage refinance will take a fresh look at your credit score and income, and will also include your existing home equity when determining your new rate.

The Takeaway

You’ll need an annual income of around $130,000 if you want to be in a good position to make payments on a $450,000 home mortgage loan. Remember that your payments will likely include principal and interest, but also homeowners insurance and property taxes. Getting preapproved by a lender can help make your search less stressful.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much do you need to make to qualify for a $450K mortgage?

Just considering the P&I payment of a $450K mortgage, the minimum you would need to make is around $130K a year. This is for a 30 year mortgage with a 7.00% interest rate.

What would my mortgage be on a $450,000 house?

How much money you would have to borrow to buy a $450,000 house would depend on the size of your down payment. First-time homebuyers can sometimes put down as little as 3% ($13,500). In this case, you would need a home mortgage loan for $436,500. If you put down 20% ($90,000), you would need a mortgage loan for $360,000.

Can you buy a house with a $40,000 salary?

Yes, but it depends on the purchase price of the home. The gross monthly income is $3,333, which means the maximum amount spent on housing should be $933. This puts the purchase price around $140,000.

Photo credit: iStock/FreshSplash

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A second chance checking account can help those with negative past banking history access banking services. It can be a place to deposit and spend money, though it may not offer all the features of a standard checking account.

These second chance checking accounts can be an important step for many people on their journey to enjoying full banking privileges. Learn more about them here.

Who Is a Second Chance Banking For?

Second chance banking can help those who have negative marks on their past banking record. To understand this, it’s important to know a bit about what ChexSystems is. Think of it as the banking equivalent of a credit bureau. It catalogs information on consumers’ banking histories, including basics like name, contact information and Social Security number, as well as information on account closures, bounced checks and overdrafts, unpaid balances, suspected fraud, and more.

When a customer applies for a new checking account at a bank or credit union, the institution may look up the ChexSystem report to determine whether or not it’s willing to extend its services. Negative report items — such as unpaid overdrafts, involuntary account closures, or a high number of recent inquiries — can cause a bank to refuse regular checking services to the client.

That’s where second-account checking comes in. A second-chance bank account is one where the bank offering the account is willing to overlook a less-than-stellar banking history. This means a client can continue to use a bank account while rebuilding their ChexSystem report.

While this type of account isn’t available at all banks, it is available at many, including some major traditional and online banks, like Wells Fargo, Chime, and Varo.

In other words, an imperfect banking history doesn’t have to mean living an unbanked existence.

How Does Second Chance Banking Work?

Here’s how second chance banking operates: much like any other regular checking account. The account holder deposits money into the second chance checking account, which they can then access using a debit card or making a withdrawal at an ATM.

Specific account features will depend on which institution is offering the account. For example, some banks may offer free paper checks, and many have convenient mobile banking features.

However, some banks may charge monthly service fees or minimum opening deposits, and may not allow second chance checking account holders to use paper checks. And although checking account interest rates are notoriously low, it’s unlikely your second chance checking account will accrue any interest at all.

That’s why, as when opening any other kind of bank account, it’s important to review the fine print closely to ensure you know what you’re getting into before you apply.

Applying for one of these accounts typically works in the same way as opening a bank account of any kind.

•   The bank will ask for a variety of personal information, and you may be asked to verify your identity with a form of official identification like a driver’s license or Social Security card.

•   You can do this in person or entirely online.

•   Depending on the institution, you may be required to put down a minimum initial deposit. However, in many cases, you will find second chance checking with no opening deposit, meaning the account will be 100% free.

•   You may need to wait a few business days for your application to process, and then you should be in.

Recommended: How to Set Up a Bank Account

Once you’ve opened a second chance checking account, you can use it as normal to pay bills, restaurant tabs, and grocery store totals — whatever expenses come up in your day-to-day life. Meanwhile, the negative items that might be on your ChexSystems report will slowly vanish. Most records fall off after five years.

If you’re interested in cleaning up your ChexSystems report, know this:

•   Consumers also have the right, under the Fair and Accurate Credit Transaction Act (FACTA), to request a free ChexSystems report once a year. A request can be made by phone, mail, fax, or online form, allowing review of the report for any incorrect negative items and disputing them.

•   If you do dispute something on your record, the investigation will generally take about a month. You will receive a letter in the mail notifying you of the results.

Over time, it’s possible to clean up a ChexSystems record — which can unlock the ability to pursue other types of banking services, including high-interest deposit accounts.

Recommended: Guide to Reopening a Closed Bank Account

Pros and Cons of Second Chance Banking

While second chance banking does provide a valuable service, there are some drawbacks to these accounts as well. Here are the pros and cons of second chance checking accounts.

Pros:

•   Allows clients to use a checking account even without a perfect banking history.

•   Gives account holders time to rebuild their banking history and let negative items fall off their ChexSystems report.

•   In many cases, second chance checking accounts are free and don’t require a minimum opening deposit.

Cons:

•   Some accounts may assess monthly bank fees and have minimum opening deposits — and may not offer waivers.

•   The account may have limited capabilities (such as an inability to use paper checks or to access overdraft protection).

•   The account is unlikely to offer interest growth on account balances.

Alternatives to Second Chance Banking

Second chance checking accounts are a solid option for those who might not be able to open a traditional checking account because of their banking history. But they’re not the only alternative. Here are two options:

•   Prepaid debit cards. A prepaid debit card can be used to pay bills and other expenses without using cash. It works like a gift card: Clients load the card with a certain amount of money, which they can then use as they see fit. The cards are also reloadable, making them a fair option for working around the handicap of not having a bank account.

   What’s more, many prepaid debit cards don’t require a credit check to open. This makes them a viable choice for those with poor credit histories as well as poor ChexSystems reports.

   That said, there are pros and cons of prepaid debit cards. In terms of downsides, they often include a variety of fees — such as monthly maintenance fees, activation fees, and reloading fees — which can eat into the user’s balance and make them unsustainable for long-term use.

•   Cash. Others who find themselves unbanked might try to simply pay their way through life using cash. After all, you can often get a paycheck cashed at the nearest major grocery store or retailer.

   However, there are downsides: Check-cashing services generally come with a fee. Plus, many utility companies, landlords, and other bill collectors don’t accept cash as payment. And if your cash is lost or stolen, there’s no reliable way to get it back. It’s gone.

The Takeaway

Second chance bank accounts can help those who are unable to get a standard bank account. While it doesn’t have all the features of typical accounts, it can offer a path to being banked and graduating to a full-fledged checking account.

FAQ

What is second chance banking?

Second chance banking is a kind of account that serves people who may not have a perfect banking record. If you have negative items on your ChexSystems record, you may still qualify for this kind of account.

What is a second chance bank account?

A second chance account is one that can be opened even if you have a less than perfect history with banking. It may have some downsides (monthly fees plus no overdraft protection, for example), but it allows people to get back in the game and have checking privileges.

Who is second chance banking for?

Second chance banking is for people who have negative items in their banking history. These typically include unpaid overdrafts, involuntary account closures, and other events which show the account holder did not use their privileges responsibly.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

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.

SOBNK-Q324-005

It’s not uncommon to feel guilty about spending money, even when it’s a necessary purchase, since you may believe the funds could be better applied elsewhere. Perhaps you could buy something better, or maybe you could use the cash to pay down debt or save for the future.

Some purchases trigger more guilt than others, and some people are more prone to experiencing this unpleasant sensation than others. Read on to learn more about feeling guilty after spending money.

Is Spending Money a Bad Thing?

Spending money in and of itself is not a bad thing. In fact, it’s a necessary reality of life, and financial products like checking accounts and credit cards are designed to enable it. It would be hard to imagine navigating daily life without spending cash to, say, buy food or commute to work.

But there are a lot of opinions out there about how people should spend their cash, which can lead to conflicting emotions. Treating oneself can stir up feelings around self-worth, and spending money on a big-ticket item can trigger anxiety about future finances. (You’ll learn more about these scenarios in a moment.)

Despite money’s necessary role in life, feeling guilty about spending it is fairly common. One recent LendingTree survey found that 71% of respondents reported feeling that way. That sensation can snowball, creating free-floating money worries.

Spending cash is an inescapable reality, but the guilt associated with it doesn’t have to be.

Recommended: How to Cut Back on Spending

Reasons Why We Feel Guilty About Spending Money

Often, guilt and anxiety around spending money come from the motivation for the transaction, not the purchase itself. Learning to stop feeling guilty after spending money may require people to notice when they feel guilt or shame after a purchase and change their mindset or spending behavior accordingly.

Everyone has different emotional triggers around their spending, but there are some common scenarios when someone might feel guilty, such as these:

Buying Items to Keep Up With Friends

FOMO, or the “fear of missing out,” may be a silly acronym, but it’s a powerful motivator for spending.
People may spend more so they don’t miss valuable time with friends or feel they are fitting into their group of pals. That could mean paying too much for a vacation or buying a cool new watch they see friends wearing. These expenses can be small, subtle purchases, too, like meeting a friend at a pricier restaurant than you’d usually visit, or it could reflect a significant financial decision, like buying a new instead of used car to “keep up with the Joneses.”

FOMO spending may make someone feel guilty about spending money because it’s tied to the deep desire to fit it. It is often more about self-image and self-esteem than a particular item.

Recommended: How to Save Money on Hotels

Buying Items That Do Not Align With Our Financial Values

Similar to FOMO spending, cultural messaging about “the right way” to spend can lead to a sense of guilt or buyer’s remorse.

It may be the influence of social media encouraging someone to buy a certain brand or societal pressure (the American dream) to own property. Whatever the purchase is, guilt could crop up because it’s not something the individual truly wants — and deep down, they know that.

Saving Goals Impacted by Impulse Spending

An impulse or unexpected purchase could lead to feeling guilty after spending money.

It could be something as simple as forgetting lunch at home and having to buy something expensive near the office. Or maybe it’s buying something you totally didn’t plan to but saw it was on sale. It may be a small purchase, but it eats into your budget and savings goals because it’s unexpected.

Many of these purchases arise from a lack of planning, leading to guilt. You feel as if you messed up, and now you are literally paying for it. Buying a new set of luggage, for instance, is not a good reason to use emergency funds or money in your savings account, so you may be upset with yourself.

Having a Money Mindset Tied to Emotions and Past Experiences

Guilt about spending money may have little to do with the individual and be more connected to their family or upbringing.

People who grew up with parents or guardians in debt may experience feelings of scarcity around money. If you grew up always hearing there wasn’t enough money and getting calls from collection agencies, you may hold a sense of guilt with every purchase.

Or, if someone’s experienced debt in the past, any transaction may trigger anxiety as they remember their old patterns of overspending.

Recommended: Using the 30-Day Rule to Control Spending

Tips to Help You Stop Feeling Bad About Spending Money

Instead of agonizing over every purchase or waking up worried about bills, it may be time to stop feeling guilty when you spend money. Here are some strategies to help combat those negative feelings while improving your financial wellness.

Taking Care of Financial Responsibilities

When people prioritize financial responsibilities, they may feel less guilty spending the surplus, or leftover money, in their budget.

That means enacting a “paying yourself first” mindset, which can be one of the most important personal finance basics. When a paycheck deposits, immediately put money away towards future goals, like retirement or savings. Setting up automatic transfers makes it easy.

Taking care of financial responsibilities first can give someone the freedom to use the remaining cash relatively guilt-free.

30-Day Savings Rule

To avoid guilt over impulse spending, try implementing a 30-day rule on purchases. If you want to purchase something, whether it’s a new laptop or a new coat, wait 30 days. After 30 days, you can buy it. But in many cases, you may find you don’t even want it anymore.

Slowing down the purchase process can help separate needs from wants, as well as quit spending money impulsively.

If impulse purchasing is a major source of guilt, consider a 30-day freeze on shopping, buying only necessities for a month. This can be a good tip to stop overspending. It can help you reset your spending behaviors.

Improving Your Money Mindset

Understanding needs versus wants can be a helpful way to understand and improve money mindset.

For some, the idea of a want is “bad,” translating to guilt when a purchase isn’t absolutely necessary. But, wants can make life more comfortable and bring pleasure — two very good things. So the key is differentiating between needs and wants, and understanding where wants fit into a budget. Perhaps not every want can or should be satisfied, but recognizing they are part of life and budgeting for them is important.

You might try the 50/30/20 budget rule, which says to put 50% of your after-tax earnings towards needs, 30% to wants, and 20% toward savings.

Creating a Personalized Budget

Sometimes guilt stems from the unknown. If someone doesn’t know how much cash they have in their bank account, they may feel guilty purchasing something.

This is where a personalized budget comes into play and can help you manage your money better. Everyone’s budget will be a little different, but feeling knowledgeable about and in control of one’s money can help alleviate guilt.

For example, if someone looks forward to having brunch out every Saturday, they may create a line item in their budget for it. That way, they don’t feel guilty spending the money as it’s earmarked for that purpose. They eliminate the possibility of anxiety spiraling over that cost.

Only Spending Money That You Have

It sounds like common sense, but only spending money that’s available can help prevent guilt around money. It’s an unhappy fact that many Americans carry credit-card debt: The typical balance is currently approximately $6,900, and the average credit card interest rate is almost 25%.

There are of course times when paying with a credit card and carrying a balance are necessary, such as when your hot-water heater breaks or you get hit with a major dental bill. But in general, it’s wise to pay with a debit card or cash so you don’t wind up getting stuck with high-interest debt. By only spending the money you have, you can avoid guilt, worry, and a lower credit score to boot.

Guilt isn’t constructive and won’t change your financial situation. However, working on financial discipline can improve the overall outlook on spending and make sure your purchases are ones you can truly afford.

The Takeaway

People feel guilt about spending money for many different reasons, even when they can afford their purchases. Getting rid of that guilt is possible through understanding why spending makes someone feel guilty and learning financial responsibility to prevent guilt altogether.

One place guilt shouldn’t crop up? In a bank account. Avoid it by knowing that you have an account that pays you a terrific interest rate while charging you no fees.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

How do I get over my guilt of overspending?

First, figure out what kind of spending makes you feel guilty and why. Perhaps it’s based on childhood or past experiences. Then, consider creating a budget and planning purchases to avoid buyer’s remorse or impulse spending.

What is the psychology behind overspending?

People may overspend because they’re afraid of missing out on experiences, they want a self-esteem boost, or they want to fit in with their peers.

How do you forgive yourself for not saving money?

Understanding the emotional triggers behind overspending and not saving can help build a sense of self-compassion. Many people overspend or fail to prioritize saving. Dwelling on it won’t change the past. For these reasons, forgiving yourself and moving on is best.

Photo credit: iStock/Deagreez

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

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.

SOBNK-Q324-002

Banking can be a complex thing, but understanding what’s known as the simple deposit multiplier doesn’t have to be. The simple deposit multiplier is the multiple by which a bank can lend out funds based on the reserve requirements. It ensures the bank maintains the minimum amount of money on hand to keep bank operations up and running. It also gives the bank the opportunity to boost the economy.

What Is a Deposit Multiplier?

Also called the deposit expansion multiplier or simple deposit multiplier, a deposit multiplier is the maximum amount of money banks can create based on reserved units. To put it another way, it’s the multiple that banks use to know how much they can lend out vs. money kept on hand (say, in checking accounts) according to the existing reserve requirement. The deposit multiplier is typically a percentage of the amount deposited at a bank.

Why does the deposit multiplier concept matter? It plays a key role in the fractional reserve banking system, or FRB. This system involves the stipulation that banks must keep a certain amount of money on hand in reserves to conduct their day-to-day business. More specifically, the U.S. central bank, the Federal Reserve, mandates that banks hold a certain amount of money, known as required reserves, to make sure there is enough month for withdrawals from depositors. Any excess money that remains after the bank fulfills its daily operations can be loaned to borrowers (say, for mortgages). The amount that can be used for loans is determined by the deposit multiplier.

By accepting deposits and then making loans, banks have the ability to increase and decrease the money supply. When a financial institution lends out money in excess of its required reserves to businesses and consumers, it can amplify the money supply. That’s why the deposit multiplier metric matters; it’s a key way that the Federal Reserve and central banks can control the money supply as part of an overall monetary policy.

Recommended: How Long Does It Take For a Direct Deposit to Go Through?

How Does a Deposit Multiplier Work?

Here’s how a deposit multiplier works: When the account holder puts money in any of the different kinds of deposit accounts offered, the bank holds a percentage of it. This percentage is called the reserve requirement, which is set by the Federal Reserve. It helps ensure that the bank keeps an adequate amount of cash reserves available to meet the needs of withdrawal requests.

Keeping money accessible on demand can be critical. This protects against people trying to withdraw cash in keeping with fund availability rules and finding that their money is unavailable, which could be a deeply problematic and distressing experience.

A deposit multiplier is the multiple that allows banks to lend out money that’s deposited in the bank. This is the maximum amount of money the bank can lend out according to the value of its reserves. It is typically expressed as a percentage. You’ll learn more about that in a moment.

Real Life Examples of a Deposit Multiplier

To understand a deposit multiplier, it’s wise to understand a few basic banking concepts.

•   For banks, deposits are liabilities, because it is money owned by the account holder, and loans are assets for banks, because that money belongs to the financial institution and must be repaid.

•   Banks also have reserves, which are deposits in the bank or in the Federal Reserve. Reserves are cash available to the bank.

◦   There is also an amount the bank must keep on hand, known as required reserves.

◦   Excess reserves is the term used to describe when the bank has more reserves than is required; these funds can in turn be lent out.

Now, if someone makes a $1,000 deposit, the bank’s liabilities and reserves would increase by $1,000. If the required reserve ratio is 10%, that means must keep $100 on hold and available, but the other 90%, or $900, may be lent. This allows the bank to expand the economy and profit.

To see how the simple deposit multiplier works, consider an example in which a deposit of $10,000 was made and the required reserve ratio is 5%, meaning $500 has to stay on hand.

The deposit multiplier formula is: 1 / reserve ratio.

So with a required reserve ratio of 20%, the deposit multiplier is five. That means that for every dollar in the bank’s reserves, the financial institution can boost the money supply by up to $5. If the reserve ratio was 5%, the deposit multiplier would be 20, and the bank could build the money supply by $20 for each dollar held in reserve. As you see, the lower the reserve ratio is, the higher the deposit multiplier is and the more it can lend out.

Recommended: Benefits of Using Mobile Deposit

How Do You Find the Simple Deposit Multiplier?

The simple deposit multiplier is a ratio between bank reserves and bank deposits. It’s important for maintaining the money supply of the economy and the banking system.

As noted above, this figure is calculated by dividing 1 by the required reserve ratio. For example, if the required reserve ratio is 10%, this means the deposit multiplier is 10. For banks, this means that for every $10 deposited, a total of $1 must be kept in reserves, and the bank can increase the money supply by $10 for each dollar it’s holding.

Deposit Multiplier and the Economy

The Federal Reserve, which is the U.S. central bank, uses the deposit multiplier as one of its monetary tools to control the supply of money in the economy. Usually the money that is deposited in a bank is unlikely to stay in the bank. The money that a consumer deposits in a bank is lent out to another consumer in the form of a loan. The deposit multiplier measures this change in checkable deposits as bank reserves change.

Banks are creating money by expanding the amount of reserves into a larger amount of deposits. If the bank decides to keep a small amount of deposits as reserves that means more money is sent to other banks and more deposits are created at these other banks. If a bank decides to keep a larger sum of deposits as reserves, that means less money or new deposits are made in other banks or circulated among consumers.

When money is loaned out to a consumer, at some point that loan will be repaid and deposited back into the banking system. If there is a required reserve ratio of 10%, then 10% of that new deposit will remain in the bank and the rest can be loaned out into the economy. This cycle fuels economic growth, not to mention profit for the bank.

Recommended: How to Deposit Cash in an ATM

Deposit Multiplier vs Money Multiplier

While these two terms sound quite similar and are closely connected, they are not quite interchangeable. Consider the differences between a deposit multiplier vs. money multiplier.

•   The deposit multiplier is the maximum amount of money banks can create by lending funds. Some deposited money must remain on hand according to the required reserve ratio, but the rest can be used to grow the economy as indicated by this figure. The deposit multiplier is calculated as one divided by the reserve ratio.

•   The money multiplier is the increase in the bank’s money supply. It measures the change in money supply created through bank lending and is usually lower than the deposit multiplier since banks don’t lend all of their reserves.

Recommended: Guide to Maxing Out Your 401(k)

The Takeaway

The deposit multiplier is a tool used by financial institutions. It expresses the maximum amount of money a bank can create based on its cash held in reserves. The figure is calculated as one divided by the required reserve ratio; the lower the reserve ratio is, the higher the deposit multiplier is and the more a bank can lend out. The deposit multiplier can help to optimize an economy’s money supply, which is why this metric is used by central banks all over the world.

If you are a personal banking client, you probably aren’t too focused on the deposit multiplier. You likely want convenience, high interest rates, and low fees. If so, check out what SoFi offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

How do you use a deposit multiplier?

The deposit multiplier is used to determine the amount of money that can be created with the funds in a bank’s money supply.

How are deposit levels calculated?

In banking, the loan-to-deposit ratio (LDR) is calculated by dividing the bank’s total amount of loans but the sum of deposits over a specific time period. Loans are considered assets, by the way, since the money is the bank’s, while deposits are deemed liabilities, since they belong to the account holder.

What is the formula for a simple deposit multiplier?

To find the deposit multiplier, you divide one by the required reserve ratio. So if the reserve ratio is 5%, the deposit multiplier is 20. If the reserve ratio is 10%, the deposit multiplier is 10.

Photo credit: iStock/MicroStockHub

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. 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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

SOBNK-Q324-004