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Q: Is socially responsible investing profitable?

According to a 2022 report by Morningstar, the performance of sustainable funds was 'on par with the overall fund universe in 2020' — and outperformed conventional funds over trailing three- and five-year periods.

Jun

2024

The Growth of Socially Responsible Investing

Guide to SRI Investing

By MP Dunleavey | Growing Wealth, invest, Investing | No Comments

Socially responsible investing (SRI) strategies help investors put their capital into a range of securities — e.g., stocks, bonds, mutual funds — that focus on socially positive aims: e.g., clean energy, air and water; equitable employment practices, and more.

Despite market volatility driven by interest rate changes and geopolitical conflicts in recent years, SRI investing strategies have garnered steady interest from investors.

Various analyses of SRI funds suggest that the philosophy of doing well by doing some good in the world may have an upside worth exploring.

What Is Socially Responsible Investing?

While SRI investing goes by many names — including ESG investing (for environmental, social, and government factors), sustainable, or impact investing — the fundamental idea is to channel capital into entities that are working toward specific environmental and/or social policies in the U.S. and worldwide. The aim of SRI is to generate both positive changes across various industries, while also delivering returns.

Generally, investors that embrace SRI strategies find ways to assess an organization’s environmental and social impact when deciding whether to invest in them. However, there are important distinctions between the various labels in this sector of investing.

Socially responsible investing can be seen as more of an umbrella term (similar to impact investing). Within SRI, some strategies focus specifically on companies that meet certain criteria — either by supporting specific practices (e.g., green manufacturing, ethical shopping) or avoiding others (e.g., reducing reliance on fossil fuels).

For that reason it’s incumbent on each investor to assess different SRI options, to make sure they match their own aims. This is no different from the due diligence required for anyone starting to invest.

Interest in SRI Investing Strategies

The tangible merits of socially responsible investing have always been subject to debate. But in the last couple of years there has been criticism of some of the underlying principles of SRI, as well as questions about the overall financial value of this investing approach.

Nonetheless, the value of global assets allocated to ETFs with an ESG focus have shown steady growth in the last two decades. As of November 2023, according to data from Statista, the value of these assets was $480 billion — a substantial increase since 2006, when the value of those assets was about $5 billion.

And according to a report published in 2023 by Morningstar, a fund rating and research firm, investors in conventional funds as well as SRI funds are likely to see returns over time.

SRI vs ESG vs Other Investing Strategies

While the various terms for SRI investing are often used interchangeably, it’s important for investors to understand some of the differences.

Impact Investing

Impact investing is perhaps the broadest term of all, in that it can refer to a range of priorities, goals, or values that investors may want to pursue. To some degree, impact investing implies that the investor has specific outcomes in mind: i.e. the growth of a certain sector, type of technology, or societal issue.

Impact investing may also refer to strategies that avoid certain companies, products, or practices. This could include so-called sin stocks (e.g. alcohol, tobacco), companies that adhere to principles that are in opposition to an investor’s or institution’s belief system, and more.

Socially Responsible Investing

SRI or socially conscious investing are two other broad labels, and they’re typically used to reflect progressive values of protecting the planet and natural resources, treating people equitably, and emphasizing corporate responsibility.

While SRI can be considered a type of impact investing, there may be impact investing strategies that are diametrically opposed to SRI, simply because they have different aims.

ESG Investing

Securities that embrace ESG principles, though, may be required to adhere to specific standards for protecting aspects of the environment (e.g. clean energy, water, and air); supporting social good (e.g. human rights, safe working conditions, equal opportunities); and corporate accountability (e.g. fighting corruption, balancing executive pay, and so on).

For example, some third-party organizations have helped create ESG metrics for companies and funds based on how well they adhere to various environmental, social, or governance factors.

Investors who believe in socially responsible investing may want to invest in stocks, bonds, or exchange-traded funds (ETFs) that meet ESG standards, and track ESG indexes.

Sustainable Investing

Sustainable investing is often used as a shorthand for securities that have a specific focus on protecting the environment. This term is sometimes used interchangeably with green investing, eco-friendly investing, or even ESG.

Unlike ESG — which is anchored in specific criteria having to do with a company’s actions regarding environmental, social, or governance issues — the phrase “sustainable investing” is considered an umbrella term. It’s not tied to specific criteria.

Corporate Social Responsibility (CSR)

Last, corporate social responsibility (CSR) refers to a general set of business practices that may positively impact society. Often, companies establish certain programs to support local or national issues, e.g. educational needs, ethical labor practices, workplace diversity, social justice initiatives, and more.

Ideally, CSR strategies work in tandem with traditional business objectives of hitting revenue and profit goals. But since CSR goals are specific to each company, they aren’t formally considered part of socially responsible, sustainable, or ESG investing.

A Focus on Results

Investors may want to bear in mind that, with the steady growth of this sector in the last 20 or 30 years, there are a number of ways SRI strategies can come together. For example, it’s possible to invest in sustainable pharmaceuticals and even green banks.

Either way, the underlying principle of these strategies is to make a profit by making a difference. By putting money into companies that embrace certain practices, investors can support organizations that embody principles they believe in, thereby potentially making a difference in the world, and perhaps seeing a financial upside as well.

Socially Responsible Investment Examples

These days, thousands of companies aim — or claim — to embrace ethical, social, environmental, or other standards, such as those put forth in the United Nations’ Principles of Responsible Investing, or the U.N.’s 17 Sustainable Development Goals. As a result, investors today can choose from a wide range of stocks, bonds, ETFs, and more that adhere to these criteria.

Understanding SRI Standards

In addition, there are also standards set out by financial institutions or other organizations which are used to evaluate different companies. It may be useful when selecting stocks that match your values to know the standards or metrics that have been used to verify a company’s ESG status.

Depending on your priorities, you could consider companies in the following sectors, or that embrace certain practices:

• Clean energy technology and production

• Supply chain upgrades

• Clean air and water technology, products, systems, manufacturing

• Sustainable agriculture

• Racial and gender equality

• Fair labor standards

• Community outreach and support

Exploring Different Asset Classes

Investors can also trade stocks of companies that are certified B Corporations (B Corps), which meet a higher standard for environmental sustainability in their businesses, or hit other metrics around public transparency and social justice, for example. B Corps can be any company, from bakeries to funeral homes, and may or may not be publicly traded.

Companies issue green bonds to finance projects and business operations that specifically address environmental and climate concerns, such as energy-efficient power plants, upgrades to municipal water systems, and so on.

These bonds may come with tax incentives, making them a more attractive investment than traditional bonds.

Another option for investors who don’t want to pick individual SRI or ESG stocks is to consider mutual funds and exchange-traded funds (ETFs) that provide exposure to socially responsible companies and other investments.

There are a growing number of index funds that invest in a basket of sustainable stocks and bonds. These funds allow investors to diversify their holdings by investing in one security.

There are numerous indexes that investors use as benchmarks for the performance of socially responsible funds. Three of the most prominent socially responsible indexes include: the MSCI USA Extended ESG Focus Index; Nasdaq 100 ESG Index; S&P 500 ESG Index. (Remember, you cannot invest directly in an index, only in funds that track the index.)

The Growing Appeal of Socially Responsible Investments

While many investors find the idea of doing good or making an impact appealing, the question of profit has long been a point of debate within the industry. Do you sacrifice performance if you invest according to certain values?

Unfortunately, the lack of consistency in terms of what constitutes a sustainable or socially/environmentally responsible investment has made it difficult to compare SRI strategies to conventional ones. One financial company may use one set of criteria when developing its sustainable offerings; another company may use its own proprietary set of standards.

That said, as the universe of sustainable offerings continues to grow, it’s possible to create more apples-to-apples comparison sets. According to Morningstar data, sustainable equity funds saw median returns of 16.7% for 2023 versus 14.4% for traditional equity funds. The relative outperformance of SRI strategies was consistent across equity fund styles and most market caps, but particularly large-cap equities. Over 75% of SRI and conventional funds include large-cap equities.

In addition, sustainable fund assets under management (AUM) globally were up 15% over 2022, growing to $3.4 trillion.

The Evolution of Responsible Investing

Socially conscious investing is not a new concept: People have been tailoring their investment strategies for generations, for a number of reasons, not all of them related to sustainability. In fact, it’s possible to view the emergence of socially conscious investing in three phases.

Phase 1: Exclusionary Strategies

Exclusionary strategies tend to focus on what not to invest in. For example, those who embrace Muslim, Mormon, Quaker, and other religions, were (and sometimes still are) directed to avoid investing in companies that run counter to the values of that faith. This is sometimes called faith-based investing.

Similarly, throughout history there have been groups as well as individuals who have taken a stand against certain industries or establishments by refusing to invest in related companies. Non-violent groups have traditionally avoided investing in companies that produce weapons. Others have skirted so-called “sin stocks”: companies that are involved in alcohol, tobacco, sex, and other businesses.

On a more global scale, widespread divestment of investor funds from companies in South Africa helped to dismantle the system of racial apartheid in South Africa in the 1980s.

Phase 2: Proactive Investing

Just like exclusionary strategies, proactive strategies are values-led. But rather than taking an avoidant approach, here investors put their money into companies and causes that match their beliefs.

For example, one of the earliest sustainable mutual funds was launched in 1971 by Pax World; the founders wanted to take a stand against chemical weapons in the Vietnam war and encourage investors to support more environmentally friendly businesses.

This approach gained steady interest from investors, as financial companies launched a range of funds that focused on supporting certain sectors. So-called green investing helped to establish numerous companies that have built sustainable energy platforms, for example.

Phase 3: Investing With Impact

With the rise of digital technology in the last 30 years, two things became possible.

First, financial institutions were able to create screening tools and filters to help investors gauge which companies actually adhered to certain standards — whether ethical, environmental, or something else. Second, the ability to track real-time company behavior and outcomes helped establish greater transparency — and accountability — for financial institutions evaluating these companies for their SRI fund offerings.

By 2006, the United Nations launched the Principles for Responsible Investment (PRI), a set of global standards that helped create a worldwide understanding of Environmental, Social, and Governance strategies.

ESG became the shorthand for companies that focus on protecting various aspects of the environment (including clean energy, water, and air); supporting social good (including human rights, safe working conditions, equal opportunities); and fair corporate governance (e.g. fighting corruption, balancing executive pay, and so on).

Why Choose Socially Responsible Investing?

While the three phases of socially responsible investing did emerge more or less chronologically, all three types of strategies still exist in various forms today. But the growing emphasis on corporate accountability in terms of outcomes — requiring companies to do more than just green-washing their policies, products, and marketing materials — has shifted investors’ focus to the measurable impacts of these strategies.

Now the reasons to choose SRI strategies are growing.

Investors Can Have an Impact

The notion of values-led investing is that by putting your money into organizations that align with your beliefs, you can make a tangible difference in the world. The performance of many sustainable funds, as noted above, indicates that it’s possible to support the growth of specific companies or sectors (although growth always entails risk, and past performance is no guarantee of future results).

Socially Responsible Strategies May Be Profitable, Too

As discussed earlier, the question of whether SRI and ESG funds are as profitable as they are ethical has long been a point of debate. But that skepticism is ebbing now, with new performance metrics suggesting that sustainable funds are on par with conventional funds.

Socially Responsible Investing May Help Mitigate Risk

The criteria built into ESG investment standards may also help identify companies with poor governance practices, or those with exposure to environmental and social risks that could lead to financial losses.

Do Retirement Accounts Offer Socially Responsible Investments?

Generally speaking, individual retirement accounts may include socially responsible or ESG investment options. For example, when investing in different types of IRAs, e.g., a traditional, Roth, or SEP IRA, investors typically have access to all the securities offered by that financial institution, including stocks, bonds, and ETFs that may reflect ESG standards. The choice is up to individual investors.

That hasn’t always been the case with employer-sponsored 401k or 403b plans. But in 2023, the Department of Labor issued a rule allowing plan fiduciaries to consider ESG investment options for plan participants.

While some plans may now offer socially responsible or ESG investments, there is a push from some lawmakers to restrict or eliminate the availability of these funds. ERISA standards for retirement plans dictate that the investment options offered by employer-sponsored plans “must be based on risk return factors that the fiduciary prudently determines are material to investment value.” Some lawmakers argue that ESG funds are higher risk and not suitable for employees in company plans.

The Takeaway

Socially responsible investing is a broad term that can mean different things to different groups, but no matter which term you use — socially conscious investing, impact investing, ESG investing — it comes down to the compelling idea that by investing your money in organizations that match your values, you can make a difference in the world.

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

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

FAQ

Is socially responsible investing profitable?

Socially responsible investing can be profitable, as multiple reviews of fund performance have shown over the last several years. That said, some believe that the financial strength of ESG or SRI strategies is debatable. While any investment strategy has its own risks, it’s best to assess them according to your own aims.

What is the difference between ESG investing and socially responsible investing?

Socially responsible investing is considered a broad term that can encompass a range of practices and standards. ESG investing stands for environmental, social, and governance factors, is a set of principles that is often used to assess how well companies meet specific, measurable criteria. While there is no single industry-wide metric for ESG standards, investors can consider various proprietary tools.

How many socially responsible investment opportunities are there?

It’s impossible to say how many SRI opportunities there are, as the stocks, bonds, and other securities that embrace ESG standards continue to grow. More than 120 new sustainable funds entered the SRI landscape in 2021, in addition to 26 existing funds that took on a sustainable mandate.

What is the socially responsible investment theory?

The theory behind socially responsible investing can be summed up by the old saying about “Doing well by doing good.” In other words, by investing in companies that support positive social and environmental products and policies, it’s possible to help investors realize a profit.

How do you start socially responsible investing?

Investors who are interested in SRI or ESG investing can begin by getting to know companies that adhere to certain eco-friendly or socially responsible standards. In addition, many financial institutions offer clients a way to screen for stocks or mutual funds that have an ESG focus.

Photo credit: iStock/luigi giordano

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Jun

2024

Guide to Art as an Investment

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

Investing in art can add diversification to a portfolio if you’re ready to move beyond traditional stocks and bonds. Alternative investments like art can offer above-average returns and offset some of the impacts of market volatility.

Art investment has traditionally had a higher barrier to entry, as individual works of art may carry five and six-figure prices (or more). In addition, there are a number of risk factors when investing in art, including lack of liquidity and lack of transparency around pricing.

However, new ways to invest in art have emerged that make it a more accessible asset class to a broader range of investors.

What Is Art Investing?

Art investing refers to the purchase of works of art to sell them at a profit at a later date. Apart from owning individual artworks (which can be expensive and difficult to maintain), there are a range of new ways to invest in art, including:

• Fractional share investing through online art platforms

• Art funds

• Art stocks

• Non-fungible tokens (NFTs)

Buying art as an investment doesn’t require you to have an advanced art degree or professional background in the art world. You will, however, need to be willing to spend some time learning about this alternative investment to understand how the market works.1

How Art Investing Works

Investing in art requires a certain mindset, and doing your due diligence to size up what constitutes the best opportunities for you, depending on your goals.

Art, like other alternative investments, may require a much longer holding period for you to realize returns, which contributes to the lack of liquidity in this space. It may be challenging to find a buyer if the artwork or the artist is not in demand.

It’s also important to understand traditional art ownership, along with some of the newer investment vehicles.

Individual Works

Similar to investing in a traditional asset class like stocks, investing in individual works requires knowing some fundamentals: a history of the artist, their status (e.g., are they in demand?), the relevance of a given work, and a sense of whether it’s overvalued or undervalued.

The risks of choosing individual works include the possibility of fraud, the cost of maintaining the work (e.g., storage and insurance), and hidden charges, similar to investment fees (e.g., commissions and other costs). Given the fragility of most art, there is also the risk of physical damage or total loss.

Fractional Shares of Art

Owing to the high cost of owning blue-chip works of art (as well as other highly valued works) it’s now possible to buy fractional shares of art, similar to investing in fractional shares of stock.

There are a number of new platforms that sell fractional art shares, and each may have its own system and process (more below).

The risk of buying fractional shares of art is that, as with any investment, there are no guarantees of a return.

Art Funds

Similar to traditional mutual funds and ETFs, an art fund is a type of pooled investment fund. But unlike conventional equity funds, say, that hold many different stocks, art funds often hold only a handful of works. Investors who buy shares of the fund are buying into the collective, potential value of those works.

Art funds are generally structured as closed-end funds, but with a twist: investors typically contribute their capital over a period of three to five years, often with no returns for another specified time period (terms vary).

These funds are highly illiquid, and (in addition to the unpredictability of the art market itself) there are substantial risks to locking up your capital for what could be years, for an unspecified return upon redemption.

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Types of Artists

There are generally three types of artists you may invest in:

• Blue-chip artists: Blue-chip artists are individuals everyone has most likely heard of. Names like Van Gogh, Picasso, and Banksy are familiar to people both within and outside the art world.

Works from these artists typically carry the least risk because there’s always someone willing to buy them. The downside is that the average investor may not have sufficient capital to purchase individual blue-chip artworks since they can cost hundreds of thousands, if not millions, of dollars.

• Established artists: Established artists are known artists whose works typically command higher prices, but have not yet reached blue-chip status. Investing in art from established artists can offer solid return potential with a moderate degree of risk.

• Emerging artists: Emerging artists present the greatest risk since they’re still up and coming. However, you might be able to generate a sizable profit from investing in their art if their career takes off.3

Risks and Returns of Investing in Art

Investing in alternatives such as art carries risks that are similar to other alternative investments, like commodities, real estate, collectibles, and other assets. Investors who are willing to accept a higher degree of risk, however, may enjoy a substantial upside.

Here’s a side-by-side look at the pros and cons of investing in art.

Rewards	Risks
Art investment offers the potential for higher returns. Art can add diversification to a portfolio, allowing you to better manage market volatility and the impacts of inflation. Investing in art can help you grow wealth while allowing you to support your favorite artists and contribute something to the art community. A significant amount of capital is not necessarily required to begin investing in art. Interest in art has persisted for hundreds of years, making it a reliable investment option for the longer term.	An investment in art is not guaranteed to be profitable. Certain types of art investments offer limited liquidity, which could make it difficult to exit quickly. Valuing artworks is often highly subjective, which could make it difficult for a beginning investor to determine what a piece is truly worth. Owning individual artworks may entail paying maintenance and storage fees, as well as insurance. Forgeries and fakes are a real part of the art world investors must contend with.

Rewards

Risks

Art investment offers the potential for higher returns.

Art can add diversification to a portfolio, allowing you to better manage market volatility and the impacts of inflation.

Investing in art can help you grow wealth while allowing you to support your favorite artists and contribute something to the art community.

A significant amount of capital is not necessarily required to begin investing in art.

Interest in art has persisted for hundreds of years, making it a reliable investment option for the longer term.

An investment in art is not guaranteed to be profitable.

Certain types of art investments offer limited liquidity, which could make it difficult to exit quickly.

Valuing artworks is often highly subjective, which could make it difficult for a beginning investor to determine what a piece is truly worth.

Owning individual artworks may entail paying maintenance and storage fees, as well as insurance.

Forgeries and fakes are a real part of the art world investors must contend with.

If you’re trying to decide whether to invest in art, consider your personal risk tolerance and investment horizon.

Dive deeper: Why Invest in Alternative Investments?

5 Ways to Start Investing in Art

When deciding how to invest in art, it’s important to remember that you’re not locked into any single path. You might choose multiple investment strategies to build out your art portfolio.

With that in mind, here are some of the best ways for beginners to start investing.

1. Fractional Art Shares

Fractional art share investing is a relatively new phenomenon. It works like this:

• You join an art investment marketplace.

• The marketplace vets works of art and lists them for investment.

• You buy fractional shares of individual works of art.

• When the artwork sells you get a piece of the profits.

Typically, you invest a minimum amount to buy a certain number of shares of a work you believe will appreciate. So you might hold 30 shares of a Basquiat piece and 20 shares of a Warhol.

The platform purchases and maintains the art; you don’t actually see or handle it. If it appreciates within a set period of time, the piece will be sold and profits will be distributed proportionately to each investor’s ownership amount.

The downside is that you might need $10,000 or more to get started on a fractional share marketplace. Additionally, you don’t get to choose when the artwork sells — that’s determined by the platform.

While trading fractional shares isn’t available on public exchanges yet, some fractional art platforms operate a secondary market whereby shareholders can execute trades.

2. Art Funds

Art investment funds are typically privately managed funds that offer investors exposure to multiple works. In that sense, they’re similar to traditional mutual funds.

Some art funds are index funds, meaning they seek to replicate the returns of an art market index, similar to a traditional index like the S&P 500. Other art funds are equity funds that try to beat the market.

If you’re considering art funds, check the minimum investment to get started. Certain funds may be limited to accredited investors, or require you to have $20,000 or more to purchase shares.

Also, consider the fund’s expense ratio, which determines your cost of owning it yearly.

3. Art Stocks

Art stocks offer a slightly different way to invest in art. Rather than funding individual artworks, you might invest in publicly traded companies that:

• Manufacture art supplies

• Handle art restoration

• Sell art insurance

• Produce art prints

• Create digital art software programs or applications

• Create software or apps used by museums

This type of art investment is more tangential, but may be worth a look if you’re interested in the art world in its entirety, not just individual paintings or sculptures.

Similar to investing in art funds, consider the minimum investment required to buy shares. And study the stock’s past performance and risks to fully understand what you’re buying.

4. Non-Fungible Tokens (NFTs)

Non-fungible tokens or NFTs are digitized versions of various works, including art. NFTs and their owners are recorded on the blockchain so they can’t be duplicated or reproduced.

If you’re weighing NFTs, carefully consider the risks as well as the amount you plan to invest. A good rule of thumb for this type of investment may be to limit yourself only to what you can afford to lose.

5. Individual Works of Art

You might invest in art by purchasing individual pieces. Again, you may choose from blue-chip, established, or emerging artists.

The advantage is that you can decide when to sell and you’re not necessarily locked in for decades. Art flipping, a controversial practice in art circles, involves buying works of art and selling them quickly for a profit. It’s similar to house flipping, another type of alternative investment.

If you’re interested in buying individual pieces, you might buy them from:

• Galleries

• Private dealers

• Art auctions

Purchasing directly from the artist may also be an option, though this may require some negotiation to decide on a price.

Before buying a piece of art, consider the ongoing costs of ownership. For example, you may need to pay to have it professionally stored to avoid damage to the work. And depending on its value you may need to buy insurance for your investment.

The Takeaway

Art and other alternative investments can help you create a well-rounded portfolio. The important thing to remember is that art is an alternative investment, with specific risks and potential advantages. While you could make a profit with art investments, you could also lose money, so it’s wise to assess the risks before wading in.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

Is art a good investment?

Art can be a good investment for people who have sufficient means to invest and are comfortable with the various risks. It’s possible to realize higher returns from art investments compared to stocks or bonds, but it typically requires a longer holding period. Reduced liquidity can make art a less attractive investment for people who are looking for near-term gains.

How do you start investing in art?

You can start investing in art by deciding which strategy you’d like to pursue. Do you like the idea of owning fractional shares, or share in an art fund? Would you prefer to buy stock in art-related companies? Or do you feel confident in your taste, and budget, as a collector to purchase individual works? Be sure to vet your all-in costs, how long your money might be locked up, and whether there are risks with one choice versus another.

Why do millionaires invest in art?

Millionaires may invest in art for different reasons, ranging from a desire for higher returns to a passion for art as a collectible. As alternative investments go, art can be profitable, though it does take some knowledge of the market to assess which pieces are most likely to see the greatest appreciation.

Photo credit: iStock/Antonio_Diaz

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Jun

2024

Guide to ESAs and How They Work

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

A Coverdell Education Savings Account (ESA) is a tax-advantaged way to set aside money for educational expenses, including those for primary, secondary, and higher education. You can open one in addition to a 529 college savings plan, or in place of one.

Generally speaking, an ESA has similar rules and benefits to a 529 plan, but more stringent income and contribution limits. ESAs offer more investment choices, however.

What Is an Education Savings Account (ESA)?

An Education Savings Account is a type of custodial account that can be established to save money for qualified education expenses for students in grades K-12, as well as in college. ESA funds can be withdrawn to pay for tuition, textbooks, tutoring, and other education-related expenses. Non-qualified withdrawals will be taxed.

Parents, grandparents, and other individuals can open educational savings accounts on behalf of an eligible beneficiary (the student) and make annual contributions. Contributions are limited to $2,000 per year, total, per beneficiary.

ESA Rules

These accounts are different from traditional savings accounts or high-yield savings accounts because they’re designed for a single purpose: funding education expenses. That means you have less flexibility when it comes to withdrawals, but the tax benefits can make up for it.

Setting up a college fund at a bank or brokerage that offers ESAs is usually just a matter of filling out an application and meeting the requirements.

• The beneficiary must be under 18 when the account is opened (or be a special needs beneficiary, per the IRS).

• If you make more than $110,000 in income (for single filers), or $220,000 (married filing jointly), you cannot contribute to an ESA. See below for details.

• It’s possible to contribute to an ESA and a 529 college savings plan for the same student.

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How Do ESAs Work?

Education Savings Accounts work by allowing savers to contribute money for the benefit of an eligible student on a tax-advantaged basis. Contributions are not deductible, but they grow tax-deferred; and withdrawals are tax free when used for qualified education expenses.

Because contributions are made with after-tax dollars (similar to a Roth IRA), you can withdraw the amount of your contributions at any time tax free. But earnings are taxable. Thus the earnings portion of non-qualified withdrawals will be taxed as income, and you may get hit with a 10% penalty on that taxable amount as well.

You might use an ESA to fund future expenses for K-12 tuition, as well as saving for your child’s college tuition. The IRS imposes guidelines on how these plans can be used to pay for education. Unlike 529 plans in some states, you cannot deduct contributions to an ESA.

Income Limits

In addition, your income determines your ability to contribute to an Education Savings Account. You might be eligible to make a full contribution, a partial contribution, or no contribution at all.

For the 2024 tax year, full contributions are allowed for:

• Single filers with a modified adjusted gross income (MAGI) below $95,000

• Married couples filing jointly with a MAGI below $190,000

Partial contributions are allowed for:

• Single filers with MAGI between $95,000 and $110,000

• Married couples filing jointly with MAGI between $190,000 and $220,000

If you file single and have a MAGI greater than $110,000, or are married with a MAGI greater than $220,000, you can’t contribute to an Education Savings Account.

Contribution Limits

The IRS is very clear about how much you can contribute to an ESA each year, for each student. The annual contribution limit is $2,000. That limit applies per beneficiary, no matter how many educational savings accounts they have.

For example, if you open an ESA for your child and contribute $1,400, and the child’s grandparents also open an ESA for the same child, they could only contribute $600 for the same year.

Excess contributions in a given year may face a penalty of 6%, except under certain circumstances. You can find more information at IRS.gov.

ESA Withdrawal Rules

As with any tax-deferred account, whether for retirement (like an IRA) or for education, ESA withdrawals rules are complicated. Withdrawals are tax-free when the money is used for qualified education expenses incurred at an eligible education institution. A qualified education institution is any school that’s eligible to participate in federal student aid programs.

You can use ESA funds to pay for college expenses, secondary school expenses, or elementary school expenses. If you’re using an ESA for college savings, qualified higher education expenses include:

• Tuition and fees

• Books, supplies, and equipment

• Room and board, for students enrolled at least half-time

• Expenses for special needs services for a special needs beneficiary

A portion of the withdrawals that exceed a student’s qualified education expenses are treated as taxable income by the IRS.

Elementary and Secondary School Expenses

ESA funds can also be used to cover tuition and fees, books, supplies, equipment, academic tutoring, and special needs services at secondary or elementary schools. Room and board, uniforms, transportation, and supplementary items may also be covered if the school requires them as a condition of attendance.

Handling Leftover Funds

Leftover funds must be distributed within 30 days of the designated beneficiary’s 30th birthday, unless they qualify for a special needs exception. Or, if the beneficiary dies before turning 30, you must also withdraw any remaining funds within 30 days of their death.

Here’s one important thing to know:

A portion of withdrawals (i.e. earnings) from an Education Savings Account that aren’t for a qualified education expense, including required distributions at age 30, may be taxed as income and subject to a 10% penalty. You can avoid these tax penalties by rolling the balance over to another ESA for another member of the original beneficiary’s family.

ESA Pros and Cons

Is an Education Savings Account a good way to save for education? There are advantages and drawbacks to consider if you’re trying to decide how to pay your child’s college tuition.

Here are some of the pros:

• Earnings grow tax-deferred, and you can open an ESA as a supplement to other college savings plans.

• Qualified withdrawals are 100% tax-free and can be used for elementary, secondary, or higher education expenses.

• Should your student decide not to go to college, you can transfer their ESA to another beneficiary (similar to a 529 plan), but they must be under 30.

• Most ESA plans offer a wide array of investment choices.

Now for the cons:

• With a $2,000 annual contribution limit per child, you can only save so much with an ESA.

• Distributions for anything other than education expenses are subject to tax and penalties (including funds left over when the child’s education is complete).

• Excess contributions may face a 6% penalty.

• High-income earners may be ineligible to contribute to an Education Savings Account.

The deadline for withdrawals at age 30 can also be a disadvantage. With a 529 savings plan, you’re not required to take money out by a specific date or age, and you’re permitted to rollover unused funds to a Roth IRA for the beneficiary.

ESA vs 529 Savings Plan

A 529 savings plan is another tax-advantaged way to save for college. Thanks to a recent rule change, parents can also withdraw funds from a 529 to pay for qualified K-12 tuition expenses.

So, how does a 529 compare to an ESA? Here’s a quick rundown.

	Education Savings Account	529 College Savings Plan
Who Can Contribute	Individuals whose MAGI is within IRS limits	Anyone, regardless of income
Annual Contribution Limit	$2,000 per child	None, though contributions above the annual gift tax exclusion limit may trigger the gift tax Lifetimes contributions (typically between $235,000-$575,000) are determined by each state
Eligible Beneficiaries	Students under the age of 18, or special needs students of any age (you cannot contribute after the student turns 18)	Any future student, including oneself, one’s spouse, children, grandchildren, or other relatives, regardless of age
Investment Options	Typically a wide array of investment choices	Typically limited or pre-set by the plan provider
Taxes on Withdrawals	Withdrawals for qualified education expenses are tax free; all other withdrawals are subject to tax and penalties	Withdrawals for qualified education expenses are tax-free; all other withdrawals are subject to tax and penalties
Eligible Expenses	Withdrawals can be used to pay for elementary, secondary, and higher education expenses, including tuition, fees, books, and equipment	Withdrawals can be used to pay for qualified higher education expenses, including tuition, fees, books, and equipment, as well as K-12 tuition, eligible apprenticeship expenses, and qualified education loan repayments
Mandatory Distributions	All funds must be withdrawn by age 30, excluding special needs beneficiaries	Funds can remain in the account indefinitely or be rolled over to another beneficiary
FAFSA Impact	Treated as parental assets	Treated as parental assets

The benefits of a 529 savings plan may outweigh the advantages of an Education Savings Account. Aggregate contribution limits for 529 plans are much higher and there’s no hard cutoff for using the money.

The Takeaway

Saving up for college can reduce the need for students to take out federal or private loans to pay for school. An Education Savings Account is one option for saving; a 529 plan is another. You can also consider opening a Roth IRA for yourself or your child, as it’s possible to access the amount you contribute for expenses like education.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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FAQ

How does an education savings account work?

An Education Savings Account works by allowing you to set aside $2,000 per year on behalf of an eligible student to cover education expenses, from elementary school through college. Your earnings grow tax-deferred, and you pay no taxes on withdrawals when they’re used for qualified expenses.

Is an ESA the same as a 529?

An ESA is not the same as a 529 plan. If you’re starting college savings late, you may get more benefits from contributing to a 529 plan versus an Education Savings Account. The annual contribution limits for 529 plans are much higher than they are for an ESA, meaning you could save quite a bit more — and you’re not required to stop making contributions once your child turns 18.

What is the income limit for an ESA?

The income limit for making a full contribution to an ESA is $95,000 for single filers and $190,000 for married couples filing jointly. You’ll need to have a modified adjusted gross income below those thresholds to contribute the $2,000 maximum; if you earn up to $110,000 (single) and $220,000 (joint) you can make a partial contribution.

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INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Jun

2024

Guide to Education IRAs

By Dan Miller | Growing Wealth, invest, Investing | Comments Off

There are many different ways you can save for education expenses, and each one comes with its own pros and cons. Depending on your situation, you may want to explore 529 college savings plans, Roth IRAs, or education IRAs — also known as Coverdell Education Savings Accounts (or ESAs).

Education IRAs — more commonly called Coverdell ESAs today — provide a tax-advantaged way to save for primary, secondary, and higher education expenses. Unlike 529 Plans, you can only save $2,000 per year, per beneficiary in an ESA, and your contribution limit is determined by your income.

What Is an Education IRA, or ESA?

Despite sometimes being called an education IRA, this is not a retirement account like a traditional IRA, but is rather intended for education-related expenses, including tuition, tutoring, books, and more.

It’s possible for a parent to consider using retirement funds to pay for college, but it’s generally unwise to compromise your own retirement.

Fortunately, there are many tax-advantaged ways to save for a child’s education. It’s even possible to use an education IRA in combination with a 529 plan, especially if you’re looking for creative ways to save for college.

ESA Basics

It’s important to know that different rules apply to each type of educational account. For example, parents, grandparents, and other individuals can open ESAs on behalf of an eligible beneficiary (the student) and make annual contributions.

But contributions are not tax deductible (as they sometimes are when creating a college fund, depending on the state); and contributions are limited to $2,000 per year, total, per beneficiary. So, if a grandparent opens an ESA for a child, and an uncle opens an ESA for the same child, the total contribution amount per year in those two ESA accounts cannot exceed $2,000.

The perks of a 529 savings plan include: No annual contribution limits; no income limits; contributions are tax deductible in some states. But you can only use up to $10,000 in 529 funds for primary and secondary education expenses.

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Only offers made via ACH are eligible for the match. ACATs, wires, and rollovers are not included.

How Do Education IRAs Work?

ESAs have two primary people involved — the custodian, who manages the account, and the beneficiary, or student. The custodian sets up the education IRA and manages the funds on behalf of the student beneficiary.

An education IRA is a self-directed account, where the custodian can invest the money in assets like stocks, bonds, real estate or mutual funds. The appreciation and interest earned in an education IRA is tax-deferred, which means that appreciation is not subject to tax on capital gains or income. Distributions for qualified educational expenses are also not subject to taxes.

ESA Rules

Here are a few of the rules for setting up education IRAs (i.e., Coverdell ESAs):

Funds Must Be Contributed Before the Beneficiary Turns 18

All funding to an education IRA must be contributed before the beneficiary turns 18 years old, unless they’re a special needs beneficiary per the IRS.

Funds Must Be Distributed Before Age 30

You must distribute all funds in an education IRA before the beneficiary turns 30 (again, this doesn’t apply to those with special needs). However, the custodian may name a new beneficiary if there are still funds in the account when the original beneficiary reaches age 30.

Contribution Limits

Each account may only receive $2,000 in funding each year, total. Additionally, if your modified adjusted gross income (MAGI) is between $95,000 to $110,000 ($190,000 to $220,000 for those filing jointly), you can contribute a partial amount, not the full $2,000. If your MAGI is above $110,000 (or $220,000 for joint filers), you are not permitted to contribute to an ESA.

Tax-free for Qualified Expenses

While contributions are not deductible, assets in an education IRA are considered tax-advantaged, which means you do not pay any capital gains or income tax over time on the money within the account. And as long as you withdraw the money for qualified education expenses, you won’t pay any taxes on the withdrawals either. Nonqualified withdrawals, however, are subject to taxes and a 10% tax penalty.

Pros and Cons of an Education IRA

Pros of an Education IRA	Cons of an Education IRA
Withdrawals for qualified education expenses are tax-free	Limited to $2,000 in contributions per year
Are self-directed, meaning contributors can choose their own investments	Ability to contribute is limited by contributors’ MAGI
Can be used for educational expenses from kindergarten through college	Can’t contribute after the beneficiary reaches age 18*
Beneficiary of an ESA can be changed to a family member of the original beneficiary	Must distribute all funds before the beneficiary turns 30*

*This does not apply to special needs beneficiaries.

Alternatives to Education IRAs

Here are a few alternatives to education IRAs:

529 Plans

A 529 plan is one of the most common ways that people save for college and other educational expenses. Earnings in 529 plans are also tax-deferred and qualified educational expenses can be withdrawn tax free, but in contrast to education IRAs, 529 plans have no limitations on the age of the beneficiary.

Roth IRA

You can also set up a Roth IRA for a child as a way to save for higher education expenses like college. While a Roth IRA is mostly intended for retirement savings, it can also be used for higher-education expenses because you can withdraw your contributions at any time (but there are restrictions on withdrawing investment earnings from a Roth before age 59 ½ ).

High-Yield Savings Account

It is also possible to put some or even the majority of your college savings money in a high-yield savings account. While you lose some of the tax advantages that come with Coverdell ESAs, IRAs, or 529 plans, you also have more flexibility since the money in a savings account can be used for any purpose without penalty. Also, these accounts are typically FDIC insured.

Investing in an IRA With SoFi

While an education IRA is not a retirement account in the way that other types of IRAs are, it can be a good way to save for a child’s education-related expenses until they turn 18. While you cannot currently open an education IRA with SoFi, you can open up a traditional or Roth IRA. Using a Roth IRA is one way to save for both retirement and higher education expenses while giving yourself maximum flexibility.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Help grow your nest egg with a SoFi IRA.

FAQ

Is an education IRA the same as a 529 savings plan?

While education IRAs (now called Coverdell ESAs) and 529 savings plans are both ways to save for education expenses, they are not the same thing. The aggregate contribution limits for 529 plans are much higher than they are for an ESA, so you could save more — and you’re not required to stop making contributions once your child turns 18.

What are the benefits of an education IRA?

An education IRA allows you to save money for a beneficiary and watch that money grow tax-free. And as long as you withdraw that money for qualified education expenses, you won’t ever have to pay income tax or capital gains tax on that money.

What is the income limit for an education IRA?

Education IRAs do limit who can make a contribution based on the adjusted gross income (MAGI) of the donor. Currently, the income limits for an education IRA are $95,000 for single taxpayers and $190,000 for married taxpayers. Single taxpayers with an MAGI of $95,000 to $110,000 and joint filers with an MAGI of $190,000 to $220,000 can contribute a lesser amount due to a phaseout rule. Single taxpayers and join filers whose MAGI exceeds $110,000 and $220,000, respectively, are not eligible to contribute to an educational IRA.

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INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Jun

2024

Guide to Tiered-Rate Savings Accounts

By Jacqueline DeMarco | Budgeting & Goals, Growing Wealth, money | Comments Off

Putting cash into a savings account can be one way to help your money grow, not only by stashing it away so you don’t spend it, but also by potentially earning interest as it sits in the account. One type of interest-earning savings account you might want to0 consider is a tiered-rate savings account.

The interest rate that a tiered-rate savings account earns typically increases as the amount of your savings increases — which can make saving cash even more motivating.

What Is a Tiered-Rate Savings Account?

A tiered-rate savings account is a savings account that has multiple interest rates that can be applied, depending on the amount of money in the account.

The way tiered-rate savings accounts generally work is that as the account holder’s savings grow, their interest rate on the savings account also rises. Interest rates for these accounts are offered on a tiered scale with the largest balances getting the highest interest rates.

A tiered savings account might encourage customers to save more money as they work towards earning the highest possible interest rate. It may also keep account holders loyal to their current bank with a long-term account.

How Do Tiered-Rate Savings Accounts Work?

If you open a bank account that’s a tiered-rate account, the higher your balance is, the higher your interest rate is likely to be. That means as your balance grows, your interest rate has the potential to rise, and your savings may grow more quickly.

Tiered-rate accounts offer account holders different “tiered” interest rates that correspond with different account balances. For example, if a bank offers a tiered-rate savings account they may give a 0.05% interest rate for savings account amounts up to $25,000. For savings ranging from $25,000 to $100,000 they may raise that interest rate to 1.00%.

Tiered-rate savings accounts tend to have a minimum balance threshold needed to open an account for the first time. Typically, a minimum daily balance must also be maintained. In addition, these accounts may require that their holders make a minimum amount of monthly transactions, such as making deposits or transferring money to another account.

Characteristics of Tiered-Rate Accounts

The following features are typically associated with tiered-rate accounts:

• Interest rates rise as account balances grow

• Minimum initial deposit and ongoing balance requirements

• Minimum monthly transaction requirements

Pros of Tiered-Rate Savings Accounts

These are some of the advantages to having a tiered-rate savings account:

Opportunity to Earn Higher Interest Rate on Savings

Tiered-rate savings accounts typically offer higher interest rates than traditional savings accounts do — especially for motivated savers who work to increase their account balances.

Potential for Money to Increase Quicker

Because interest rates can be higher with tiered-rate savings accounts, it’s possible for money held in these accounts to grow faster than it might in other types of savings account, as long as it remains in the account. Because of the effect of compound interest, your money could make more money.

Cons of Tiered-Rate Savings Accounts

There are also some disadvantages of tiered-rate savings accounts that are worth keeping in mind.

Putting Money Elsewhere May Be Better to Build Wealth

The interest rates offered by tiered-rate accounts tend to deliver a lower return when compared to some other investments over time, such as investing in the stock market. While investing in stocks is considered far riskier than earning interest in a savings account, investors could potentially see a higher return over the long term from stocks. This could be helpful when saving for long-term goals like retirement.

Need a Larger Account Balance for the Highest Rates

To secure the best interest rates through a tiered-rate savings account, account holders may need to keep a large sum of money in their savings account. If someone doesn’t have that amount of money, they may find that a standard savings account is better for them.

Here is a chart comparing the pros and cons of tiered-rate accounts:

Pros of Tiered-Rate Accounts	Cons of Tiered-Rate Accounts
Opportunity to earn higher interest rates on savings	Putting money elsewhere may be better for building wealth
Potential for money to increase more quickly	Need a larger account balance for the highest rates

Alternatives to Tiered-Rate Savings Accounts

If you’re looking to earn money on your savings, there are a few different vehicles you can consider for earning competitive interest on your funds.

• High-yield savings accounts: High-yield savings accounts are similar to standard savings accounts, but they earn much higher interest rates. High-yield savings accounts are often found at online banks. These financial institutions don’t have to finance bricks-and-mortar branch locations, so they may pass along the savings to their customers in the form of higher interest rates, lower fees, and/or special bonuses.

• Money market accounts: Money market accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) like savings accounts. They tend to have higher annual percentage yields (APYs) than traditional savings accounts. There is, however, a potential downside: Money market accounts may have significantly higher minimum deposit and balance requirements, and they might also have withdrawal limits much like some savings accounts do.

• Certificate of deposit (CD): Certificates of deposit vs. savings accounts can be a wise choice for some consumers. CDs are time or term deposits, meaning the money stays in the account for a specific period of time (typically six months to a few years, though longer and shorter terms are available). If you withdraw the funds before the maturity date, or the end of the term, you will likely pay a penalty fee. Because of the time commitment involved, CDs may offer higher interest rates than savings accounts and money market accounts.

The Takeaway

If an individual has a sizable amount of money to deposit, they may find that a tiered-rate savings account could be a good option. This type of account offers a way to earn a higher interest rate the more the account holder has in the account.

If, however, a person is just starting their savings journey, a traditional savings account may be a better fit. Either way, an aspiring savings account holder should evaluate such variables as interest rate, minimum deposit and balance requirements, and account fees. That can help them find the right savings account for their needs.

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

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

FAQ

What is tiered APY?

Tiered-rate accounts offer account holders different tiered APY, or annual percentage yield, which is how much you will earn on your cash over the course of a year. The amount of money an account holder has on deposit will qualify them for a certain tier or level. Typically, the more money on deposit, the higher your APY.

What is tiering in banking?

Tiering in banking refers to tiered-savings accounts, which provide account holders with different interest rates based on the balance in their savings account. Usually, the higher someone’s account balance is, the higher their interest rate is.

Is a tiered interest rate good?

A tiered interest-rate structure tends to benefit savers who have high account balances because the more money you have on deposit, the higher your interest rate. If someone has a smaller amount of savings, a traditional or high-yield savings account with a single interest rate may be more advantageous to them.

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

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

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4.60% APY
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 recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, 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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBK-Q224-1927417-V1

Guide to SRI Investing

What Is Socially Responsible Investing?

Interest in SRI Investing Strategies

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.

SRI vs ESG vs Other Investing Strategies

Impact Investing

Socially Responsible Investing

ESG Investing

Sustainable Investing

Corporate Social Responsibility (CSR)

A Focus on Results

Socially Responsible Investment Examples

Understanding SRI Standards

Exploring Different Asset Classes

The Growing Appeal of Socially Responsible Investments

The Evolution of Responsible Investing

Phase 1: Exclusionary Strategies

Phase 2: Proactive Investing

Phase 3: Investing With Impact

Why Choose Socially Responsible Investing?

Investors Can Have an Impact

Socially Responsible Strategies May Be Profitable, Too

Socially Responsible Investing May Help Mitigate Risk

Do Retirement Accounts Offer Socially Responsible Investments?

The Takeaway

FAQ

Is socially responsible investing profitable?

What is the difference between ESG investing and socially responsible investing?

How many socially responsible investment opportunities are there?

What is the socially responsible investment theory?

How do you start socially responsible investing?

Guide to Art as an Investment

What Is Art Investing?

How Art Investing Works

Individual Works

Fractional Shares of Art

Art Funds

Alternative investments, now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.

Types of Artists

Risks and Returns of Investing in Art

5 Ways to Start Investing in Art

1. Fractional Art Shares

2. Art Funds

3. Art Stocks

4. Non-Fungible Tokens (NFTs)

5. Individual Works of Art

The Takeaway

FAQ

Is art a good investment?

How do you start investing in art?

Why do millionaires invest in art?

Guide to ESAs and How They Work

What Is an Education Savings Account (ESA)?

ESA Rules

Boost your retirement contributions with a 1% match.

SoFi IRAs now get a 1% match on every dollar you deposit, up to the annual contribution limits. Open an account today and get started.

How Do ESAs Work?

Income Limits

Contribution Limits

ESA Withdrawal Rules

Elementary and Secondary School Expenses

Handling Leftover Funds

ESA Pros and Cons

ESA vs 529 Savings Plan

The Takeaway

FAQ

How does an education savings account work?

Is an ESA the same as a 529?

What is the income limit for an ESA?

Guide to Education IRAs

What Is an Education IRA, or ESA?

ESA Basics

Boost your retirement contributions with a 1% match.

SoFi IRAs now get a 1% match on every dollar you deposit, up to the annual contribution limits. Open an account today and get started.

How Do Education IRAs Work?

ESA Rules

Funds Must Be Contributed Before the Beneficiary Turns 18

Funds Must Be Distributed Before Age 30

Alternative investments,
now for the rest of us.

Student Loan
Refinancing

Personal
Loans

Online
Investments