How to Open a Bank Account For a Minor

Guide to Opening a Bank Account for a Minor

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

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

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

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

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

What is a Bank Account?

Much like regular bank accounts, minor bank accounts provide convenience, safety, and flexibility when it comes to saving and spending money.

For younger children, saving money in a safe place may be the primary reason to open a minor bank account. Sure, that piggy bank you bought them is cute, but it’s not exactly Fort Knox. A bank account is secure, and the funds deposited will likely earn a bit of interest.

Teens may find the same benefits to a savings account. However, they may also be excited to test-drive the checking and debit-card features that minor checking accounts offer. These accounts can be a valuable learning tool in terms of budgeting. They will become familiar with how money flows in and out of an account; they may even overdraw their account for the first time and learn from it.

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

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

Driver’s License

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

Social Security Card

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

Child’s Social Security Card

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

Child’s Birth Certificate

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

Proof of Address

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

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Types of Bank Accounts for Children

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

Checking Accounts for Children

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

Savings Accounts for Children

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

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

Recommended: How Does a Savings Account Work?

What to Look for in Bank Accounts for Kids

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

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

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

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

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

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

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

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

Tax Implications

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

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

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

Open a Bank Account With SoFi

While you’re thinking about a minor bank account, why not take a fresh look at your own banking needs?

If you want an account where you can earn interest, spend, and save all in one place, check out SoFi Checking and Savings. We offer over 41 times the average checking account interest rate; sign up for direct deposit, and you’ll earn 1.25% APY. Plus, you won’t pay account fees and you’ll have access to 55,000+ fee-free ATMs worldwide.

See how smart and simple banking with SoFi can be.


Photo credit: iStock/Riska

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 1.25% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 0.70% APY on all account balances in their Checking and Savings accounts (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.25% APY is current as of 4/5/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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25 Tips to Cut Costs When Traveling With Pets

25 Tips to Cut Costs When Traveling With Pets

Traveling can already be costly, but add a pet and your prices could be even more anxiety-inducing. But sometimes traveling with a pet is unavoidable, be it because you’re planning on being gone for a while or you simply want to bring your best friend with you. Fortunately, if you’re looking for the cheapest way to travel with a dog or another pet, we have some tips to help. Beyond making sure you have all the budgeting tips you need to create a travel fund, here are some more pet-specific ways to save on travel.

1. Be Savvy About Pre-Travel Vet Trips

If traveling by air or train, review what checkups and vaccinations your pet needs to travel well in advance. This will allow you to shop around for the cheapest vet, which can provide some major savings. This tip can really help you if you own a pet on a budget, even when you’re not traveling, as comparing local vet prices can help you save money on your pet’s next check-up!

2. Make a Packing List for Your Pet

Just like you make a list for yourself, a partner or even kids, make sure you have a list for your pet, too. This can prevent you from having to waste money re-purchasing items at your destination because you didn’t pack them.

3. Bring a Leash & Harness

This may sound obvious, but it can be overlooked if you’re planning a trip to the country or somewhere else your pet may have free-reign. However, in an emergency situation, already having these items packed and readily available can save you both time and money. Plus, many cities and towns have laws that require dogs to wear leashes. Check out the laws in your travel destinations ahead of time to avoid potentially getting hit with a fine if you’re caught with a dog off-leash in an area with leash laws.

4. Pack Extra Food

Even if you don’t think you’ll need it, pack extra dog food and treats. If you end up being delayed because of traffic, layovers, canceled flights or other inconveniences you may end up having to buy pet food you didn’t plan for. Worse still, depending on where you’re delayed, you may have trouble finding spare pet food to purchase at all.

5. Don’t Forget Portable Water Bowls

At some point, be it while hiking or at a rest stop on a road trip, your pet is going to become thirsty. If you forget to bring a collapsible bowl, you may have to buy one on the road if you don’t have an empty cup large enough for them to drink from.

6. Check Your Carrier Dimensions

If you’re bringing Fido in a carrier for a train or airline, double-check ahead of time that your carrier fits their regulations. Just like luggage and carry-ons, airlines often have specifications for carrier sizes. Making sure your carrier will be accepted ahead of time can save you a lot of time and money.

7. Invest in Pet Car Safety Items

If you’re driving, make sure you have everything you need to make sure your pet gets to your destination safely. Sure, this may cost you money upfront, but a proper pet seat belt or travel crate could save your pet’s life or prevent costly injuries in case of an accident.

8. Compare Airline Pet Fees

An airplane isn’t exactly the cheapest way to travel with a dog or any other pet. Why make it more expensive by just going with the first airline that pops up on your search engine? You can save money by doing some comparison shopping sans pet, and given how expensive pet fees can be, it’s even more important to do so when traveling with your furry companion!

9. Consider Skipping the Hotels

Hotels can charge some pretty hefty pet fees, especially if your pet weighs more than 10 or so pounds. You can avoid the fees by opting for an Airbnb instead. Not only can this be a cheaper option when traveling with a pet, but it could give your friend more space to run and play, especially if your host has a backyard.

10. Research Dog-Friendly Cities

Pet fees in a major city like New York City are bound to be higher than those of a remote campground in, say, northern Michigan. So you may want to do your research before finalizing your destination to find cities and towns that are pet-friendly both in terms of the average fees charged for pets at hotels and how many dog-friendly activities are around.

11. Look for Free Dog-Friendly Activities

Look for cities that offer beaches, hiking trails, parks and perhaps even restaurants where your furry pal can tag along. Many pet beaches and parks are free, so you and your pet can have a good time on a budget!

12. Determine if it’s Cheaper to Pack Pet Food

If you’re not traveling by airplane or a train with bag limits, then the odds are that it’ll be cheaper to bring your pet’s food than it will be to buy a bag at your destination. However, if your pet food weight is going to drive up the prices of your luggage, you may actually be better off just buying food from a local pet store when you land.

13. Don’t Forget the Toys!

Your pet will still want to play fetch, snuggle with her favorite stuffed squeaker and chew on his favorite bone. Not bringing toys could mean you have to buy toys at your destination to stave off having a grumpy (and even destructive) pet.

14. Pack a Pet Essentials Bag

Emergencies happen. Your pet could catch a cold playing in some mud at a rest stop or have an allergy flare up and need eye drops. To avoid paying for overpriced medications on the road, pack a bag of essentials you can keep handy whenever you’re out with your pet. Your bag could include wipes, treats, an extra leash, pills, water or anything else you think your furry friend may need in a pinch.

15. Reconsider Rental Cars

Many rental car companies charge exuberant fees for bringing along a pet. And if you don’t disclose you’re bringing a pet to avoid the fees, you could end up getting charged even more if they find dog hair or any accidents when you return the car. The cheapest way to travel with a dog is often to bring your own car, if possible. And if it isn’t, you may want to ask a close friend or family member if you could borrow theirs for the trip. Just be sure to offer to pay them and return it clean … or at least bring them back some great souvenirs!

16. Try Traveling by Train

If cars and airplanes aren’t going to work for your situation, then you may want to consider traveling by train. For instance, Amtrak allows you to travel with pets under 20 pounds if you keep them in a carrier for just $26 or 800 rewards points.

17. Collect Your Membership Cards

Are you a part of any membership programs with any chain pet stores? Be sure to bring those cards with you as you travel with your pet. These loyalty programs often offer benefits such as discounted products & services, and even rewards points that can benefit you and your budget if you end up needing to buy something at your destination.

18. Research Local Vets & Emergency Clinics

No one wants to think about a pet getting sick or injured on a trip. However, knowing your options and having a plan if an emergency happens while you’re out of town can save time and money.

19. Check Your Pet Insurance Policy

Check if your pet insurance policy is likely to cover a pet bill from a vet office that is out of town. Additionally, make sure the policy is up-to-date before leaving to avoid paying high fees if you do need a vet while you’re on vacation. You probably don’t want to find out your pet insurance expired during an emergency vet visit while traveling.

20. Ask About Public Transportation Policies

Do you plan on traveling by cab or bus when you get to your destination? Call ahead of time and see if your furry companion is allowed to ride with you on the modes of public transportation you plan to use. Most cities allow animals that can fit in a carrier under the subway or bus seat to ride for a small fee or even free.

21. Don’t Forget About Non-Pet Savings

Have a few tried-and-true travel hacks? Be sure to use them even if you’re traveling with a pet! You can save on human and pet-related grooming products by using hotel soaps and shampoos, if your pet doesn’t have an allergy to them. Other popular hacks, like having flexible travel dates and using credit card points can also still save you money when you travel.

22. Try to Get Direct Flights Only

If you have to take an airplane, try to only take direct flights. While layovers could mean savings if you’re traveling alone, it actually could end up costing you more time and money with your pet. A direct flight can be less stressful for your pet and prevent you from spending on food and amenities to pass the time.

23. Travel During ‘Off’ Season

Airplanes, rideshares and other means of transportation with a pet will all be cheaper if you travel during odd times. The cheapest days to fly are usually Tuesday or Wednesday, for instance, and prices for Uber and Lyft are lowest outside of commuter hours. By traveling during less busy times and seasons, you’ll most likely have lower costs for services like UberPets, too.

24. Use Rewards Points

Pet or no pet, rewards credit cards can help you save money while on vacation. If you’ve collected enough rewards points and awards you can use them toward your expenses to cut down on costs. And even if your rewards bank is empty, you can still use your cards to build up points so you’ll have a nice stack of bonus rewards ready to use on your next trip.

25. Skip Indoor Activities

Operas, theaters, museums, and other touristy activities may be fun for you, but not so much for your pet. Plus, if your pet can’t really be trusted alone, the costs of finding an animal daycare or a pet sitter while you’re gone for a few hours may be pretty expensive. Even if your pet is usually fine alone, the anxiety from being somewhere new without their owner could trigger stress and anxiety, and cause them to have an accident or destroy something while you’re gone that you’ll be charged for. Instead, try finding free or inexpensive things you could do with your pet, like hiking or swimming in a lake.

Other Pet Travel Tips

Before hitting the road (or air) with your furry pal, you may want to help you and your pet prepare for what traveling will be like. Here are few extra tips that can help you and your pet stay safe and happy while traveling, especially if your pet is new to long-distance travel.

1. Practice Traveling

If your pet has never been on a long car ride before, take a few practice trips before a big trip. Jump on the expressway for an hour or so to see how your pet does. This can help your pet get used to traveling for a longer period of time than they’re used to.

2. Plan for Extra Potty & Play Time

You may be in a hurry to get to your destination, but your pet may need to take more breaks than you think, especially if you’re traveling by car. So when you’re planning your trip, take into account how often your pet usually needs to go to the bathroom or how long they can realistically be in a car without exercising and make room for a few more breaks in the day where possible.

3. Talk To Your Vet about Pet Anxiety

If your pet is anxiety-prone, talk to your vet about safe ways to help your pet calm down, which may include prescription or drug store calming supplements. If your pet is especially anxious, you may want to consider asking a close friend or family member to pet sit and leave the pet behind, if possible.

4. Bring Comfort Items

Having a few comfort items can help make the journey easier for your pet. Bringing a favorite toy, blanket, or even a dog bed if you’re traveling by car can all go a long way in helping them keep calm and feel at ease while traveling somewhere new.

5. Keep to Scheduled Meal Times

If possible, feed your pet around the same times you usually would while you’re traveling. Plus, try to feed them the same food they’re used to getting. This can help keep their bellies from getting upset and help them have a sense of routine, which is especially important for anxious pets.

The Takeaway

Traveling with a beloved pet can be fun if you’ve got the budgeting basics and tips you need to make sure the trip is successful. While it can be more costly, with proper planning, bringing your furry friend along doesn’t have to be outrageously expensive.

If you need help budgeting for a vacation with a pet, consider opening a Sofi Checking and Savings account. The automatic savings feature can help you collect and organize your trip money, and you can earn 1.25% APY by setting up direct deposit. Plus, using your SoFi debit card locally can earn you up to 15% cash back that you can also put toward your travel fund.

See how a SoFi Checking and Savings account may work for you.


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 1.25% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 0.70% APY on all account balances in their Checking and Savings accounts (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.25% APY is current as of 4/5/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet

Photo credit: iStock/Fenne
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What Is a Liquid Certificate of Deposit?

Guide to Liquid Certificates of Deposit (CDs)

If you’re looking for a safe but accessible way to grow your money, a liquid certificate of deposit (CD) could be a good option. Managing your money is all about managing risk, and a liquid CD can allow investors to secure interest with very low risk. Granted, returns from liquid CDs may not be as competitive as stock market investments. However, when you’re committing to a liquid CD, you’ll have a fixed, guaranteed payment when the account matures.

If you are the type of investor who is not in the financial position to take on a potential loss, putting your money in a liquid CD for a period may be a suitable option. The best part is, you can access those funds anytime and withdraw money from a liquid CD without paying fees. Here, we’ll take a closer look at liquid CDs and review:

•   What a liquid CD is

•   How to withdraw money from a liquid CD

•   The pros and cons of liquid CDs

•   Alternatives to liquid CDs

What Is a Liquid Certificate of Deposit?

Before you think about investing in a CD, let’s get the terminology clear. A certificate of deposit, or CD, is usually a savings vehicle that gives you a bit of interest with virtually no risk, provided you keep the money in place for a certain term. If, however, you withdraw funds before the CD matures (or reaches the end of its term), you are usually penalized. You will likely lose some or all of the interest earned and perhaps even a bit of the principal.

A liquid certificate of deposit, on the other hand, gives you flexibility. It allows account holders to withdraw money from their account prior to the maturity date without incurring penalties. (You may also hear it referred to as a no-penalty CD, in fact.) This means you can access funds in the CD should you need them, which can provide peace of mind and some real-life help. It’s worth noting, though, that you will probably pay for this privilege: The rates for liquid CDs tend to be lower than other kinds of CDs.

Understanding a Liquid CD

You may be wondering, “What are liquid assets?” Let’s dive in a little deeper. In the realm of finance, the concept of “liquid” means that an asset can quickly be converted to cash. A liquid CD is a time-bound deposit account where you can earn interest for a specific period of time. Compared to traditional CD’s however, liquid CDs will not charge you early withdrawal penalties. This means you can easily liquidate (turn into cash) your CD without taking a hit in terms of its value.

Yes, there’s a “but” to this proposition: Liquid CDs typically pay less than traditional CDs. Depending on which financial institution you go to, these products can offer various terms, either as little as a few months or up to several years or longer. Your fixed interest rate will vary according to the length of the term you’ve chosen. Typically, the longer you hold your money in the liquid CD, the higher the rate of return. The great thing about CD rates is that they are locked in during the full term. This means even if interest rates decrease, your rate would not change. Some financial institutions may require a minimum deposit for these CDs, and they can be significantly higher than traditional CDs; some are at the $10,000 and up level. What’s more, the minimum deposit may go up if you are seeking a higher interest rate. , while others don’t have a minimum deposit requirement.

How Do You Withdraw Money From a Liquid CD?

If you have decided that you need to withdraw from your liquid CD, you need to notify your bank. You will likely have to wait about a week after opening the liquid CD before you can start withdrawing. However, it’s not as quick as withdrawing funds from a checking or savings account; your financial institution might require anywhere from a week to a month to process the transaction. Do check on timing in advance. Also, before you open the account, find out whether you will have to withdraw a certain percentage at a time or whether you need to remove all funds from the account. This can vary depending on the specific account you open.

Liquid CD: Real World Example

Once you have decided a no-penalty CD is right for you, you will need to go to a bank or credit union that offers this account. Once you’ve opened an account, you have to fund it. If you invested $10,000 in a liquid CD with a three-year at a rate of 0.50%, at the end of the three-year period with interest compounded monthly, you will have a total balance of about $10,152.

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Pros of a Liquid CD

When evaluating liquid CDs, it’s worthwhile to review the benefits of these accounts. Some of the key upsides are:

•   Liquidity. One of the key selling features of liquid CDs is the ability to access and withdraw your funds prior to the term’s end. Perhaps you’re having an emergency that requires cash, or you decide to move around your money to better meet your financial goals.

•   No penalties. If you dip into the account before it matures, you won’t be assessed a fee.

•   Security. Liquid CDs are safe investments. These accounts are federally insured, so you know your money is protected when you open a liquid CD with a bank or credit union. This is one of the reasons why liquid CDs are considered low-risk investments. Even if a bank falters, your money is still safe.

•   Guaranteed returns. When you start a liquid CD account, you usually know the interest rate upfront. It may not be stratospheric, but it’s a sure thing.

Cons of a Liquid CD

Now that we’ve explored the good things about a liquid CD, we need to give equal time to the potential downsides:

•   Lower rate of return. The interest rates are significantly lower compared to certificate of deposit rates.

•   Withdrawal rules. Yes, these accounts are more accessible, but after your deposit has been in place for a week, your withdrawal guidelines may be quite specific. For instance, you may have to remove all your funds if you want to make a withdrawal, or the amount might be limited to a certain percentage that doesn’t suit your needs. Check before starting a liquid CD investment.

•   Tax implications. Earnings on your liquid CD will be taxed at your federal rate, which is something to keep in mind as that will take your return down a notch.

Alternatives to a Liquid CD

If the idea of a liquid CD doesn’t sound like an appealing low-risk investment option, there are alternatives to also consider.

Traditional CDs

Traditional certificates of deposit require you to stow your money away for a certain period of time. In exchange, you receive a return at the end of that period. The catch is, you are not able to withdraw your funds during this holding period. If you have a financial emergency, for example, and need the money from your CD, you will receive penalties for withdrawing your cash before the period of maturity. However, this might be a gamble you are willing to take, especially if you have a nice, healthy emergency fund set aside. You’ll earn a better rate of return than with a liquid CD.

Laddering

CD laddering usually involves opening CDs of different term lengths. This strategy allows you to invest long-term CDs which provide higher rates of return, while having the ability to access your funds through a shorter-term CD.

Money Market Account

Another CD alternative is a money market account, which is similar to a savings account with some added benefits. Money market accounts typically require minimum balances and offer rates comparable to savings accounts that can change over time. While the rates may be lower than a CD, money market accounts typically allow you to withdraw and transfer your money six times per month or more.

Emergency Fund

An emergency fund, or a rainy-day fund, is a savings account that should only be used in times of financial emergencies or unexpected expenses. Depending on your financial position, you can have an emergency fund in a regular savings account, money market account, CD, or liquid CD. It depends on how much you plan to access your emergency fund and how much interest you want to earn in the account.

High-Yield Savings Account

A high-yield savings account can offer a competitive rate of interest, depending on the financial institution offering it (online banks tend to pay more than bricks and mortar ones). And you’ll have more liquidity than a CD because you can deposit and withdraw from the account more frequently, though the specifics may vary with each bank. So if you want easy access to your funds, a high-yield bank account may be a good option.

The Takeaway

Liquid CDs are a financial product that offers the safety and guaranteed return of a traditional CD with the bonus of not being penalized if you make an early withdrawal. For those who are comfortable locking their money into a CD but worry an emergency or other need might pop up, this accessibility can be very attractive. Worth noting: Expect lower interest rates from a liquid CD than a standard one, which may or may not sync with your financial goals.

Here’s one great boost when you’re working to achieve your money dreams: Banking with SoFi. Our Checking and Savings account offers a competitive 1.25% APY rate when you sign up with direct deposit, plus zero account fees. And you’ll even have access to your paycheck two full days early.

Come bank better with SoFi.

FAQ

Are CDs liquid investments?

Traditional CDs are not liquid investments. This means, funds held in a CD cannot be accessed until the account term is reached. If you need to withdraw money from your CD prior to its maturity date, you will have to pay a penalty. A liquid CD, however, offers flexibility to withdraw money from your account prior to its term date without the usual fees.

What is a non-penalty CD?

A non-penalty CD, also known as a liquid CD, is a savings account that offers interest on your money. However, the rate is usually somewhat lower than the rate for a typical CD (the kind with penalties). The longer the term you choose for your liquid CD, the more you usually can earn.

How much is the penalty for early withdrawal from a CD?

Each financial institution has its own way of calculating this, but it usually involves losing some of all of the interest you have accrued. If your CD term is two years and you withdraw funds early from a traditional CD, the fee could be two months’ worth of interest or six months’ worth, according to a recent search. Your bank might be more or less than these figures. If you have a liquid or no-penalty CD, you will of course avoid these fees.


Photo credit: iStock/champc

SoFi members with direct deposit can earn up to 1.25% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 0.70% APY on all account balances in their Checking and Savings accounts (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.25% APY is current as of 4/5/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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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Protecting Your Money From Inflation

How to Protect Yourself From Inflation

Inflation has been squeezing — and infuriating — U.S. consumers for a long time now.

What began as an annoyance (an extra pinch at the gas pump and the grocery store) has turned into a painful reminder that budgeting and saving may be even more important than anyone ever thought. And without a plan to deal with inflation’s effects — day to day and over time — your dollars can lose purchasing power.

The good news is that it’s never too late to consider strategies that could protect your money from inflation, while also keeping in mind your personal financial situation, your goals, and your tolerance for risk.

So here, we’ll take a look at:

•   What inflation is

•   How to prepare for it

•   Steps to take that will help maximize your money

Read on for intel on how to protect your money and yourself from inflation.

What Is Inflation?

Wondering what inflation is exactly? In basic terms, inflation means prices are rising and your purchasing power is declining. You can’t get the goods and services you’re used to buying without paying more for them. And if your income doesn’t increase to match those higher prices — because you can’t get a pay raise that keeps up, or you’re a retiree on a fixed income — it can really impact your lifestyle.

The U.S. has been on a months-long run of record-setting inflation since the start of the coronavirus pandemic. And according to the U.S. Department of Labor Statistics, it’s the costs most people can’t avoid — like food, gas, and rent — that are driving the continued increase in the Consumer Price Index (the most commonly used measure of inflation).

It’s true that there are common causes of inflation and escalating prices aren’t uncommon, but what is happening right now is undoubtedly intense. Rates are hitting the highest numbers the U.S. has seen since the early 1980s, which means it’s the first time many consumers here have experienced inflation at this level. But even a low inflation rate can erode purchasing power over the long haul. For example, according to the U.S. Inflation Calculator, if you purchased an item for $100 in 2000, that same item would have cost $150.30 in 2020 — before inflation soared. The dollar had an average inflation rate of 2.06% per year in the two decades between 2000 and 2020, producing a cumulative price increase of a whopping 50.30%.

That’s why preparing for inflation can be an important consideration for every consumer, whether you consider yourself a saver, a spender, an investor, or (like most people) you’re a mix of all three.

Recommended: Is Inflation a Good or Bad Thing for Consumers?

Preparing for Inflation

Needless to say, stuffing your money into a mattress or cookie jar probably isn’t the best strategy for protecting your hard-earned dollars.

Not only is an FDIC-insured savings account generally considered a safer place to keep your funds, but you also can earn interest on your money until you need it. Perhaps you’re saving for a down payment on a car or home, a wedding or vacation, or maybe for an unexpected expense.

Although most savings accounts pay minimal interest — usually not enough to counteract even low inflation rates — you’re at least earning something. And if you take time to occasionally review the interest rates various financial institutions are offering, you may be able to improve on what you’re currently getting.

For example, online financial institutions are more likely to offer high-yield savings accounts than traditional brick-and-mortar banks. So if you’re comfortable with the idea of electronic banking, you may find a significantly higher annual percentage yield (APY). You also might be able to reduce or eliminate some of the fees you’re paying, which can boost your savings as well.

If the Federal Reserve continues to raise its benchmark interest rate in an effort to combat inflation, as it has indicated it will, you may see the rate on your current savings account slowly increase. But if it doesn’t, or if you don’t want to wait around for that to happen, it may make sense to start shopping for a smarter way to save right now.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning 1.25% APY on your cash!


6 Ways to Protect Yourself from Inflation

Taking the time to reassess the potential earnings from your savings account can be an important step in offsetting inflation’s impact on your bottom line. But there are other strategies you also may want to consider. Here are steps that can help you protect yourself from inflation.

1. Buying vs. Renting a Home

It might be hard to believe when the housing market is this hot and prices are this high, but homeownership actually may help protect you from inflation.

If you’re a renter, you’re probably at the mercy of your landlord when it comes to how much your monthly payment could go up when it’s time to renew your lease. And during an inflationary period, your landlord may decide to raise your rent to reflect higher prices. If you decide to move, your new lease also could reflect the high inflation rate. Plus you’ll have to go through the hassle of finding a new place and moving.

If you buy a house, on the other hand, you’re more likely to have a fixed monthly payment that’s locked in for the life of your mortgage. Another benefit: The value of the home you own may increase along with inflation. And if you hang onto your home until it’s paid off, you won’t have to worry about what housing prices (renting or owning) might look like in the future.

2. Financing Your Home

Especially if you’re a first-time homebuyer, you might feel more than a little overwhelmed thinking about signing off on a 30-year fixed-rate mortgage for, let’s say, $350,000.

It might help to take a deep breath and think about this: According to the U.S. Inflation Calculator, $350,000 in today’s dollars is equal to about $173,000 in 1992 dollars. Thirty years ago, somebody thought $173,000 was a crazy-high amount of money for a house. Now, it sounds like a bargain. It often takes us by surprise how prices (and salaries) do rise over the years.

If you’re borrowing money for 30 years (the most common mortgage term) at a competitive interest rate — and you aren’t paying more than the home’s appraised value — inflation could work for you. That’s because the value of money, including debt, declines as the inflation rate rises. So the inflation-adjusted value of your mortgage payments goes down as inflation and your property value go up.

3. Preparing Ahead of Time

If you have the room and a knack for bargain-hunting, it may make sense to build up a supply of the kinds of goods that could be affected by inflationary prices. This is especially those items that are often linked to shortages.

Unfortunately, it isn’t really feasible for most folks to stockpile gasoline. But your backup supply might include canned goods, baby food, paper towels, toilet paper, and other necessities that you find on sale or can buy for less in bulk.

Keep in mind, though, that if you pay for those goods with a high-interest credit card and you don’t pay off the balance each month, you might not see any savings. (Which is another good reason to keep some money stashed in your checking and savings account to pay for such purchases.)

4. Buying Durable Products for the Long Term

The price of durable goods (products that typically last at least three years) also can be affected by shortages and increased consumer demand.

If you need a new car, for example, and prices seem high for the make or model you want, it may be tempting to purchase a lower-quality replacement. Keep in mind, though, that over the long term, you could end up spending more on repairs than you would have if you bought the better brand. Or the less expensive make may not last as long as a better car would have.

You may find it’s a smarter strategy to get an auto loan and invest in the higher-priced car from the start.

5. Sticking to a Budget

A household budget can be a helpful tool any time, but it could be particularly useful when prices are soaring.

Even if you already have a budget, you may want to reevaluate your spending in categories that are or could be vulnerable to inflation, such as food, transportation, healthcare, and utilities. And you may have to look for categories you can spend less on (at least temporarily), such as entertainment, dining out, clothing, and vacations.

If you’ve put most of your bills on autopay, you also can check for “expense creep” on things like cable and wifi, subscription services, and utilities.

Sticking to a budget could help you avoid touching your emergency savings when times are tight—or, worse, overusing high-interest credit cards.

6. Investing Your Money

Once you’ve established a savings account (hopefully a high-interest one) for your emergency fund and other short-term expenses, you may want to look at investing as another strategy to combat inflation.

Though it carries more risk than keeping your money in a high-yield savings account, investing in stocks, mutual funds, or exchange-traded funds (ETFs) can help you grow your money for the future.

Once again, let’s go back 30 years to get some perspective. According to Officialdata.org’s S&P 500 data calculator, if you had invested $100 in the S&P 500 at the beginning of 1992, you’d come out with about $1,974.20 at the end of 2022 (assuming you reinvested all dividends). That’s a return on investment of 1,874.20%, or 10.42% per year. Even after adjusting for inflation, you’d be looking at a 7.87% return per year — which is better than most alternatives. Which all goes to say that investing may be a very good hedge against inflation.

The Takeaway

To younger consumers, today’s high inflation may seem like a new phenomenon. But inflation always has been — and always will be — a challenge.

While you probably can’t avoid inflation completely, with proactive planning, you may be able to blunt its impact on your day-to-day and long-term finances. If you haven’t already, you may want to review your savings, spending, and investing strategies to be sure you’re getting the most you can for your money.

For example, the SoFi Checking and Savings no-fee bank account is currently offering a 1.25% APY to customers who sign up for direct deposit. That’s at least twice what many high-yield accounts are offering customers right now. Another plus: SoFi doesn’t charge overdraft, minimum balance, or monthly fees. And SoFi members have access to free tools that can help with budgeting and managing their money as they work toward their savings goals.

Check out everything a new SoFi Checking and Savings® has to offer today.

FAQ

What is the best way to protect against inflation?

The best approach may be to prepare for the worst while hoping it doesn’t happen. This means finding ways to get the most for your money as a saver (perhaps with a savings account that pays more in interest), spender (adopting a budget and savvy buying tactics), and investor (with investments that keep growing your money over time).

Where should I put my money to combat inflation?

You may want to start by shopping for a savings account that offers a higher APY and/or lower fees. That way, you won’t be slowly losing money as your cash sits in the bank. Another option is to invest it, which is riskier but may yield you a higher return.

How can I prepare for hyperinflation?

You can use many of the same tactics to protect against runaway or hyperinflation as you would for high inflation. You might decide to stockpile goods now, while your money has value, for example. You may choose to buy a car or make another important purchase sooner rather than later. You also can evaluate what expenditures are “needs” vs. “wants” and budget appropriately. Also try not to panic — which can lead to poor decision-making.


Photo credit: iStock/akinbostanci

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 1.25% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 0.70% APY on all account balances in their Checking and Savings accounts (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.25% APY is current as of 4/5/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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Getting a Bank Account After Being Blacklisted

Getting a Bank Account After Being Blacklisted: What You Should Know

It may seem as if having a bank account is a given in life, but actually, it’s not: Some people get rejected and have to work hard (really hard) to attain that privilege. There’s a situation called being blacklisted by banks, and it’s a tough one to overcome.

Granted, for many, having enough money for a deposit and the proper paperwork to prove who you are gives you all you need to open a bank account.

But if you’ve had problems with a bank account before and your screening report reveals those issues, you could be denied. But all is not lost: Take a deep breath and read on. We’ll share:

•   What it means to be blacklisted

•   Why this happens

•   What you can do to earn back the ability to access the financial products and services you need

What Does It Mean to Be on the ChexSystems Blacklist?

Unless you’ve had trouble opening a bank account, it’s possible you’ve never even heard of ChexSystems. Think of ChexSystems as being akin to the credit reporting agencies that determine your all-important FICO credit score. Except instead of keeping track of how well you manage debt the way Equifax, Experian, and TransUnion do, ChexSystems records how well you manage your banking life.

Do you have a history of bouncing checks, overdrawing your account, failing to pay bank fees, suspicious activity, or have had your account closed by a financial institution? If so, it’s likely ChexSystems knows about and is keeping track of those negative activities. Approximately 80% of banks use these agencies’ screening reports when deciding whether to approve a consumer’s application to open a checking or savings account.

Along with your report, banks also may use your ChexSystems Consumer Score to assess your potential risk as a new or returning customer. A score can range from 100 to 899 — and a higher score signifies lower risk.

There’s no official point or score at which consumers are automatically “blacklisted” by ChexSystems or the banks that use its services. Each financial institution determines independently how much risk is acceptable when deciding to open a new account for a client. But if your score is in the lower range, you should be aware that your application could be refused. The reason why: You don’t appear to be someone who will use your bank accounts responsibly.

If you’re planning to open an account and you’re wondering what your current ChexSystems Consumer Score is, you can request it at the ChexSystems website. You’re able to get one free report per year.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning 1.25% APY on your cash!


What to Do If You Are Blacklisted

So let’s say you’ve applied for a bank account and got rejected. That can be an upsetting feeling. After all, bank accounts — especially checking accounts — are the hub of most people’s financial lives. Paychecks are deposited there, and bills and other debts are paid out of that same account. You may wonder, “How will I ever get a bank account after being blacklisted?”

We have good news: If a financial institution denies your request to open an account, there are a few things you may be able to do to improve your standing: Here are four steps to take.

1. Request Consumer Disclosure Report

The bank or credit union that declined to open an account for you should inform you which reporting agency (ChexSystems or another) generated the report it used when considering your application. You can then contact that agency by phone, mail, or online to request a free copy of the report. You’ll then take a look at exactly what’s on your record.

2. Report Any Discrepancies

Once you receive your copy of your file, you should be able to see which banks or credit unions provided negative information about you to the reporting agency. If the report doesn’t match up to experiences, there may have been an error or the problem could be connected to identity theft. Either way, it’s a good idea to check your own records for any discrepancies and prepare to address what you may uncover.

3. Dispute Any Errors Found

Consumer reporting agencies must comply with the federal Fair Credit Reporting Act. That means they are required to ensure the information they provide is as accurate as possible. What’s more, by law, they can’t include certain types of negative information that’s more than seven years old. (ChexSystems typically keeps negative information on a report for five years.)

If you feel your banking report has errors, is incomplete, or that some negative information is out of date, your next move may be to file a dispute. The Consumer Financial Protection Bureau (CFPB) website provides sample letters for contacting both the financial institution that supplied the incorrect data and the agency that included it in its report. Or you can file your dispute on the ChexSystems website.

Under the Fair Credit Reporting Act, ChexSystems must verify the negative information within 30 days or delete it from your ChexSystems report.

You also may want to get an updated credit report from one or all three of the major credit bureaus to see if there are similar problems there. You can request those reports once a year for free at annualcreditreport.com. If you find anything amiss, you can and should dispute those credit report errors.

To be clear, your ChexSystems score is not the same as the FICO credit score lenders look at when you apply for a credit card or loan. And the banking reports ChexSystems provide do not include the same information as credit reports. But if there’s inaccurate information in a report about your checking account activity, there may be similar issues with your credit reports — especially if you’ve been the victim of identity theft. If you can catch discrepancies early, you may be able to head off future questions about your creditworthiness. There are different types of debt, and fake debt that doesn’t really belong to you is definitely something you want to eradicate from your records.

4. Pay Off Outstanding Debts and Fees

Of course, there is the possibility that the black marks on your report are valid. Maybe you bailed on an account that was overdrawn or had another negative situation. If information on your report was accurate, you still may be able to improve your chances of opening an account. You will probably want to show that you are trying to rectify past problems.

Check with the bank that declined your recent application for an account. A banker there may have some suggestions. It could help, for example, if you can pay off any old fees you still owe to ChexSystems’ member institutions. Once those past bad debts are taken care of, you can ask the bank or credit union that provided the negative information to update that item on your ChexSystems report.

You still may have to wait five years for the negative information to be completely removed from your report. But ultimately, it’s up to each individual bank — not ChexSystems — to decide if a customer’s application will be approved or denied. If the bank sees you’re making an effort to right old wrongs, it may reconsider your application. That’s why connecting with a banker to explain what steps you’re taking can be a move in the right direction.

How to Avoid Being Blacklisted by ChexSystems

Obviously, the best way to avoid getting a low ChexSystems Consumer Score or a negative report is to avoid the activities that could make you a riskier bank customer. If you want to be a good checking and savings account customer, avoid such things as:

•   Bouncing checks or running up too many overdraft fees

•   Having an account closed involuntarily

•   Committing ATM or debit card abuse

•   Being suspected of fraud or illegal activity

•   Opening and closing multiple accounts in a short period of time

But there are other steps you can take to further secure your finances and your financial reputation. Consider these options as well to boost your standing as a banking customer. They can help you avoid being blacklisted:

Monitor Your Financial Health

If there’s information on a ChexSystems report that you weren’t aware of, you may have been the victim of identity theft. Reviewing your accounts regularly could help you clear up problems faster. Even if you don’t have this kind of fraudulent activity on your record, it’s still a good idea to stay on top of your financial profile. Specifically:

•   Reporting companies like ChexSystems are required to provide consumers with one free report each year upon request. You can get your free report at their websites. Take advantage of this and scrutinize what you receive.

•   As mentioned above, you also can get one free report each year from each of the three major credit bureaus at annualcreditreport.com. Again, your goal is to make sure that everything is up-to-date and accurate and that there isn’t any fraud or identity theft occurring.

•   You can regularly check your bank account and credit card statements to make sure there aren’t any transactions you aren’t aware of. Many financial institutions offer online tools and mobile apps that can make tracking your accounts easy and convenient.

•   You may want to set up a low balance alert for your checking account. That way, you’ll get a text or email when your balance reaches a certain threshold, and you’ll know to stop using the account until you make a deposit. That can help avoid overdrawing your account and bouncing checks and/or triggering fees. You also might consider setting up bank alerts for unusual activity, overdrafts, and new log-ins.

Find an Alternative to a Traditional Banking Account

If you’ve been rejected and are worried that you might be unable to open a bank account, don’t give up hope. If your ChexSystems reports seems to be blocking you from getting an account, you may have other options.

•   Some banks and credit unions offer what are called “second chance” checking accounts. These typically offer fewer features and higher fees than regular bank accounts to customers who have been blocked by a ChexSystems report or score.

•   There are also some banks and credit unions that don’t use ChexSystems when making decisions on account applications. You might be able to enjoy the same benefits as other account holders, with low or no fees, if you choose to do business with one of those financial institutions. A little online research should show you which banks don’t depend upon ChexSystems.

By investing a bit of time and energy, you should be able to find an account that suits your needs even if you have been blacklisted.

The Takeaway

If a bank denied your application for a new checking or savings account, it could be that you were blacklisted due to negative information on your ChexSystems report.You still have options, though. If the information on your report is wrong or more than seven years old, you can dispute the inaccuracies and have your report corrected. And if it turns out the negative information is true, you can take steps to remedy the situation and possibly open an account elsewhere. The convenience of a bank account may well be within reach.

And when it is time to shop for a bank account, check out SoFi Checking and Savings, which offers an array of benefits. Those who set up direct deposit will earn a super-competitive 1.25% APY plus access to your paycheck up to two days early. And we don’t believe in monthly fees, minimum balance fees, or overdraft fees. Those are just some of the ways we help make the most of your money.

Ready to see if SoFi Checking and Savings® is right for you? Find out more, and apply today.

FAQ

Can I open a bank account if I’m blacklisted?

You may have a few options if you’ve been blocked from opening an account. You could try to fix your old problems, and ask the bank to reconsider. You could sign up for a “second chance” account that’s geared to people with a negative banking history. Or you could look for a bank that doesn’t base its decisions about customer accounts on ChexSystems reports.

How long are you blacklisted from banks?

Every bank has its own policies when it comes to deciding a customer’s account eligibility. But if you have negative items on a ChexSystems report that could cause a bank to decline your account application, you can expect that information to stay on your report for up to five years.

What does it mean when your bank account is blacklisted?

If someone tells you that you have a blacklisted bank account, it generally means you have enough negative information on your ChexSystems report — or a low enough ChexSystems score — that the bank sees you as a risk. They therefore decline to offer you an account.


Photo credit: iStock/PeopleImages

SoFi members with direct deposit can earn up to 1.25% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 0.70% APY on all account balances in their Checking and Savings accounts (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.25% APY is current as of 4/5/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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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