How to Become a Millionaire

Do you often find yourself dreaming about what you would do if you were a millionaire? Maybe you fantasize about retiring early and traveling the world. Or maybe what excites you is being able to donate to a bunch of causes you care about.

No matter how you would spend your dough if you joined the ranks of young millionaires, you might suspect the only way you’ll ever be that rich is if you win the lottery.

But the road to wealth isn’t that narrow—there are many ways to become a millionaire. Sure, winning the lottery would make it simpler, but some middle-class workers retire with over a million dollars in savings because they made good financial decisions and have luck on their side.

Others may have started businesses that brought them success, advanced their careers so that they made enough to save seven figures, or made smart and successful investments.

Though there are no guarantees, here are some ideas that could help put you on the path toward becoming a millionaire:

Getting a Good Job and Increasing Your Income

You can’t join the ranks of the young millionaires if you’re not bringing in more money than you need for your basic necessities. But getting a good job and increasing your income isn’t always as easy as it sounds.

If you haven’t gone to college yet, going could increase your potential income. You could also go back to college for a master’s degree or even a doctorate to up your earning potential, or take on a side hustle.

If you don’t want to get more schooling or spend your nights and weekends hustling, you could look at people who have your degree who have become very successful.

Maybe they’ve figured out how to use it in unexpected ways or maybe they’re great at chasing opportunities for professional advancement. You could invite them out for coffee to learn from them!

Another way to potentially increase your income could be to start your own business. While starting a business is risky , since 20% of businesses fail in their first year and 50% fail by their fifth year, if you’re able to find the right product for your market, then you could potentially make a lot of money.

That’s how some young millionaires made their first millions—people like Grant Sabatier, who made his money by founding Millennial Money , said in an interview with Money Magazine that you need to keep searching until you find something to do that, “you like the most that makes you the most money.”

Eliminating Debt

One thing that could be holding you back from becoming a millionaire is debt—especially if that debt is “bad debt,” a term often used for high-interest debt. Eliminating your debt could be key because it’s difficult to build wealth if you’re paying a significant portion of your income toward interest.

That’s what billionaire Mark Cuban does. He’s said in the past that, “if you’ve got $25,000, $50,000, $100,000, you’re better off paying off any debt you have because that’s a guaranteed return.”

Paying off debt could help free up money to invest and help you build wealth. One way to pay off debt is the debt avalanche method, which suggests paying off the debts with the highest interest rates first and then focusing on debts with the next highest interest rates (while still making minimum payments on all of the debt, of course). A financial tracking program is just one method that could help you plan ways to pay off debt.

Eliminating debt isn’t just about paying off existing debt, it’s also about reducing the chances of going into debt in the future. Part of a debt payoff strategy could involve reducing spending so that, for example, you don’t need to rely on credit—or by setting a strict budget and paying with cash whenever possible.

You also might want to create an emergency fund by setting aside a certain amount every month so that if you have a financial setback, you don’t have to go into credit card debt.

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Cutting Overspending and Saving Your Money

Getting control of your spending is critical to building wealth. One way to potentially become a millionaire is to save aggressively.

That doesn’t mean that you have to cut back on everything that gives you pleasure, but you could consider the happiness return on investment you get from the money that you spend. How big of an apartment or home do you truly need to be happy? What kind of car do you need? Do you need to buy a coffee every morning?

You could find ways to cut back on the things that don’t matter so much, but not skimping to the point that you miss out on things you love. For example, maybe you need your morning latte, but you can do without spin classes.

Or maybe coffee shop beverages can fall to the wayside, but you can’t get by without the fun of weekly Zumba. Also, you could focus on cutting back on big expenses instead of those that won’t have a huge impact on your budget.

For example, dining out only once a month, adjusting your thermostat higher or lower depending on the season, or finding a cheaper, smaller home to save a significant amount of money.

While cutting back can be hard, Sebatier told Money Magazine that it’s all about how you look at it. “You have to cut back, but you should view saving as an opportunity, not a sacrifice.”

One way to stay on top of managing your money is to create a debt reduction plan.

Making Smart Investments

When it comes to how to become a millionaire, getting your money to work for you is a common refrain. But investing is not a get rich quick scheme. Just as billionaire and investing wunderkind Warren Buffett says, “Successful investing takes time, discipline, and patience.”

Investing your money can seem complicated since there are so many ways you could invest your cash, but there are a few rules to know that could help you improve your chances of becoming a millionaire.

First, compound interest can make all the difference. Compound interest is what happens when the interest you earn on your investments starts earning interest.

The more time your money has to compound, the more it will grow. That’s why some save aggressively starting when they’re young.

Saving $100,000 by the time you’re 30 might not be possible for everyone, but the more you save when you’re young, the greater impact it could have on your net worth.

There are other ways to become a millionaire. Another option to help you on the road to $1 million could be to reduce the amount you spend on investment fees. High investment fees can have a big impact on your returns, so you might want to look into low-fee investments. If you’re new to investing a robo-advisor might be the right fit for you and could cost you no management fees.

Finally, you might want to make sure that you invest in a way that’s right for you throughout your life—which could mean investing more aggressively when you’re younger and gradually becoming more conservative in your investments as you age.

Ready to Get Started Investing?

Everyone might dream of becoming a millionaire, but that doesn’t mean it’s always possible. Becoming a young millionaire might involve a lot of sacrifices and luck—especially if you aren’t getting help from family members with deep pockets.

But becoming wealthy is still possible if you didn’t grow up with a silver spoon. You could start with these tips and see how far they take you on your path to being a young millionaire.

You can start investing your money with SoFi Invest. You can do it yourself by choosing stocks, ETFs, and crypto, or let SoFi build a portfolio for you with automated investing.

Ready to get started? Start with as little as $1!


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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Test Your Financial Literacy

Becoming financially literate means gaining an understanding about how money is made, saved, and spent. It involves gaining the ability to use your own financial resources to make the best decisions for your situation, whether that means earning more money, or saving, investing, and spending your money wisely.

Gaining and increasing financial literacy is important because it helps you to get the most out of the money you earn, facilitating the process of saving for a home, for children’s college education, and for retirement, thereby maximizing funds for what’s most important to you.

In short, knowledge is power.

Higher levels of financial literacy have been linked —and consistently so—to responsible financial behavior. This helps consumers to:

•   avoid high-cost debt
•   plan for financial goals
•   avoid defaulting on mortgages
•   build an emergency savings fund
•   earn higher interest on investments

Unfortunately, studies indicate that Millennials are less financially literate than other generations. In fact, only 24% of people from this generation could demonstrate basic financial knowledge, with just one-third of that group (8%) demonstrating high financial literacy.

Financial education is key, but Millennials can be overconfident in their knowledge, which can prevent them from researching and learning more. More specifically, by looking just at college-educated Millennials, approximately 70% of them rated themselves as having high financial literacy; in reality, only 34% even had basic financial literacy.

Yet, only 27% of Millennials seek advice from a financial professional about savings and investing despite the fact that 34% of survey participants were dissatisfied with their financial situations (and 18% not being satisfied at all with theirs).

The study focuses on Millennials, at least in part, because this generation will be shaping national and global economies, which makes their gap in financial literacy-related knowledge a concern.

No matter what generation you’re in, though, becoming educated about money matters is crucial. To help, we’ve created this financial literacy quiz.

The financial literacy assessment questions focus on key components of this type of knowledge, which includes:

•   understanding how to create an effective budget, so that you’re aware of and accountable for where your money is going
•   understanding how interest works when you save and invest, as well as how it works when you borrow, including the concept of compound interest
•   saving, whether that means for emergencies or for a specific goal, such as a big-ticket item or even a house
•   managing your debt and avoiding the credit card debt rollercoaster
•   protecting your identity and otherwise using practices to safeguard your funds
•   investing wisely, according to what kind of investor you are

Educating Yourself

If you’ve taken our quiz, the financial literacy questions will likely have helped you to pinpoint where you need to bolster up your own understanding of money matters.

Financial topics can be challenging but, fortunately, there are plenty of resources to help you increase your knowledge, including at SoFi Learn.

There is in fact an entire section of SoFi Learn that’s dedicated to helping people gain financial literacy by defining terms related to student loans, home ownership, credit, and investing, and answering frequently asked questions in those areas.

SoFi Learn also provides insights into life and career issues, including how to budget, how to get a raise, and much more. There are also numerous tools and calculators available there to help you do some number crunching and give you a better picture of your finances.

There are also government resources, including those available at the Financial Literacy and Education Commission (FLEC), connected to the Treasury Department. This commission was founded to boost literacy.

If you have questions about federal agencies connected to financial literacy and education, or their programs, benefits, or services, you can call 1-800-FED-INFO. The specialists who answer the phone can answer questions in English or Spanish, or they can refer you to the appropriate agency.

Another government site, one created by FLEC, is dedicated to financial education: MyMoney.gov .

This site provides practical information about each of what they call the five building blocks for money management (MyMoney Five), which are:

•   Earn: Understand your pay and benefits to make the most out of what you earn.
•   Save and Invest: Start as soon as you can to save for future goals, even if you need to begin by saving small amounts.
•   Protect: Create an emergency savings fund, choose the right insurance for your needs, and otherwise take precautions to protect your finances.
•   Spend: Shop around and compare prices and products to get a good value on purchases, especially with larger ones.
•   Borrow: Borrowing allows you to make essential purchases and also helps you to build credit, so it makes sense to understand how to borrow in the smartest way possible for your situation.

Another government resource is Federal Reserve Education , which provides resources for educators and students alike, while also empowering consumers to boost their understanding of banking, including central banking and monetary policy; economics/macroeconomics; our government’s role in money regulation; personal finances; and more.

You can filter resources by your age, and by type of resource, which includes activities, blog posts, comic books, infographics, online tools, video, and much more.

Here’s another financial literacy resource from the federal government: FDIC’s Money Smart . This program provides resources to help people learn how to improve their financial management skills.

These include computer-based instruction games with separate learning tracks for adults and young adults (aged 13 and up). Each time you complete a module, you can earn a certificate of completion. Money Smart also provides podcasts that focus on saving and borrowing, as well as helpful videos.

Colleges, adult education centers, libraries, and community centers often offer financial management classes, and there are also online courses to consider. It can also make good sense to consult with a financial planner, who can walk you through your own unique challenges and opportunities.

If you’d like to help children learn about financial literacy in an age-appropriate way, Jump$tart’s Reality Check Reality Check allows them to answer questions online to help them understand how much money will be needed for them to live their dream lifestyle.

Whichever sources you use to educate yourself, make sure they’re reputable. Like with any topic, there are great resources—and then there are some that aren’t so hot.

Another Way to Gain Financial Literacy

Another way to help with your financial literacy is to use an account where you have insight into your spending and saving. SoFi Money® is a cash management account where you can spend, save, and earn all in one place.

You can keep an eye on your spending with the weekly spend dashboard within the SoFi app. On top of that, SoFi Money gives you the ability to create different vaults within your account to save for different spending goals, like a travel fund or an emergency fund.

It’s fast and easy to sign up for SoFi Money. In fact, you can sign up in just 60 seconds. You can manage your mobile transfers and photo check deposits by your mobile device, and send money to anyone you need, right from your app. And, when you send funds to other SoFi Money holders, they’ll receive them instantly.

In short, SoFi Money could be a smart financial move for you. Learn more.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.

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The Importance of Setting Your Long-Term Financial Goals

Long-term financial goals are a daunting subject. A long-term financial goal is typically something that’s at least seven years ahead of you, which can feel like forever away.

But setting long-term financial goals can allow you to be steadfast in your commitment to your finances in general—when you consistently work towards setting yourself up for a more comfortable future, you’ll be more proud of yourself in the present. As the saying goes, people don’t plan to fail—they fail to plan.

First, it’s important not to beat yourself up for not being financially sound enough or feeling like you’re behind your peers.

It’s reasonably difficult for many of us to imagine the distant future when we’re busy covering day-to-day, month-to-month expenses.

According to a recent poll , 40% of Americans reported that they would struggle to cover a $400 unexpected expense. According to data from the Population Reference Bureau, approximately 24% of men and 16% of women ages 65 and older were currently active in the workforce. These numbers are supposed to increase to 26% for men and 18% for women by 2026.

Starting By Thinking Big

Although those statistics are harrowing, they help make a good case for setting seemingly difficult long-term financial goals sooner than later. Indeed, oft-cited psychological research by Edwin Locke and Gary Latham showed that subjects who were assigned specific, challenging goals were 90% more likely to succeed.

The two researchers went on to publish A Theory of Goal Setting and Task Performance, in which they discussed what they’d determined as the five key components of setting achievable goals:

•   Clarity
•   Challenge
•   Commitment
•   Complexity
•   Feedback

What do these mean for your financial goal setting? Let’s break it down. First, you must have clarity and specificity about exactly what you want to accomplish. It can be helpful to start by making two lists—what’s most financially stressful to you right now, and what you might consider a dream that better finances could aid in making real.

While traditional long-term financial goals like saving for retirement or buying a home are worthwhile, they’re so universal that they might seem uninspiring.

Keep in mind that you can and will likely end up working towards those goals and some goals that feel personal. Dream big—what kind of goals might you find meaningful to work towards? Some long-term financial goals we’ve encountered when speaking with SoFi members might spark an idea of your own:

•   “Start my own bakery business and become my own boss.”
•   “Travel throughout every continent, writing about it as I go.”
•   “Buy a property in the desert and build my own personally-designed home to rent as a boutique AirBnB.”
•   “Start a scholarship fund for low-income high school students to enroll in STEM college programs”
•   “Pay for my parents housing and health care costs for the rest of their lives, so they don’t have to worry.”
•   “Release an e-commerce capsule collection of clothing I’ve designed.”

You probably have general ideas of what your long-term financial goals may be, but getting as specific as possible is what can help you the most. You could take time to do some structured self-reflection in order to be clear about exactly what makes your goals matter to you in the biggest way possible—write them down and ask yourself questions about them.

What about your goals is motivating for you? Can you break your big goals down into smaller benchmarks that also motivate you? Do they feel challenging enough to be aspirational and inspiring? You might find it helpful to try not to think of your long-term financial goals as dreams.

Consider them possible realities, ones that you’ll be living in once you start working towards the achievements you’ve identified.

Spend, save, and earn all in
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Breaking Them Down

Next comes the harder part—making your commitment to your goals real and tangible. This is where the “complexity” component becomes important. How might you simplify the path you’ll take towards your future?

At this stage, you can take a look at the goals you’ve laid out and prioritize them. Which goals will have the biggest positive impact on your life? Is there a goal that feels like it aligns nicely with the achievement of another?

Next, you can break down the goal into smaller, shorter-term goals. Any big to-do will likely seem overwhelming without a tangible, step-by-step plan towards reaching the end point.

Taken together, the processes of prioritizing and breaking down your various long-term goals all at once can help you be realistic and excited about the processes of achievement. You might find it helpful to place dollar amounts on these components.

Let’s go over how we might break it down. For example, we can consider the goals “save for retirement” and “start my own bakery business” alongside one another. First, you might find it helpful to focus on any outstanding shorter-term debts—if you’re in credit card debt, consider making it a priority to get out from under it.

If you don’t have an emergency fund that covers at least three months of your expenses, you could commit to contributing towards it until it’s full. How much will you need to put away on a monthly basis? Next, you could research retirement savings options.

You might go through your employer or pursue a separate account on your own. What’s your goal amount of money for this fund? Break down what you’ll need to contribute to get there, month-by-month and year-by-year.

Conversely, you could approach the goal of starting your own business by laying out the steps you’d need to take to get there. For any personal long-term financial goals, it’s possible your initial steps can be delightful or even cost-free:

Research: what do you need to learn? Can you do online research and consult your local library?
Find a mentor: any expert will tell you that they became a master by following in another’s footsteps. This can be as easy as finding someone who’s currently a small business owner and asking them out to coffee, or as huge as approaching your hero for advice via email.

Whatever the first steps are, or whatever the subsequent steps you need to take to move forward after getting started, the important thing that can be truly invaluable is understanding how to develop your own repeatable goal-setting process. Everyone is different, so find what works best for you.

Being Your Own Accountability Expert

Finally, think about feedback—how will you hold yourself accountable to working towards the benchmarks you’ve identified? Once you’ve identified your goals, prioritized them, broken them down, and put dollar amounts on the pieces that require them, you might find it helpful to find an accountability buddy.

You could tell someone you trust about your goals and ask them to check in with you on a weekly or monthly basis. Schedule those calls or meetings ahead of time and put them in your calendar to make sure they don’t get lost in the ether.

If you have a partner, be sure to discuss your goals with them—they can help you achieve them and support you in ways you might find invaluable as you move forward.

Ultimately, it’s possible that creating your own rewards system and deciding what you’ll do when you fall short could be the most crucial ways to truly ensure your own success. As far as rewards go, this could mean setting aside as little as $40 per month as pure fun money to use after you’ve hit your benchmarks, or it could be saving up for a vacation.

When it comes to self-imposed consequences, it can be helpful to remember that you’ve set these goals in order to develop better habits and experience more happiness in the long run punishing internal monologue likely won’t do you any good.

You can benefit from reframing negative thoughts like “I’m never going to get there” or “I’m a failure” with less catastrophic ones, like “trial and error is crucial to getting anywhere.”

It’s important to set out a prospective system for checking in with yourself, like a weekly log of hits and misses, that allows you to be realistic so you don’t end up hurt by your own blind spots, and you can chart improvement as you go.

Setting Yourself Up For Success

No matter what your long-term financial goals are, it’s the planning that helps make them possible.

Creating plans to achieve your long-term goals can help give your life structure and a deeper sense of purpose in all of your actions.

Using tools can help you get where you want to be—one option to help you do so is to open a SoFi Money® cash management account.

It is easy to see your weekly spending within the dashboard to see if you are on track of your budget.

Plus, with SoFi Money vaults you can easily create separate vaults within your SoFi Money account for different savings goals and purposes. And you’ll be able to easily keep track of progress on each of your vaults.

Want to learn more about SoFi Money? Get started today!


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.

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Are Your Spending Habits Healthy? – Take The Quiz

The overall health of a person’s spending habits can run the entire gamut. From having very good spending habits to those that wreak havoc on a budget and a lifestyle. So, how can you tell where yours fall—and perhaps even more important, how can you ensure yours are more healthy tomorrow than they are today?

In this post, we’ll share key differences between healthy and unhealthy spending habits, provide a quiz so you can see where yours fall on the spending spectrum, and offer tips on how to change your spending habits, if necessary.

Healthy vs. Unhealthy Spending Habits

Here’s a quick gut check. If, on average, you’re spending more than you make, then this is a red flag, a sign that you should consider reviewing your budget to see how you can bring income and expenses into balance.

You could reduce spending, or you could brainstorm ways to earn more income, whether that means finding a new, higher-paying job or getting a side gig to supplement your paycheck. Or, you could use both strategies.

Here are a few questions to ask yourself:

•   Are you able to pay off credit card debt in full when your statement arrives?
•   Do you make all your payments on time?
•   Have you been able to save enough money in an emergency savings account—say, three to six months’ worth of income?
•   Are you able to also contribute money to your retirement account?

If you can answer yes to all these questions, then that’s a good sign.

To find out more specifically where you fall within the spectrum of healthy spending habits, we invite you to take this quick online quiz:

Changing Your Spending Habits

If changing spending habits is in the cards for you, then step one is typically to create a new budget. Create a sheet that will allow you to track your income, expenses, and more. As you create your budget, consider how quickly you’d like to pay off credit debt, as one example, how much you need to put into an emergency savings account, and so forth.

It’s typically best if you create a budget that helps you to move steadily towards your financial goals while also containing some flexibility. It can also help to create an initial draft of a budget and then tweak it as you test it out. Using this budget, are you able, say, to pay off credit debt in full each month? Is your savings account increasing? Is this a budget you can live with?

If you find yourself going off-budget one month, don’t be too hard on yourself—but do analyze what happened. Perhaps, for example, you had an unexpected car repair and you haven’t yet built up your emergency savings account to a level that would allow for covering that. If so, keep moving steadily ahead with your plan.

Or, maybe you’ve discovered that you’re spending more at restaurants than what’s in your budget. In that case, are there ways you can tweak the budget, moving money from one area to the dining one? Or would it be more helpful to find intriguing recipes that you can cook at home? Answers are unique to each person.

More Tips for Spenders

If you realize that your spending habits are causing you to fall short of your savings goals, then here are more strategies to consider. For some people, it can help to share their savings goals with family members and close friends. If you think this would help to make you more accountable to your budget, then this can be a quick and easy strategy to implement.

Make sure you pay as you go. Let’s say there’s a neighborhood watering hole that allows customers to put expenses on a tab. If you know that you like to spend, then skip the tab system and pay for whatever you buy, right then and there.

Each time you’re tempted to make a purchase, stop to think about whether this is a need or a want. There isn’t anything wrong, per se, with buying things you want, but it can be quite helpful to practice distinguishing between wants and needs and then doing a gut check before making a buying decision. To help avoid feeling overwhelmed from too much frugality, carefully plan rewards that fit within your budget.

Track Your Money With SoFi Money®

As part of your plan to improve your spending and saving habits, you may be looking for the right account to help you track your money. SoFi Money may be a good option for you. SoFi Money is a cash management account where you can spend, save, and earn all in one place.

You can keep tabs on your spending within your dashboard in the SoFi app so you always know where you stand. You can open an account in just 60 seconds (seriously!). Plus, you’ll have access to mobile transfers, photo check deposits, and more—making it easier to save and otherwise manage your finances.

Interested in finding out more about SoFi Money?



External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.

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Money Tips for Teenagers

Maybe it’s the first summer job. Or wanting to save up for that first car. Or realizing how much college tuition costs. Whatever the reason for wanting a bank account or a budget, trying out some of these basic financial planning tips might be a great start for a teen hoping to build money management skills.

Figuring out how to start saving money and budget smartly are great ways to become more independent, and may lead to long-term financial success. Working on best practices early on can help any teen continue making smart money choices in the future.

After all, it’s never too early to start saving money.

Let’s pause for a moment before we dive in to note that these tips and their applicability are going to vary from state to state, so doing research ahead of making any financial decisions is a great idea. Teenagers should always consult with a parent or legal guardian before embarking on any financial journey, or taking on responsibility for any financial product.

Setting up for Success

1. Opening a Bank Account

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

Most bank accounts billed as “teen accounts” are really just joint bank accounts, because teenagers under 18 typically need a parent or guardian to also be an account holder. Although it’s sometimes easier for teens to open an account at the same place their parents bank, it may be worth researching which banks in the area have the best benefits for teenagers specifically.

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

Valid identification like a student ID, driver’s license, passport, birth certificate, and/or social security card is also required for account owners when opening a teen checking account. In some cases, a parent or guardian must be present to open the account, but some banks do offer the opportunity to open an account online. This will often require uploading the same documents to prove your identity.

Some banks also offer parental controls, setting withdrawal and debit card limits, or even text alerts about account activity. Before opening an account, it may be worth considering what is most important and beneficial—definitely talk it over with a parent or legal guardian. Learning about any fees or minimum balances from the bank is also important, so make sure to ask the right questions in person or check out the bank’s fee structure on their website.

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

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

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

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

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

2. Budgeting For Teens

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

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

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

Next, 30% would be allocated for day-to-day spending, like going out to eat with friends, entertainment, shopping, and other fun activities. The remaining 20% would be allocated for financial goals, usually savings or debt payoff. Maybe this can be the start of a college fund, or saving up for a big purchase in the future?

Making Financial Goals

3. Smart Savings

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

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

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

Taking away the manual need to transfer money can help eliminate any mental gymnastics surrounding the desire to spend it immediately—it’s like it was never there in the first place.

Plus, in an emergency, a connected savings account can help prevent overdraft fees. If college is in the plans, saving now could mean taking out fewer loans in the future—especially when spending on things like textbooks or essentials like food and clothes.

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

Learning Smart Spending

4. Being cautious with credit

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

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

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

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

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

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

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

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

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

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

5. Setting up a side hustle

If a part-time job or summer gig isn’t an option just yet, whether due to age, school work, or other restrictions, there are other options for earning extra cash. Any income, however small, could help build good personal finance habits like budgeting and saving.

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

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

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

Asking Questions Early

For teens starting out on their financial journey, or even looking to revamp their money management skills, SoFi Learn has resources on everything from student debt and budgeting, to credit and investing. And again, teenagers should always talk with their parents or guardians before embarking on their financial journeys.

SoFi Learn is there to help answer questions, whether it’s what certain financial terms mean, or estimating how long it might take to pay off a loan.


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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
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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.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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