How to Open a Bank Account For a Minor

Guide to Opening a Bank Account for a Minor

Is it time for a young person in your life to start understanding how banking works? Do they get an allowance? Are they raking in some cash for odd jobs? Or perhaps they are just plain curious about how money works, or you’re eager to get them in the habit of saving?

Whatever the trigger, there are plenty of benefits a kid can reap from learning how to bank before they leave the nest. Gaining financial literacy and responsibility is a very good thing. Fortunately, an array of banks and credit unions offer minor accounts designed for exactly this purpose.

Because most state laws and corporate policies don’t enter into contracts with minors — and opening a bank account is a kind of contract — most banks require a child to have an adult as a joint account owner.

That’s where you come in. It’s tempting to simply open an account for your young one at the place you do your banking. But it can also be worth comparing accounts to see which institution offers the best fees, rates, and other features specifically for minor accounts.

To help with your search, here are answers to several frequently asked questions regarding opening a bank account for a minor.

What Do I Need to Open a Bank Account for My Child?

As you shop around for an account, you’ll see that each financial institution has its own rules regarding documentation needed to open a bank account for a minor. In most cases, whether you are opening an account online or in person, you will need the following, in addition to a sum of money (often between zero and $25) to open the account:

Driver’s License

Government-issued photo identification is a gold standard for proving you are who you say you are. If you don’t have a driver’s license, a passport will likely be acceptable.

Social Security Card

You may or may not need the actual card in front of you; just knowing your Social Security number should do the trick.

Child’s Social Security Card

Many people apply for their child’s Social Security number at birth; it’s an important thing to have for obtaining medical coverage or government services. Have those nine digits at the ready.

Child’s Birth Certificate

The bank will want to document that your child is who you say they are. That birth certificate is an important way to do just that.

Proof of Address

A typical way to authenticate your address is with a recent utility bill. If you don’t have a hard copy of your bill lying around, you should be able to easily download a bill from your provider’s online portal.

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Types of Bank Accounts for Children

As with standard banking, checking and savings are the most common types of accounts for minors. There are, however, some special aspects of both types of accounts when the child is under age 18. These accounts can help teach good money management and support your family savings efforts. Let’s take a closer look at how they work.

Checking Accounts for Children

Minor checking accounts are common offerings at banks. Most accounts are designed for kids ages 13 to 17; in other words, kids who are a little older and ready to learn the budgeting skills needed to balance a checking account. Some teen checking accounts offer interest, and the best of the bunch offer very low or no fees. This is important since teens are unlikely to carry large balances in their checking or savings accounts. You don’t want fees eroding or even erasing their money.

Savings Accounts for Children

Lots of banks offer special savings accounts for kids. Age restrictions vary, but these may be designed for younger children (the 12-and-under set). There are even savings accounts designed for babies. Check at a couple of banks you are considering for this kind of account and compare offerings.

Many of these accounts have competitive interest rates Some, however, require a minimum deposit to earn those rates. In addition to looking into those details, also see what kind of parental controls are available. These typically allow you to monitor the account and control access. This can be a good thing to have in place in case your child decides to go splurge on videogames or the like.

Recommended: How Does a Savings Account Work?

What to Look for in Bank Accounts for Kids

As you look for the best checking and savings accounts for kids, here are a few things to keep in mind.

Interest. As mentioned before, you may want to compare interest rates on a number of children’s savings accounts. Some are quite competitive but may come with other requirements.

Fees. You want a minor banking account that doesn’t charge the same types of fees you find on an adult account. Many banks waive an application fee and the monthly maintenance fee. But debit card and ATM fees may still apply. Because an adult is the joint account owner, sometimes overdraft and other fees are eased. Be sure to check specific fees on the minor account carefully.

Balance Requirements. Sure, you’ll start the account with an initial deposit, but after that, how much do you need to keep at the bank? Kids’ accounts may require a minimum balance to avoid monthly fees or earn the best interest rates.

Aging Out of the Account. Many banks convert kids’ accounts to standard accounts once the child turns 18. This often takes both adults and the account holder by surprise. The conversion can mean adult account fees, minimum balance requirements, overdraft fees, and changes in withdrawal and deposit protocols. With savings accounts, it may mean a change in interest rates and balance requirements.

On the other hand, some banks allow children to keep their minor account well into their twenties. And there may be special considerations for kids who turn 18 and are students. Be sure to understand what your child’s account allows.

Apps and Financial Literacy Features. Many minor accounts offer apps that help you monitor the account and your child’s activities. Some even go so far as to allow you to assign chores and make the decided-upon payments. In addition, you may be able to get a preloaded debit card for your child, which can help teach budgeting in a very hands-on way. When all the money’s gone, your child will likely understand the value of careful tracking expenses.

Notifications. Many banks allow you to sign up for automatic notifications whenever a transaction has taken place on the minor’s account. This not only lets you know that your child may be overspending but you may also be alerted to any suspicious account activity.

Tax Implications

Sometimes, a minor’s account has a small amount of money that slowly accrues as your child deposits birthday money and some summer-job earnings. Other times, a budding entrepreneur or devoted saver might have a higher balance. In either case, interest income on your child’s account may be subject to taxes, specifically what’s known as the “kiddie tax,” which applies to children under 19 and full-time college students under the age of 24. Any unearned income over $2,100 is taxed at the rates that apply to trusts and estates. This is to avoid parents putting large amounts of money in their children’s name and likely lower tax rate.

In addition, funds in your child’s bank accounts can affect their financial aid awards. Because money in a child’s name is weighted more heavily in financial aid formulas than it is for parents’ accounts, you may find high bank account balances work against your student when it comes time to apply for financial aid.

Now that you understand the ins and outs of opening an account for a minor, you can take the next step and figure out the best place for your child to start banking. Congrats on taking this step to foster a healthy financial life for your child.

Open a Bank Account With SoFi

Currently SoFi Bank does not offer accounts to minors. But while you’re researching minor bank accounts, why not take a fresh look at your own banking needs?

If you want an account where you can earn interest, spend, and save all in one place, check out SoFi Checking and Savings. Sign up for direct deposit, and you’ll earn a competitive APY. Plus, you won’t pay account fees and you’ll have access to 55,000+ fee-free ATMs worldwide.

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.


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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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What is a Secondary Offering?

An Introduction to Secondary Offerings

You may be familiar with the phrase “initial public offering,” or IPO, when a new company makes its shares available on a public exchange. The term secondary offering can refer to a couple of things: One is when investors sell their IPO shares on the secondary market to other investors. Another is when companies seek to raise more cash in a follow-on offering some time after the IPO.

When companies seek to raise additional capital after an IPO through a secondary offering, there are two types: dilutive and non-dilutive.

Secondary offerings can have a significant impact on stock prices, so it’s beneficial for investors to understand how they work. Let’s dive into the details.

What Are Offerings In Stock?

When a company begins selling shares of stocks, bonds, or other securities to the public, it’s called an offering.

Usually people talk about buying stocks during initial public offerings, or IPOs, but there are other types of offerings companies can make to raise cash.

A company may have later offerings, post-IPO, which are called seasoned offerings or follow-on public offerings (FPO) in which the company sells new shares on the market or by issuing a convertible note offering. These are low-interest notes that can be converted into shares, often within five to 10 years.

Any of these can also be called a secondary offering or secondary stock offering.

Companies may make these offerings if they need cash, are looking to expand their business, want to acquire another company — or their stock is performing well and they want to stoke investor demand with a limited additional supply of new shares.

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Primary vs Secondary Offerings

The difference between primary and secondary offerings is pretty straightforward, but there are different types of secondary offerings.

A primary offering is to raise capital. Companies issue new shares to investors in exchange for cash that’s used to fund business operations, make acquisitions, and other corporate aims.

In a secondary stock offering, investors who own those IPO shares can buy and sell their shares directly from and to each other. Or a company may decide to issue new shares. Here’s what that can look like.

Recommended: Shares vs. Stocks: What’s the Difference?

What Is a Secondary Offering, What Are the Different Types?

There are a couple of different types of secondary offerings, so it’s important to distinguish between them.

The main definition of a secondary offering refers to investors who buy and sell IPO shares amongst each other. In this case, the cash is exchanged between investors, as noted above.

Sometimes a company needs to raise more capital and may hold what’s known as a follow-on, or seasoned equity offering. This is referred to as a type of secondary offering as well.

Sometimes, in this type of secondary offering, shareholders such as the CEO and founders sell a portion of their shares on the secondary market for private or personal reasons. If the shares are sold by individuals, the money goes to those sellers.

If the shares come from the company, the money raised from the sale goes to the company. There are two types of shares that can be offered here: dilutive and non-dilutive.

Types of Secondary Offerings

It’s important for investors to understand the difference between dilutive and non-dilutive shares as they can have different impacts on the value of the stock.

Dilutive Secondary Offerings

A dilutive offering involves the creation of additional shares by the company, which in turn reduces the amount of ownership that preexisting shareholders have. As the name implies, the offering has a dilutive effect. Investors often have a negative sentiment toward dilutive offerings.

The company’s board of directors must approve of the increase in floating stock shares. The float of a stock is the number of shares available for trade.

Non-Dilutive Secondary Offerings

With non-dilutive offerings, no additional shares are created. A non-dilutive offering is often made by major shareholders selling their existing shares. This doesn’t have any effect on the company itself, except perhaps the investor’s perception about why the shareholders are selling.

This type of offering can also be beneficial because it allows more individuals and institutions to invest, which can increase the stock’s liquidity since there are more people buying and selling.

Examples of Secondary Offerings

Google made a secondary offering in 2005 after its IPO in 2004. During the IPO, the company had a share price of $85 and raised $2 billion. During the secondary offering, the share price was $295 and the company raised $4 billion.

Then there’s Rocket Fuel, a company that made a secondary offering of 5 million shares in 2013. Existing shareholders sold 3 million shares and the company sold 2 million, all at a price of $34 per share. Just one month after the secondary offering, the value of the shares had gone up nearly 30%, to $44.

Why Make a Secondary Offering?

Similar to an IPO, a secondary offering helps companies raise money so they can expand their operations. This can be a quick way for companies to raise significant funds fairly efficiently.

Companies may also hold a second offering between their IPO and the end of their stock’s lock-up period, which is a time when large shareholders are not allowed to sell shares. After the lock-up period, a stock’s price often falls when these shareholders sell off some of their shares. By holding a secondary offering before the end of the lock-up period, additional investors can benefit from the success of an IPO.

It’s important for investors to look into why a company is making a secondary offering before deciding whether to invest, as this can affect the price of the stock in both the short and long term.

How to Trade Secondary Offerings

Most companies that file secondary offerings choose to do so soon after the end of the lock-up period after their IPO.

When a company wants to make a secondary offering, they file it for approval with the SEC.

Investors can find out about the latest secondary offerings in a few ways. The SEC has a database of secondary offerings called the EDGAR database, where investors can find out about them. Investors can also look to the NASDAQ list of secondary offerings made by companies listed on the NASDAQ stock exchange. Companies filing secondary offerings tend to get covered in the media and also put out press releases with details about the offering.

How Do Stock Prices React to a Secondary Offering?

The basic concept of supply and demand dictates that if there is more of something available, its price will decrease. This is sometimes what occurs during a secondary offering, but not always.

If more shares are created, the price of the shares may fall — especially with dilutive offerings because they can decrease the earnings per share of the stock.

The price of stocks can also decrease during a secondary offering because the company issues the offered shares at a discounted price to incentivize investors to buy. The decrease in value can last a while because any investors who buy-in at the discounted price can sell at a slight increase and make a profit.

If a company creates new shares and sells them at market value with a discount to account for the amount of dilution, this generally results in the least amount of price volatility.

Although a secondary offering often results in a decline in stock price, that isn’t always the case. Non-dilutive offerings are viewed more positively, as they don’t affect the stock’s earnings per share or shareholders’ amount of ownership. Also, it can be seen as a good sign for the long-term value of the stock if a company is investing in growth and acquisitions.

Many secondary offerings don’t have any restrictions, but some may require a lock-up period similar to an IPO, during which investors aren’t allowed to sell their shares.

For Investors, Green or Experienced

Now the difference between a primary offering and the different types of secondary offerings makes more sense. A primary offering is when a new company goes public and makes its shares available on a public exchange — this is part of how companies raise capital.

A secondary offering is when IPO investors subsequently sell their shares on the secondary market to other investors. In this case the company doesn’t issue new shares, and they don’t raise more cash from this type of secondary stock offering. However, companies can seek to raise more cash in a follow-on offering some time after the IPO — which is also called a secondary offering. There are two types, dilutive and non-dilutive secondary offerings, which can impact the stock price overall.

If you’re ready to start investing in stocks — or even buying IPO shares — you can set up an Active Invest account with SoFi Invest® and start trading almost immediately. The SoFi Invest® online brokerage account allows you to set alerts for stocks you’re interested in and buy and sell with just a few clicks — without paying a commission. As a SoFi member, you can track personalized financial goals, look at all of your accounts in one place, and even get complimentary financial advice from professionals.

Need help getting an account set up? SoFi has a team of professional advisors available to help at any time.

FAQ

Is a secondary offering good for stock?

A secondary stock offering can be good for the stock price, particularly if the shares offered are non-dilutive. Dilutive shares, which reduce the value of existing shares, may not be good for the stock price in the short-term — although prices may recover.

What is the difference between a primary and secondary offering?

A primary offering is to raise capital, typically during an IPO. In a secondary offering, investors with IPO shares can trade their shares directly with each other. Or a company may decide to issue new shares in a follow-on offering to raise more cash.

Can you sell a secondary offering stock?

Yes, you can sell stock from a secondary offering, whether you’ve bought it from an IPO investor selling their shares, or from the company during a follow-on offering.


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SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.


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A Beginner’s Guide to Investing in Your 20s

Deciding how to invest money in your 20s can seem overwhelming at first; many people have differing opinions, and it’s hard to know where to start. But remember that you don’t need to have a lot of money upfront to be a successful and savvy investor. The most important thing is to start investing early, even if your initial investments are small.

Thanks to advancements in investment technology and options available to investors of all income brackets, investing has never been more accessible. Here are a few different strategies for investing money in your 20s.

Think About Financial Goals

When determining your financial goals, you may want to break down short-, medium-, and long-term milestones. You want to ask yourself what you want from your money and figure out when you’ll need to use the money. For example, the money you save for a medium-term goal, like a down payment on your first home, should be treated differently than the retirement savings you won’t touch for 40 or more years.

If you have not earmarked savings for a specific financial goal, take some time to think about what purpose you’d like to apply it to. A great first saving goal is to have three to six months of living expenses in an emergency fund. After that, it might be good to turn your attention toward savings and investing for longer-term goals, like retirement.

Decide Where to House Your Money

where to put your money in your 20s

When deciding how to invest money in your 20s, it can help to think about immediate, mid-term, and long-term financial needs. Once you have outlined some money goals, you could consider setting up your accounts. The type of account you open often depends on when you need the money.

Where to Put Immediate Money

Food, bills, rent, and everything else you must pay for on a month-to-month basis are immediate needs. Often people keep this money — along with a cushion so as not to overdraft their account — in an online bank account. These types of accounts allow you to withdraw money instantaneously, generally without penalties, making them ideal for your immediate financial needs.

Where to Put Mid-term Money

Mid-term money is any money you might need in the next couple of years, such as a travel fund, wedding fund, or home down payment savings. It might make sense to keep this money in a high-yield savings account, which provides a better return on your money than traditional savings accounts.

High-yield savings accounts, along with other cash equivalents like certificates of deposits (CDs) and money market accounts, are considered to be lower-risk investments (though CDs are not helpful for emergency funds because of the early termination penalties).

Where to Put Mid- to Long-term Money

For money you’ll use in five to 20 years, you may be prepared to take slightly more risk than a high-yield savings account. You might choose to keep the money in your high-yield savings account or in CDs, or a online brokerage account where you can invest that money in stocks, bonds, mutual funds, or other asset classes. You can also do a combination of the different types of accounts.

Longer-term savings options, like a tax-advantage 529 plan, can also be appropriate if you’d like to start planning for higher education needs for current or future children.

Where to Put Long-Term Money

Think of long-term money as cash you won’t need for several decades. A retirement account is a great example of an appropriate place to hold long-term money. Retirement plans like a Traditional IRA, Roth IRA, or a 401(k) account can offer significant tax benefits.

💡 Ready to invest in your retirement? Consider opening a Traditional or Roth IRA with SoFi.

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Potential Assets to Invest in During Your 20s

potential assets to invest in during your 20s

One important thing to understand about investing in your 20s is the tradeoff between risk and reward when implementing your investing strategy. You cannot have one without the other. With this risk and reward calculation in mind, you need to determine what asset classes you might consider when investing in your 20s.

Stocks

A stock is a tiny piece of ownership in a publicly-traded company. When you invest in a stock, you could earn money through capital appreciation, dividends, or a combination of the two.

Stocks can be volatile because prices fluctuate according to supply and demand forces as they trade on an open exchange. Even though stocks can be volatile and experience losses, they tend to provide positive returns over time. The S&P 500 index has had an average annual growth rate of 10.5% from 1957 through 2021.

Bonds

Although not risk-free, experts generally consider bonds less risky than stocks because they are a contract that comes with a stated rate of return. Bonds backed by the U.S. government, called treasury bonds, are the safest within the category of bonds because it is unlikely that the U.S. government will go bankrupt.

Bonds are debt investments, meaning investors fund the debt of some entity. The money you earn on that investment is the interest they pay you for borrowing your money. In addition to treasuries and corporate bonds, there are municipal bonds, which state and local governments issue, and mortgage- and asset-backed bonds, which are bundles of mortgages or other financial assets that pass through the interest paid on mortgages or assets.

Mutual Funds and Exchange-Traded Funds

Some investors might want to utilize mutual funds or exchange-traded funds (ETFs) to gain exposure to certain asset classes.

A fund is essentially a basket of investments — stocks, bonds, another investment type, or a combination thereof. Funds are helpful because they provide immediate diversification: safety against the risk of having too much money invested in one stock, sector, or any other single asset.

Funds are either actively or passively managed. A fund that is passively managed is attempting to track a specific index. An actively managed fund is maintained with a hands-on approach to determine investments in a portfolio. ETFs tend to be passively managed, but there are many actively managed ETFs funds on the market. Mutual funds can be either passively or actively managed.

Tips on Investing In Your 20s

Once you’ve become familiar with the basics of investing, it’s time to put that knowledge into action. These tips can help you shape a strategy for how to invest money in your 20s and beyond.

Gauge Your Personal Risk Tolerance

gauging your risk tolerance

One of the key things to remember about investing in your 20s is that time is on your side. You have a significant time horizon window to allow your portfolio to recover from bouts of inevitable stock market volatility. Because of this, you could take more risks with your investments to achieve higher rewards, including the benefits of compounding returns.

Getting to know your personal risk preferences can help you decide where and how to invest in your 20s to achieve your investment goals. It’s also important to understand how risk tolerance matches your risk capacity and appetite.

Risk tolerance means the level of risk you’re comfortable taking. Risk capacity is the level of risk you prefer to take to reach your investment goals, while risk appetite is the level of risk you need to hit those milestones. When you’re younger, playing it too safe with your portfolio might mean missing out on significant investment returns.

Know the Difference Between Asset Allocation and Asset Location

asset allocation when investing in your 20s

People often invest in a combination of stocks and bonds, which is easy to do using mutual funds and ETFs. One strategy for investing in your 20s is to invest a higher allocation of your long-term investments in stocks and less in bonds, slowly moving into more bond funds the closer you get to retirement. This big picture decision is called asset allocation.

But asset allocation is only part of the picture. One might also consider asset location: the types of accounts where you’re putting your money, like savings accounts, an online brokerage account, a 401k, or an IRA.

Asset location matters when it comes to investing money in your 20s because it can maximize tax advantages if you’re utilizing a 401k or IRA. But these retirement accounts also have restrictions and penalties for withdrawing money. So if you want to be able to access your investments quickly, an online brokerage may be a complimentary investing account.

Take Advantage of Free Money

One of the simplest ways to start investing in your 20s is to enroll in your workplace retirement plan like a 401k.

Once you’ve enrolled in a plan, consider contributing at least enough to get the full company match if your employer offers one. If you don’t, you could be leaving money on the table.

And if you can’t make the full contribution to get the match right away, you can still work your way up to it by gradually increasing your salary deferral percentage. For example, you could raise your contribution rate by 1% each year until you reach the maximum deferral amount.

Don’t Be Afraid of Investment Alternatives

alternative investments in your 20s

Stocks, bonds, and mutual funds can all be good places to start investing in your 20s. But don’t count out other alternative investments outside these markets.

Real estate is one example of an alternative investment that can be attractive to some investors. Investing in real estate in your 20s doesn’t necessarily mean you have to own a rental property, though that’s one option. You could also invest in fix-and-flip properties, real estate investment trusts (REITs), or crowdfunded real estate investments.

Adding alternative investments such as real estate, cryptocurrency, and commodities to your portfolio may improve diversification and could create some insulation against risk.

Learn more: What Are Alternative Investments?

The Takeaway

Learning how to invest money in your 20s doesn’t happen overnight. And you may still be fuzzy on how certain parts of the market work as you enter your 30s or 40s. But by continually educating yourself about different investments and investing strategies, you can gain the knowledge needed to guide your portfolio toward your financial goals.

One thing to know about investing in your 20s is that consistency can pay off in the long run. Even if you’re only able to invest a little money at a time through 401k contributions or by purchasing partial or fractional shares of stock, those amounts can add up as the years and decades pass.

If you’re ready to start saving and investing for your financial goals, the SoFi investment app can help. With SoFi Invest®, you can begin building a portfolio of stocks, and ETFs for as little as $5 to meet all the critical financial goals and milestones in your life.

Find out how SoFi Invest® can help you take a big step towards reaching your financial goals.


SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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5 Popular Investing Trends of 2023

Heading into 2023, many investors had a brighter outlook on the U.S. economy and financial markets. Both staged impressive rebounds in 2021 after Covid-19 quarantine measures triggered wild volatility. Vaccine breakthroughs and stimulus checks further stoked optimism that the finances of many businesses and individuals were on the mend.

However, rising inflation, higher interest rates, and geopolitical conflict have been several headwinds getting in the way of continued economic and financial market growth in 2022. Year-to-date, the benchmark S&P 500 Index is down about 7% through April 20, 2022, after rising nearly 27% in 2021.

Nonetheless, there are opportunities in some areas of the financial markets for investors looking beyond Covid-19. Here’s a look at five popular investment trends for 2023.

1. Looking Beyond Covid-19

Some of the success stories in the stock market in 2020 and 2021 were companies that benefited from coronavirus-related stay-at-home measures, like entertainment streaming businesses, video conferencing services, and at-home workout companies. But many companies in these sectors are losing their luster as the country reopens; investors are looking for other opportunities as the world returns to normal.

Investors have wagered that airline, cruise line, travel website operators, and other transportation stocks will benefit now that most Covid-19 restrictions are in the rearview mirror. While these sectors, like the rest of the economy, may be hindered by rising interest rates and inflation, many investors still see them poised to grow because of pent-up demand.

2. ESG Investing Movement

Financial advisors often tell clients to take their emotions out of investing. However, a new breed of ethically-minded investors has become increasingly interested in putting their money where their values are in recent years.

This strategy is known as environmental, social, and governance (ESG) investing. A Bloomberg study estimated that ESG investments may hit $41 trillion globally by the end of this year and $50 trillion by 2025, a third of global assets under management.

In early 2022, the Russian invasion of Ukraine set off global protests and pronouncements against the unprovoked conflict. Many American companies followed by pulling their business operations out of Russia and issuing statements on their commitment to Ukrainian democracy. This development is just one example of companies looking beyond the bottom line in their business decisions. Moreover, shareholder advocacy groups are applying pressure on some companies to back their pledges with transparency on diversity, equity, and inclusion issues.

3. Web 3.0

Bitcoin and other cryptocurrencies were among the most discussed investments in 2021, with wild swings in prices across the entire sectors. The prices of crypto assets cooled off in the early portion of 2022, but they are still in the front of the minds of a lot of investors for a number of reasons, including potential risks, possible regulation, notable hacks, failures, and more.

Because of the attention paid to crypto over the past several years, some investors are interested in related investments: companies involved in what is known as Web 3.0, or the next phase of the internet. Web 3.0 companies include those involved with blockchain technology, decentralized finance (DeFi), the metaverse, and artificial intelligence.

Recommended: Learn the basics of cryptocurrency with this Crypto Guide for Beginners.

4. Commodities Markets

After years of muted returns, commodity prices rebounded in 2021. Investors wagered that recovering economies would lead to more construction, energy usage, and food consumption. Tight supplies also boosted these markets.

Moving into 2022, the attention paid to the commodities market has only intensified, especially with the geopolitical turmoil in Ukraine and Russia affecting critical commodities like oil, natural gas, and wheat. Prices of these key commodities have spiked as the Russian-Ukrainian conflict constrains supplies.

Rising prices of agriculture, lumber, and industrial and precious metals have sparked a debate about whether commodities are going through a new supercycle. A supercycle is a sustained period, usually about a decade, where commodities trade above long-term price trends.

Recommended: Commodities Trading Guide for Beginners

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, auto investing, IRAs, and more. Get started in just a few minutes.


*Customer must fund their Active Invest account with at least $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

5. Hot Housing Market

The housing market will continue to be an area of focus for investors, policymakers, and potential homebuyers in 2022. During 2020 and 2021, rock-bottom mortgage rates, a shortage of housing supply, and homebuyers looking to purchase larger houses to accommodate working from home led to houses selling quickly and at high prices. Additionally, investors and real estate investment trusts (REITs) bought an increasing share of homes on the market.

During the first quarter of 2022, mortgage rates are rising at a record pace, with the average 30-year mortgage nearing 5% for the first time since 2018. Analysts are looking to see if rising mortgage rates will cool the hot housing market or if buyers will continue to purchase homes.

Recommended: Pros & Cons of Investing in REITs

The Takeaway

Putting hard-earned dollars into any investment — whether it’s trendy or traditional — can be daunting. Investors should be aware that, while momentum can feed investment fads for long periods, some market trends can become vulnerable because of frothy valuations and turn on a dime.

However, if investors still want to try their hand at choosing popular investment trends themselves, SoFi’s Active Investing platform makes it easy by making it easy to track their picks of stocks, ETFs and fractional shares. Investors can also make trades online without incurring management fees from SoFi Invest®.

Open an Active Investing account with SoFi today.


Photo credit: iStock/MicroStockHub
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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How Many People Have Student Loans in the United States?

How Many Americans Have Student Loan Debt?

Student loan debt and education continue to go hand in hand. According to the latest figures from the Federal Reserve, 30% of U.S. adults had student loan debt upon leaving school.

Federal student loan relief under the CARES Act, set to end on Aug. 31, 2022, has paused monthly federal student loan payments, enacted a 0% interest rate, and halted loan default collections.

However, as the relief window comes to an end, Americans must continue to face their outstanding student debt.

How Many People in the USA Have Student Loans?

The total federal student loan debt crisis amounts to $1.61 trillion in unpaid federal student loans. This outstanding balance is spread among 43.4 million U.S. borrowers.

A 2021 MeasureOne report found that unpaid balances within the federal student loan system account for 92% of U.S. student loan debt. However, U.S. adults are also burdened by private student loans.

As of Q2 2021, Americans have amassed a total of $131.1 billion in unpaid private student loans — accounting for nearly 8% of outstanding student loans in the country.

Who Is the Typical Borrower?

The CollegeBoard’s “2021 Trends in College Pricing and Student Aid” report found that the average four-year, bachelor’s degree graduate left school with an average $26,700 in student debt. Bachelor’s recipients from private nonprofit institutions left school with an average of $33,600 in student debt.

Student Loan Distribution by Institution

Borrowers who were enrolled in a public, four-year U.S. institution received the highest distribution of federal Direct Loan funding.

Nearly 45% of distributed Direct Subsidized Loan funds went toward students enrolled at a four-year school, as did 41% of Direct Unsubsidized Loan funding.

Similarly, 51% of disbursed Parent PLUS Loan funds — designed for parent borrowers on behalf of their college-bound dependant — were for a public, four-year education.

Graduate and professional students who attended a private nonprofit college also received a variety of federal loan funding. Graduate-level students enrolled at a private nonprofit institution saw the highest percentage of total dispersed Grad PLUS Loan funds (68%).

In some cases, student loans for certificate programs may also be borrowed. Some certificate programs are offered at two-year institutions, which make up about 11% of Direct Subsidized loans.

Student Loan Debt by Age

US Adults ages 35 to 49 have a total aggregated balance of $613 billion in federal loans across 14.3 million borrowers. On average, a borrower in this age group has a student debt balance of $42,900, according to CollegeBoard data.

Age

Total Balance

Average Balance per Borrower

Up to age 24 $113.7 billion $15,200
25 to 34 $500.6 billion $33.600
35 to 49 $613.0 billion $42,900
50 to 61 $273.7 billion $43,400
62 and older $92.7 billion $38,600

The next-highest total balance, at $500.6 billion, falls on borrowers ages 24 to 34. The 14.3 million borrowers in this age group have an average loan balance of $33,600.

Borrowers with the highest average balance ($43,400) are those who are ages 50 to 61 — this group accounts for 6.3 million borrowers in the U.S.

Student Loan Debt by Race and Gender

According to a report by the American Association of University Women (AAUW), two-thirds of the total U.S. student loan debt is held by women.

Men borrow an average of $29,270 in student loans. By contrast, each woman borrower carries an average of $31,276 in student debt.

Race/Ethnicity (Women)

Cumulative Debt

American Indian or Alaska Native $36,184.40
Asian $27,606.60
Black or African American $41,466.05
Hispanic or Latina $29,302.45
Pacific Islander/Hawaiian $38,747.44
White $33,851.98

Black women face the greatest hurdle when it comes to student loan debt. According to AAUW, one year after graduating, Black or African American women carry the highest cumulative student debt by race and ethnicity at $41,466.05. This figure includes the principal amount and student loan interest rate charges.

What Percentage of College Students Take Out Student Loans?

The percentage of students who borrow student loans vary, based on factors like degree type and institution.

According to the latest data published by the National Center for Education Statistics (NCES), in the 2019-2020 academic year, 31.8% of undergraduate students received student loans from the federal student loan program.

About 47.6% of bachelor-seeking students attending a private nonprofit received federal student loans, while 13.5% of bachelor’s students enrolled at a public college received federal loan aid.

Among master’s degree students, 51.5% who attended a private nonprofit school received federal aid, compared to 40.5% who attended a public institution.

Finally, 57.4% of students pursuing a non-professional doctorate degree at a private nonprofit received federal loans. Of those who attended a public college, 33.4% of doctoral candidates got a federal loan.

What Is the Total Amount of Money Owed by Americans on Student Loans?

Collectively, Americans have an outstanding student loan balance of $1.61 trillion in federal student loans. This includes Direct Loans, Federal Family Education Loans, and Perkins Loans. However, this figure doesn’t include education loans from the private sector.

Total private student loans that U.S. adults still owe is estimated at $131.1 billion, according to MeasureOne.

The Takeaway

Americans are carrying a significant student debt burden after leaving school. New and currently enrolled college students will likely see continued rising education costs.

Despite these figures, one of the benefits of student loans is that they can provide access to college for students who might otherwise not be able to finance their education. SoFi Private Student Loans lets eligible students borrow up to the total cost of attendance, through a fast and completely digital process.

Find out if you pre-qualified in just a few minutes.

FAQ

Who holds the majority of student debt?

According to the CollegeBoard, borrowers ages 35 to 49 hold the majority of outstanding federal student debt at $613 billion, with an average balance of $42,900 per borrower.

What is the average student debt in the US?

The average student debt for a public, four-year bachelor’s degree graduate is $26,700, based on 2021 figures from the CollegeBoard.

What is the total amount of student debt owed by Americans?

Americans owe $1.75 trillion in federal and private student loans.


Photo credit: iStock/Prostock-Studio

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

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