Routing Number vs Account Number: When to Use and How to Find

Routing Number vs. Account Number: How to Find

They may not be numbers you can rattle off the top of your head, but your routing and account number are the keys to your banking kingdom.

Your account’s routing number identifies your financial institution, while your account number is unique to your checking or savings account. You need both of these numbers for nearly every bank-related financial transaction you make, from paying bills online to signing up for direct deposit at work.

Learn the difference between these numbers, where to find them, and how to use them safely.

Recommended: How to Transfer Money From One Bank to Another

What is a Routing Number?

A routing number is a sequence of nine digits that identifies a bank or credit union, and each banking institution has a unique number.

A routing number is also sometimes referred to as an ABA number, in reference to the American Bankers Association, which assigns them. Routing numbers are only issued to a federal or state-chartered financial institution that is eligible to maintain an account at a Federal Reserve Bank.

A small bank may only have one routing number, while a larger financial institution may have several (they typically vary by region or state).

Routing numbers are generally required when reordering checks, paying bills, establishing a direct deposit, or making tax payments. The routing number required for making a wire transfer is not the same as the routing number that is printed on your checks, however. That number can be found online or by calling your bank.

What is an Account Number?

While the routing number identifies the name of the financial institution, the account number identifies your account. While anyone can find your bank’s routing number, your account number is private.

Typically between 10 and 12 digits, your account number acts as a road map of sorts to the bank, letting them know where to deposit or withdraw money.

If you have two different accounts at the same financial institution, you will have two different account numbers. The routing number for these accounts, however, will be the same.

Because your account number effectively provides access to the funds in your account, it’s critical that you keep it safe.

When Will I Need A Routing Number or Account Number?

You’ll need to know your account number and, in many cases, also your routing number for a variety of everyday financial transactions. These may include:

• Setting up direct deposit of your paycheck

Setting up autopay

• Making a withdrawal

• Depositing cash or checks into your account

• Filling out a rental application

Linking external bank accounts

• Filling out a loan application

• Scheduling payments from vendors you do business with

• Sending or receiving a wire transfer

• Paying a bill online

Sending or receiving money to family and friends

How to Find Your Bank Routing and Account Number

You can find your routing number and account number printed on the bottom of your checks.

You’ll see three groups of numbers. Typically, the first number (usually nine digits) is the routing number. The next group of numbers (usually 10 to 12 digits) is generally the account number. The third is usually the actual check number.

Don’t have any checks? No problem. You can typically find these two important numbers by going online and logging into your account.

Your financial institution’s routing number is public information and should be easy to find. If your account number is encrypted (and you can only see the last four digits), you may be able to get the full number by downloading a recent bank statement. Another way to get your account number is to go into your bank (you’ll likely need to show ID).

When you are ready to input your routing and account numbers for a financial transaction, it’s a good idea to check your numbers at least twice to make sure you get them exactly right. This will ensure a seamless transaction that avoids delays or any associated bank charges stemming from the funds ending up in an incorrect account.

Protecting Your Routing and Account Number

Although anyone can locate your bank’s routing number, your account number is not public information. Just like you are mindful about who sees your Social Security number, the same goes for your bank account number.

To avoid potential fraud, it’s wise not to share your account number with any person or business unless you absolutely need to, and also to keep your checkbook in a safe place. Any old checks should be shredded before they get discarded. Also wise: not sharing pictures of checks you’ve written on social media.

You’ll also want to make sure your bank account password is secure. You can do this by using a mix of numbers, letters, symbols, upper and lower case letters, and not using any personal information someone could find on social media.

The Takeaway

Your account and routing numbers work together to identify your account and ensure that your money gets removed from the right place, or gets put into the right place.

The routing number indicates what bank your account is held, while the account number is your unique ID number at that bank. Both of these numbers are required to complete many everyday financial transactions.

While your financial institution’s routing number is public information, your account number is private and should be kept safe and secure.

Knowing the difference between these numbers and being able to locate them when you need them is key to making your financial transactions, from setting up autopay to sending people money, go off without a hitch.

Another way to make money transfers–and other everyday money moves–go quickly and smoothly is to sign up for a SoFi Money® cash management account.

With SoFi Money, members can quickly transfer money straight from their phones using the mobile app, making everything from paying bills to splitting the dinner bill fast and simple.

Make it easy to manage your finances with SoFi Money.

Photo credit: iStock/SeventyFour

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. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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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Most Popular Time Of The Year To Buy Furniture

Most Popular Time of the Year to Buy Furniture

Buying furniture is simultaneously exciting and stressful. It can be fun to look at different furniture styles and imagine them in your space. But furniture can be expensive.

Shopping at the right time can help you save a bundle on your new furnishings, no matter what type of pieces you’re looking for: indoor or outdoor, custom or ready-made. In this article, we’ll discuss the best time of the year to buy furniture and some general tips to help you find quality, long-lasting pieces.

When Is the Best Time to Buy Furniture?

The best time of year to buy furniture depends on which kind of furniture you’re talking about. Here are some rules of thumb to keep in mind as you redesign your living space.

Indoor Furniture

Like many other manufactured goods, sales on indoor furniture are dependent on the release of new pieces: when a showroom needs to make room for next season’s stock, they put the older stuff on sale. New furniture designs tend to be released in spring and fall, which means the best sales happen at the end of the winter and summer seasons.

So for indoor furnishings like beds and couches, shopping at your local furniture stores in January/February and July/August and paying special attention to any seasonal or holiday-related sales may offer decent savings on the cost.

Outdoor Furniture

Outdoor furniture, on the other hand, tends to be released in the late winter and spring between February and April. Shoppers might consider the earlier part of that range the best time of year to buy furniture for outdoor spaces in plenty of time for the long, sunny days of summer.

However, furniture shops also generally want to have that stock off their floor by August, which means there are usually some great outdoor furniture sales to shop over the summer and particularly towards early fall.

Custom Furniture

Having a piece (or three) hand-built to your specifications can bring your interior design dreams to life. However, on-demand, custom-built furniture typically costs more and is less likely to go on sale the way ready-made furniture does.

That said, buying custom furniture can be better for your budget in the long run if it means you won’t be itching to change your furniture again in a couple of years—or if it means your furnishings are of higher quality and, hopefully, a longer life. Plus, buying custom designs from a small business, or even an individual crafter, can feel more rewarding than purchasing something from a big-box store.

Furniture Shopping on Holiday Weekends

As is true of many major purchases, holiday weekends and annual sales can offer excellent opportunities to buy furniture on the (relatively) cheap. Some holidays that routinely bring furniture sales include:

• Presidents Day.

• Memorial Day.

• Fourth of July.

• Labor Day.

• Black Friday and other winter holiday sales events.

Many retailers offer regular sales in addition to these events, so it’s always a good idea to watch for promotions. Signing up for the store’s email newsletter can help keep you apprised of their ongoing sales events, and many dealers also offer clearance stock year-round that could be worth perusing.

Recommended: 25+ Tips for Buying Furniture on a Budget

General Furniture-Buying Tips

No matter what time of year you shop for your furnishings, the following tips can help you find a good deal and get the most for the money you do spend.

Being Patient

Furniture—especially furniture you want to keep around for a decade or longer—is a big purchase. It’s worth waiting to find the right piece rather than dropping a bunch of money on one that’s only okay.

If you’re furnishing your new home for the first time and need something fast, consider visiting a local thrift shop or surfing Craigslist. You might be able to find an inexpensive, pre-owned piece that’s only temporary, but still workable—and won’t eat too much into your budget.

Shopping Around

With so many design aesthetics and price points to choose from, furniture shopping is not a time for brand loyalty. Shopping around at different dealers can help you find the best deal for your needs, but also give you more ideas and inspiration when it comes to creating a cohesive look for your home.

Consider Shopping Online

Shopping for furniture online can open a whole new world of color and design options. Some discount furniture retailers don’t offer physical storefronts, which can make shopping a little tricky. Choosing certain pieces of furniture, like couches and armchairs, for example, maybe easier if you try them before you buy them.

Many online furniture retailers do offer return policies, which can help make your purchase less stressful, knowing that if it doesn’t work out, you’re not stuck with the product. And at online stores that do have brick-and-mortar locations, you could visit in person, try out a certain model, and then order online later, which may give you a better opportunity to compare the pieces you’re considering side-by-side.

Asking About the Warranty

Since furniture does tend to be a major expense, you want to make sure it’s built to last and has some guarantee to go with that. Many furniture sellers do offer warranties, and the fine print may also specify what the return policy is. In short, it’s worth getting familiar with.

The Takeaway

Shopping for furniture during certain times of the year can help you save money on a potentially expensive project like furnishing your home. When budgeting to buy a house, furnishings are just one of many things to save for, so it’s a goal that might take a backseat to expenses that are essential to homeownership, like the down payment and monthly mortgage, among others.

SoFi Money® is a financial tool you can use to set cash aside for a variety of different financial goals, with the option to set up different Vaults for different goals—including a living room full of brand-new furnishings. There are no account fees and no minimums required to set up Vaults and start saving toward your financial goals.

Learn more about SoFi Money.

Photo credit: iStock/fizkes

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. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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How to Read Crypto Charts: 2021 Complete Guide

How to Read Crypto Charts: 2021 Complete Guide

Reading crypto charts is an important skill for anyone who wants to trade digital assets. Understanding crypto charts will allow you to perform the technical analysis necessary to make investing decisions.

Here’s what to know:

How to Read Cryptocurrency Charts

There are many potential methods for reading crypto charts.

Some factors aside from the chart itself can be worth considering too, as important events or changes in overall market sentiment can have a heavy-handed impact on charts.

For best results, traders can implement multiple methods of reading crypto charts at the same time. When several different indicators lead to similar conclusions, market observers have more confidence in their predictions. Relying on a single indicator is likely to create an incomplete picture and could be misleading.

Recommended: 6 Things to Know Before Investing in Crypto

1. Support & Resistance Levels

Support and resistance are among the most basic technical analysis concepts used when reading charts. Support refers to a potential bottom in prices, while resistance refers to a potential top. Prices tend to reverse at these points, and if they don’t, it can mean that a new trend has emerged.

When prices breakout beneath support, further declines could be possible. Likewise, when prices breakout above resistance, further increases could be possible.

Pivot points, predictive indicators that average the high, low, and closing price from the previous trading session, provide a more precise way to calculate specific support and resistance levels. Traders who are serious about reading crypto charts could begin by researching topics like pivot points more thoroughly.

2. Moving Averages (MA)

Moving averages plot a line on a chart that indicates the trend of price averages over a certain period. Investors can use MAs for just about any time frame, but many believe that long-term averages carry more weight as they include more data. The same can be said of most technical indicators.

Investors also often use multiple moving averages in conjunction with each other. For example, investors consider a “golden cross” a bullish signal, while a “death cross” is a bearish signal.

A golden cross happens when a short-term moving average rises above a long-term moving average. Often this involves the 50-day MA moving above the 200-day MA. A death cross happens when this trend reverses and the short-term moving average falls beneath the long-term moving average.

3. Volume Weighted Average Price (VWAP)

The Volume Weighted Average Price (VWAP) appears on a single line on a chart. Similar to a moving average, VWAP includes one crucial variable – volume. Including volume into the average price calculation may create a more accurate picture of previous price behavior. A trend based on low volume could be weak and reverse quickly, while a trend based on high volume is thought to be more robust.

4. Relative Strength Index (RSI)

The RSI is another often-used and easy-to-read indicator. It appears as a single line beneath the price chart itself, with a value between 0 and 100, with 50 being neutral. A low RSI reading may signal oversold conditions, meaning prices could rise soon, while a high RSI reading could signal overbought conditions, meaning prices could fall soon.

The closer the RSI is to its extremes of 0 or 100, the more reliable investors consider it. In some cases, the RSI can remain elevated or suppressed for long periods before the foretold price reversal materializes. For this reason, it can be helpful to use other price indicators alongside ones like the RSI.

5. Crypto Fear & Greed Index

The Crypto Fear and Greed Index provides an approximation of overall market emotions. Using a variety of data, the index shows a value between 0 and 100, with 100 being maximum greed and 0 being maximum fear.

This is a contrarian indicator, meaning investors might use it to do the opposite of what everyone else is doing. When the index reads below 20, that signals extreme fear, and could mean buying opportunities. When the index reads above 80, that signals extreme greed, and could mean it’s time to take some profits.

Recommended: How to Use the Fear and Greed Index to Your Advantage

6. Trends Tend to Continue

Figuring out exactly when a trend is about to reverse can be difficult if not impossible much of the time. Many believe it’s better to just identify existing trends and try to ride on that momentum.

But how do you know exactly when a trend has changed? It’s difficult to say, and traders might disagree. In general, it’s when a pattern breaks down or prices close above resistance or below support, for example, the trend may have changed course.

7. Candlestick Charts

Candlesticks are price charts that show the high, low, opening, and closing prices of cryptocurrency during a specific time period. When you set up a candlestick chart, you’ll choose the time period that you want it to cover.

8. Bitcoin Dominance

One last factor worth taking note of when reading crypto charts is Bitcoin dominance . This number, expressed as a percentage, refers to the amount of the crypto market captured by Bitcoin. For many investors, the higher this value rises, the more bullish they are on Bitcoin, while being bearish for many altcoins.

The opposite is also thought to be true. Investors may perceive a decline in Bitcoin dominance as a bearish signal for Bitcoin and bullish for altcoins.

On April 22nd, 2021, Bitcoin dominance fell below 50% for the first time since 2018. Some market observers believe this means that Bitcoin could either fall or trade sideways for a time while many altcoins rally.

Bitcoin forks can also potentially impact Bitcoin dominance, as a new altcoin is created when this happens.

Recommended: How to Invest in Bitcoin

The Takeaway

This has only been an introduction to how to read crypto charts and tips for investing in Bitcoin and crypto. Using one or more of the above listed methods can help traders make informed decisions, but they may also want to do additional research.

If you’re ready to start trading cryptocurrency, consider opening an account on the SoFi Invest brokerage platform. It allows you to trade not only cryptocurrencies, but also stocks and exchange-traded funds.

Photo credit: iStock/SARINYAPINNGAM

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 . 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.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
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.

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US Coin Shortage — What to Know

US Coin Shortage — What to Know

The coin shortage that started during the COVID-19 pandemic actually hasn’t gone away. While the situation has improved since 2020, there is still a lack of change currently circulating in the U.S.

Initially fueled by the pandemic and a growing trend towards cashless transactions, the current coin shortage is causing a problem for businesses and many others.

Here’s what’s happening with the national coin shortage, why it matters, and what you can do about it.

Are More Coins Available Now?

Yes, but, according to the U.S. Federal Reserve , there still isn’t enough loose change making the rounds.

Indeed, in May 2021, the U.S. Federal Reserve acknowledged that businesses and banks in various parts of the country were once again having a hard time getting their hands on enough coins.

The current coin shortage, however, isn’t the same as it was during the height of the pandemic when fewer coins were being produced.

The U.S. Mint has been operating at full production capacity since mid-June of 2020. Last year, the Mint produced 14.8 billion coins, up 24% from the year before.

The problem, says the U.S. Coin Task Force (a group established by the U.S Mint and Federal Reserve in July 2020) is that much of this change isn’t making the rounds.

Instead, it’s “sitting dormant” in the pockets, jars, and couch cushions of America’s 128 million households.

What Caused the US Coin Shortage?

One of the chief causes of the 2020 coin shortage was that production at the United States Mint was slowed due to the COVID-19 pandemic.

Business and bank closures associated with the pandemic also significantly disrupted normal circulation patterns for U.S. coins, according to the Federal Reserve.

The other problem was that early in the pandemic, very few coins were circulating in the economy.

Due to stay-at-home orders, fewer people were going out and spending money. As a result, there was a major shift in consumer behavior from shopping in person to making purchases online and via delivery apps, where it isn’t possible to use cash.

Even when businesses reopened, concern about COVID-19 transmission led many people to want to touch fewer things, and that included cash. This continued to increase the popularity of cashless transactions.

Recommended: How To Cut Back on Spending

How the Coin Shortage Affects Consumers?

A coin shortage can disproportionately hit lower-income families that don’t have debit or credit cards, and that rely on cash for getting paid and making payments. If you mostly use credit or debit when making in-person purchases, then the coin shortage may not have impacted you much.

According to the Federal Deposit Insurance Corporation (FDIC) , roughly 5.4% of American households (roughly 7.1 million total) are unbanked, which means they don’t have a credit or debit card and rely solely on cash.

Small businesses have also suffered. These businesses, which often deal in cash, are not able to complete cash transactions if they don’t have enough coins to make change. They also don’t have the same systems in place as larger retailers to provide gift cards or other solutions in lieu of change.

What You Can Do to Get Coins Moving Again

The U.S. Coin task force is recommending a simple solution to the national coin shortage–breaking open your piggy bank, coin jar, or change cup, and starting to spend all those quarters, nickels, dimes, and pennies.

According to the task force, “if just a fraction of the coins sitting dormant in households and businesses is redeemed and reused, this problem can be greatly reduced.”

By spending or depositing your coins, or redeeming them at a coin kiosk, consumers can help close the circulation loop that has been disrupted in recent years and get a small but important part of the market moving again.

Recommended: COVID-19 Financial Guide

The Takeaway

Even before COVID-19, there was already a change in the way consumers were using coins, due to the increasing popularity of cashless transitions.

But a national shutdown and stay-at-home orders, coupled with concern about how COVID-19 was transmitted, led to an abrupt pause in the way coins were naturally being circulated throughout the economy.

While there are plenty of coins being minted today, much of the supply is sitting unused in people’s homes or wallets. This has a negative effect on small businesses as well as people who, out of necessity or preference, rely on cash for making purchases.

Buying items in cash, and handing over your spare change when you do, can help ease the current coin shortage.

As an added benefit, you may also find that using cash (rather than always relying on debit or credit) can also be good for your budget. When you can literally see your money going somewhere, you may find yourself becoming much more intentional in the way you spend it.

With a SoFi Money® cash management account, getting cash is easy and convenient. Members have access to 55,000+ fee-free ATMs worldwide within the Allpoint Network.

Check out all the benefits of joining SoFi Money today.

Photo credit: iStock/Christian Horz

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. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.

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How To Calculate Marginal Propensity to Save

How to Calculate Marginal Propensity to Save

In economics, when an individual’s income increases, the marginal propensity to save (MPS) determines the amount of money saved instead of spent on goods and services. MPS is an element of Keynesian Economic Theory, which helps economists determine how to spend government dollars or private funding. But what does MPS mean to the average household’s savings? This article will explain how to calculate MPS, why it matters, and what it means to you.

The Keynesian Economic Theory, Explained

Economist John Maynard Keynes published The General Theory of Employment, Interest, and Money, or simply as The General Theory, in 1936. This text changed economic thought from that point on and is known as one of the classic economic publications. In the book, Keynes tried to explain economic fluctuations, especially the ones seen in the Great Depression of the 1930s.

Essentially, The General Theory was built on the idea that as a result of inadequate demand for goods and services, recessions and depressions could occur. Keynes’ theory was not just for economists—it was intended for policymakers worldwide. Keynes advocated for an increase in government spending, which would boost the production of goods and services to minimize unemployment rates and enhance economic activity. In general, this theory went against the traditional economic policy of laissez-faire, which requires minimal government involvement.

There are three main elements of this theory. These elements include:

Aggregate demand: This is the demand influenced by the public and private sectors. The level of demand in the private sector may impact macroeconomic conditions. For instance, a lull in spending may bring an economy into a recession. At this point, the government can intervene with monetary stimulus.

Prices: Wages, for example, are often slow to respond to supply and demand changes. This may result in an excess or shortage of labor supply.

Changes in demand: Any change in aggregate demand results in the most considerable impact on economic production and employment. The theory states that consumer and government spending, investments, and exports increase output. Therefore, even a change to one of these factors and the output will change.

The Keynesian Multiplier was created as a result of the change in aggregate demand. The Keynesian Multiplier states , “The economy’s output is a multiple of the increase or decrease in spending. If the fiscal multiplier is greater than 1, then a $1 increase in spending will increase the total output by a value greater than $1.”

How to Calculate Marginal Propensity to Save and Consume

The Keynesian Multiplier value relies on the marginal propensity to save (MPS) and the marginal propensity to consume (MPC).

Marginal Propensity to Save

When people receive additional income, the MPS is the change in the savings amount. If their income increases, the MPS measures the amount of income they choose to save instead of spending it on goods and services.

That said, the MPS is calculated as MPS = change in savings / change in income.

For example, let’s say someone received a $1,000 raise. Of that $1000 increase in income, they decide to spend $300 on new clothes, $200 on a fancy dinner out, and save the remaining $500, so the MPS is 0.5.

(1000 – 300 – 200) / 500 = 0.5

Marginal Propensity to Consume

Conversely, the MPC is the change in the spending, or consuming, amount. If someone’s income increases, the MPC measures the amount of income they choose to spend on goods and services instead of savings.

With this in mind, MPC is calculated as MPC = change in consumption / change in income.

By using the example above, the MPC would be 500 / 1000 = 0.5.

Factors That Influence Saving and Consumption

The MPS and MPC seem pretty straightforward. However, both calculations only account for the excess of disposable income; the calculations don’t account for other factors that may influence a consumer’s consumption functions. If one of these non-income factors shifts, the entire consumption function may shift. Here are some of the non-income factors that may influence a consumer’s consumption function.


Wealth and income are two different variables in economics. For example, suppose Javier has a job earning $60,000 per year. If his aunt Ines passes away and leaves him $200,000 as an inheritance, his income is still $60,000 per year, but his wealth has increased. Similarly, if Javier owns a piece of art that increases in value or his investment portfolio grows, his wealth has also gone up. Just because his wealth increases doesn’t mean his income does as well.

Therefore, an increase in wealth may increase consumption despite income levels staying the same. However, both the consumption and savings function may shift upwards as well because of the newfound wealth. The same is true in the opposite situation. If wealth decreases, the consumption and savings functions may decrease as well.

Recommended: What is the Average Savings by Age?


In some cases, consumers may adjust their spending habits based on the expectation of future income coming their way. Expectations change the shift in consumption and savings functions because there is no change in actual income, just how it’s being spent.

For example, suppose Naomi assumes her income is going to increase soon. She may consume more now because of her expectation that her income is about to grow. This may highlight an upward shift in the consumption function without an increase in income.

On the other hand, if Naomi were pessimistic about her future income, such as the fear of losing her job, she may decrease her consumption without dropping her income. This scenario may also shift the consumption factor.

Recommended: Changing Your Spending Habits: A Guide


Consumers may also adjust their consumption and savings if they’re in debt. It’s observed that in economies where consumer debt rises, savings go up while consumption goes down. There is a level of debt when consumers typically feel uncomfortable spending more. Even if their income remains the same, if too much debt plagues their pocketbooks, they will start to save more and spend less so they can pay off their debt.

Conversely, if there are low levels of debt, consumers tend to spend more and save less.

Why Marginal Propensity to Save Matters

Using the data from MPS and MPC helps businesses, governments, and foreign policymakers determine how funds are allocated. For example, economists can assess this data to determine increases in government spending or investment spending, influencing savings numbers.

As for consumers, using the marginal propensity to save formula can help them make adjustments to their own spending habits. If their MPC is higher than their MPS, adjustments to consumption may need to be made.

How to Start Saving Money

While the way consumers spend helps the government and economists determine the best way to increase government spending, the way you choose to spend your money can help you set up a solid financial future. Carefully considering all of your spending options may get you on a path toward financial security.

So if a windfall comes your way, you may want to consider carefully choosing how to spend those funds. While it’s tempting to use the money on a shopping spree, putting it in some type of savings account may be a better financial decision. After all, saving your extra disposable income can help build a rainy day fund for emergency expenses, help you stay away from debt, and accumulate a nest egg for your retirement.

Recommended: Why Saving Money is Important

Here are a few steps for getting started:

Identifying Your Savings Goals

Do you have short-term goals like accumulating an emergency fund to pay for unexpected expenses? Or perhaps you want to save for a family vacation? Maybe you have a medium-term goal, such as paying for a wedding reception or a new kitchen renovation. Or would you like to save for retirement as a long-term goal? No matter your goals, you’ll want to have a clear idea of how much cash you need and by when.

First, decide on a goal date—when you want to have the money save by. Then, divide the goal amount by the time frame, in months, to determine how much cash you need to stash away each month. Finally, decide where to keep the funds.

• If your goal is short-term, you may want to consider putting your cash in a high-yield savings account or money market account. Either type of account is relatively low risk and is likely to be FDIC or NCUA insured, depending on the financial institution.

• If the goals are more long-term, retirement accounts or brokerage accounts are worth considering since they may help your money grow.

Creating a Budget

It’s hard to keep track of your money if you don’t know where it’s going. Creating and sticking to a budget is a great way to monitor your spending habits so you can stay on track.

To start, take note of your expenses for a month or two. Next, create a monthly budget that reflects the average spending amounts for fixed expenses such as your mortgage and variable expenses such as eating out or clothes shopping. If you determine you’re spending more than you earn, you may want to look for ways to cut back on your expenses, such as canceling subscriptions you don’t use.

Using a tool like SoFi Relay makes it easy to track and categorize your expenses. It also helps you find ways to save and lets you monitor your progress toward your goals.

The Takeaway

When you receive an increase in your income, setting up automatic contributions to your savings or retirement accounts allows you to set aside extra money by automating your savings instead of having to manually transfer money each month.

SoFi Money® is a cash management account worth considering when looking for a savings vehicle. It can help you spend, save, and earn all in one place. Set goals and save for them using the account’s automated savings features, all without paying any account fees.

Ready to start saving? Take a look at the benefits of using SoFi Money.

Photo credit: iStock/MarsBars

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. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
SoFi’s Relay tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
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