A Guide to Managing Your Child’s Allowance

Part of teaching your kids to be more independent is giving them money as part of an allowance. It can be an exciting time for your child — remember when you first got your hands on some cash? It can also be fraught with some bumps along the way as your child learns sound money management skills.

That’s not to say it’s not worth it. Rather, deciding on how to give them money and helping them budget their allowance can take time, but your kids will thank you for it. Read on for ways that you may handle this part of parenthood and help your child build financial literacy.

What Is an Allowance?

An allowance for kids is a predetermined amount of money you give them on a consistent basis, most commonly on a weekly or monthly cadence. You can choose to have your child earn their allowance by completing chores or “jobs” or do none at all. The idea is that with an allowance, your child can learn the value of work (if you have them do chores), gain experience handling money, and learn responsibility.

The decision to give an allowance is up to the family. The same holds true regarding whether the allowance is earned by completing chores. Depending on the age, some parents may feel more comfortable with giving their kids cash. Some may feel older kids can handle their own debit card and a children’s checking account — with some limits, of course.

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Types of Allowances

The type of allowance you give your child is based on your preferences, what you want your child to learn, and their needs. Here are some options for how an allowance can work.

Chore-Based Allowance

The chore-based allowance tends to be the most common, where a child is given some household tasks and offered a certain amount once these tasks are complete.

•   Tasks typically will depend on your child’s age and their readiness to handle certain types of responsibilities.

•   It can be wise to assign tasks your child can realistically accomplish so that they don’t wind up feeling discouraged.

For example, say your nine-year-old wants to start doing chores regularly to receive allowance money, which they plan to save up to buy a new science kit. Based on what they’ve demonstrated to you in the past, you believe they’re able to load the dishwasher and help put the laundry away. You discuss this with your child, and you both agree that you’ll give them a weekly allowance if they complete all their assigned chores.

Pure Allowance

Some parents would rather teach their child money management skills without connecting this to some sort of labor. Instead of asking your child to complete chores, parents agree to give them an allowance — typically a consistent amount in cash or perhaps put on a debit card connected to a bank account. While your child may still do chores around the house, the allowance isn’t contingent upon its completion.

Hybrid Approach to Allowance

Parents who want to teach their kids about reaching a goal (and also how money is tied to work) can take the hybrid approach. Here, you’ll give your child a regular allowance that isn’t contingent on any chores. However, you give them an opportunity to earn more money by taking on extra chores around the house. In that way, they’d get more experience in allowance management.

•   For example, your child receives $5 a week, but they want to earn more so they can head to the local arcade for their friend’s birthday party or see their savings grow.

•   Based on their age and ability, you have them do a chore or two (pulling weeds in the yard or taking out garbage). Once the tasks are complete, you give your child the amount you agreed upon.

How Much Allowance Should You Give Out?

The amount you should give your child will depend on several factors. Ultimately, it will depend on your budget and what you can afford to give your child. One popular formula is to give a child $1 or $2 per week for every year of age, which would mean $8 or $16 for an eight-year-old and $16 or $32 for a 16-year-old.

You might consider not just the age of your child but also how challenging or time-consuming the task is. A couple of other pointers:

•   If you’re unsure what’s a good amount, you can ask some of your trusted parent friends or family members about what they’re giving their child.

•   If your child reaches the age where they can get a part-time job, you may even consider lowering the amount or not giving an allowance at all since they can earn their own pocket money.

Whatever the amount you choose to give, make sure you set clear expectations. This means spelling out the chores in detail (is the child making their bed every day or just on weekdays, for instance?). It also means determining how much money will be paid, when, and how, as well as what (if anything) they will receive if a task is not fully completed. This can result in headaches down the road.

Advantages of Giving an Allowance

There are plenty of upsides to giving an allowance. Consider the following:

Teaching Money Management

Giving an allowance, whether tied to chores or now, gives your child an opportunity to understand how money works. Plus, it can teach them that the items they want to purchase or activities they want to do cost money. It gives them hands-on experience earning, saving, and spending, providing a valuable lesson in money management for kids.

They’ll learn about what it takes to purchase something, such as looking at price tags in the store.

•   To go a step further, you can even teach the concept of saving and investing money and why that can help them as well.

•   If you open a children’s or teen’s bank account for your child’s allowance money, that will teach valuable basic banking and financial literacy skills too. They might see how interest compounds and grows their savings, for instance.

•   The same holds true if they get a debit card (typically one where you can view and possibly approve their spending).

Teaching Responsibility

An allowance can teach your child what it means to be responsible with money. They can learn not to spend their earnings on snacks if they’re saving for, say, a video game. They can learn to safely store their funds, be patient until their next paycheck rolls around, and earn extra money if they’re eager to accumulate a certain amount.

Building Confidence

Giving kids an allowance can help boost their confidence because it can show them you believe they’re ready to earn and manage their own money. They may also feel proud of their ability to make cash and spend it as they see fit, whether that means buying themselves new clothes or making a donation to a favorite charity.

Creating a Safe Space to Learn

Instead of having kids learn about money and other types of responsibilities when they’re grown, giving an allowance can give them a bit of a head start. You can help guide them to make their own decisions, which can include making money mistakes without huge consequences. Any errors they make can be an opportunity for you to teach your kid about what they can do differently next time.

Recommended: Guide to Opening a Bank Account for a Minor

The Takeaway

If you choose to give your child an allowance, whether it depends on chores or not, it can be a good way for them to learn how to manage a bit of money responsibly. You might have them work for the money, not work at all, or have them earn a bonus for doing additional chores.

Whatever amount you give, showing your child how to save their money in a savings account is a great teaching opportunity.

Currently SoFi Bank does not offer accounts to minors. But while you’re thinking about money management, why not take a fresh look at your own banking needs?

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FAQ

What is a fair allowance for kids?

A fair allowance for kids should be based on age and what you feel is appropriate. Many parents provide $1 or $2 per week for each year of the child’s age (meaning, if a child is 10, they get $10 or $20 per week). You might survey other parents in your circle and see what they give their kids as a way of coming up with a ballpark figure.

Are allowances bad for kids?

In most cases, allowances can have several advantages for kids, such as learning how to handle money and becoming more responsible. However, some parents may believe that allowances aren’t appropriate and should in no way feel obligated to give one.

How do parents give allowance?

Parents can give an allowance in a weekly, biweekly, or monthly cadence (or whatever other frequency suits them). They can also give a consistent amount or vary it depending upon tasks completed. In addition, an allowance can be paid as cash, on a debit card for older kids, or deposited into children’s bank account or an account that their parent holds for them.


Photo credit: iStock/SbytovaMN

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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

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What Is Shrinkflation?

Shrinkflation is the practice of reducing the size or amount of a product in a given package while maintaining the same sticker price. You know when you buy a box of cereal only to realize that it’s slightly smaller than you’re used to — even though you paid the same amount as before? That’s shrinkflation.

Companies may practice shrinkflation to combat rising back-end costs and maintain or increase profit margins. This can help them stay afloat when faced with growing competition or rising costs. But it’s no fun for the consumer (that’s you) — if you’re wise enough to pick up on it, that is.

Below, learn what you need to know about shrinkflation and how to deal with it.

Why Does Shrinkflation Happen?

First, let’s take a step backwards. Why is it called “shrinkflation” anyway?

When companies shrink their products and thereby inflate the price, that’s shrinkflation. For instance, perhaps you notice that the 14-ounce bag of pretzels you used to buy is now 12 ounces…while the price has stayed the same or risen.

Once you understand how it works, it’s pretty easy to understand why companies shrinkflate their products, as sneaky a tactic as it is. By offering less of their product at the same or a higher price, companies can increase their profit margins.

This, in turn, can help them battle rising production costs, competition from other companies, or simply drive more profits — which, in the end, is the main goal of every for-profit company.

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Examples of Shrinkflation

To avoid implicating any specific brand, let’s use an imaginary example to demonstrate how shrinkflation works and how you might notice it as a consumer.

•   Say you’re at the grocery store, and you’re about to buy your favorite bottle of pomegranate juice. It’s a little pricey, but you love the taste — and besides, it’s good for you.

•   You pick up the bottle, expecting to pay $8 for your typical 16 ounces. The bottle looks the same and costs the same, but it feels different in your hand. You go ahead and purchase it.

•   When you get home, you notice that the almost-empty bottle in your fridge is just a little bit bigger than the new bottle. When you look closely, you notice the new bottle actually has 14.5 ounces, not 16.

You’ve just been shrinkflated.

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Is Shrinkflation Temporary?

Unfortunately, most financial experts say shrinkflation is here to stay, even if the economy rebounds and regular inflation decreases. In the world of making money, more is always better, and shrinkflation can help companies do just that: make more money with the same amount of work and less material.

And because shrinkflation usually happens gradually, many consumers don’t even recognize it’s happening. Instead, they just slowly see their grocery bills and household expenses increase. If companies were transparent and sold the same amount of product at a higher price, you’d likely notice — and perhaps balk — while you were putting the item in your shopping cart.

With shrinkflation, companies can get a financial boost without (hopefully) triggering any consumer pushback. But careful, observant shoppers may still pick up on this sneaky business tactic.

Is Shrinkflation Illegal?

Shrinkflation is currently legal, and companies are not required to announce changes in sizes or packing. Nor do companies typically say that new, smaller sizes are the same as before when they shrinkflate products (if they did, that would likely be considered deceptive).

Consumer advocates are, as you might guess, not usually fans of the practice. And, according to a 2023 study from YouGov, Americans are catching on — and they’re not happy about this practice. In that survey, 73% of respondents said they were concerned about shrinkflation and 41% were very concerned. It’s possible that a consumer group or an individual consumer might someday file a suit and possibly prove the practice is unethical.

Recommended: The Inflation Reduction Act, Explained

Tips for Noticing Shrinkflation

Want to be aware of whether or not you’ve been shrinkflated?

Given how expensive the cost of living is in general today in many parts of the United States, plenty of shoppers don’t want to fall victim to inflation of any kind, including the shrinky one discussed here.

Follow these tips to help you stay ahead of shrinkflation.

1. Pay Attention to Your Receipts

Although plenty of us forego paper receipts entirely, keeping them can actually be very instructive, particularly when it comes to avoiding shrinkflation. Keeping and comparing receipts, especially for products you buy often, may help tip you off to shrinkflation more quickly than you’d otherwise notice on your own. (Plus, you may get a better picture of how much you actually spend on groceries, as opposed to how much you expect to.)

2. Make a Price-inclusive Grocery List

If you’re really serious about beating the shrinkflation machine, grab that receipt you kept and make your next grocery list — with the approximate price you paid next to each item. That way, you’ll notice shrinkflation before it even happens as you’re about to put the item in your cart.

You can update this on a monthly basis or so to stay abreast of any shrinkflation moves, should companies roll out new, smaller-sized products for the same or a higher price.

3. Pay Attention to Price-per-unit When Shopping

When it comes down to it, price per unit or per-ounce of a product is the best way to understand what a product really costs. When items are shrinkflated, their price per unit or ounce goes up.

Many stores even list price-per-ounce information on the shelf or in an online listing, or you can also do your own quick division. If you see that, say, your favorite orange juice brand now comes in a smaller bottle for more money, you can decide whether to pay up or find another option. This may help you spend less on food.

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Should You Buy Shrinkflated Products?

From a consumer’s point of view, shrinkflation can feel just plain bad. Nobody likes to feel like they’re being deceived.

But only you can decide whether or not the juice is worth the squeeze, so to speak, when it comes to buying from a company that employs this tactic.

•   If you really, really love that brand of pomegranate juice, you may just put up with it… and adjust your budget accordingly.

•   If you strongly feel that this tactic is deceptive and it’s taking a substantial chunk out of your checking account, it may be time to find brands that don’t engage in this practice.

•   You might decide to buy generic brands, or to shop at a warehouse or wholesale club store, like Costco or Big Sam’s. There, you may benefit from economies of scale—and stock up on your favorite items before their prices go up.

Recommended: Passive Income Ideas to Help You Earn Money

The Takeaway

Shrinkflation is the practice of consumer goods being sold in smaller packages than in the past for the same or a higher price. In other words, your money goes less far. While shrinkflation can be a bummer, it doesn’t have to destroy your finances. By being a vigilant shopper and/or adjusting your budget, you can continue to enjoy products that have been shrinkflated. You can also make sure that your money is working as hard as possible for you by selecting a banking partner that offers favorable terms.

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


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

FAQ

Why is shrinkflation allowed?

Shrinkflation is allowed because it hasn’t been proven deceptive or illegal. There isn’t a law saying companies must disclose packaging changes, nor are manufacturers or marketers claiming they are selling the same size as before. Perhaps if a lawsuit is filed and the outcome favors consumers, this could change.

What is a real life example of shrinkflation?

A common example of shrinkflation is the size of tuna cans, which have steadily gotten smaller over time — even as the price of each can has remained the same or increased.

How do you beat shrinkflation?

By paying attention to how much you spend on products and the amount of product you get each time you buy, you can stay ahead of sneaky tactics like shrinkflation. You can then decide if you want to buy that brand, a different one, or look into shopping at warehouse club stores.


Photo credit: iStock/AlexSecret

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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

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

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What Is ACH Debit and How Does It Work?

An ACH debit is an electronic transfer that will take money from one account and credits it to another account. ACH, or the Automated Clearing House, is an interconnected system that allows banks to transfer money to and from accounts at different banks. ACH debits are common for things like recurring subscriptions and online payments.

The counterpart to an ACH debit is an ACH credit, and these debits and credits are a key part of the world’s banking infrastructure. ACH debits and ACH credits are safe, convenient, and come with many advantages over writing paper checks or other forms of payments. Learn more about ACH debits and how they work here.

What Is ACH Debit?

An ACH debit is when money is electronically removed from your account to another account at another bank via the Automated Clearing House (ACH). In most cases, you will see an ACH debit listed on your account when you are making a payment to another bank or account. This could be a regular monthly subscription payment (perhaps for a streaming channel) or another type of automated payment.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

How Does ACH Debit Work?

Now that you know the “ACH debit” meaning, consider what it actually involves. ACH works because nearly all of the banks in the United States are connected electronically. Each bank that is part of the ACH system has a nine-digit routing number that identifies it to other banks.

When you make an ACH debit, you provide your bank’s routing number and your savings or checking account number to the other customer/bank. They instruct their bank to contact your bank and debit your account. Then, their account is credited once the funds are transferred.

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Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Different Types of ACH Debit

There are several types of ACH debits, each coming with its own three-digit code that might identify it to the banks in question. To the customer, these codes or types of debits come without distinction:

•   ARC (Accounts Receivable Entry)

•   BOC (Back Office Conversion)

•   CCD (Corporate Credit or Debit Entry)

•   POP (Point-of-Purchase Entry)

•   POS (Point-of-Sale Entry)

•   PPD (Prearranged Payment & Deposit Entry)

•   TEL (Telephone-initiated Entry)

•   WEB (Internet-initiated Entry).

Advantages of ACH Debit

Here are a few of the biggest advantages of using ACH debits:

Ease and Convenience

One of the biggest advantages of the ACH system is its ease and convenience. ACH transactions happen automatically, without having to take any action besides the initial setup. This can make them perfect candidates for recurring monthly transactions, as one example.

They are also typically quite quick, taking one to three days to be completed.

No Need to Write Checks

If you have a recurring monthly transaction, it is much easier to set up a recurring ACH debit than to write a check each month. Moving your transactions to ACH means that you may no longer have to write checks (or order additional checks).

Save On Postage

Using ACH to make and receive payments can also help you save money. You will no longer have to pay for postage to mail checks or other payments.

Easier Payment Tracking

Using an electronic payment system like ACH also allows for better payment tracking. Rather than having to say “the check is in the mail,” you or your bank may be able to see exactly when ACH payments are sent and received.

Better for the Environment

ACH can also be better for the environment. Some of the green reasons to use ACH include the fact that you don’t have to use paper checks, nobody has to physically deliver your payment, and there is no leftover paper to recycle, shred or throw away once the payment is complete.

Disadvantages of ACH Debit

Here are some of the biggest disadvantages of using ACH debits:

Less Control

You may have a little bit less control over an ACH payment, since it can happen automatically. Still, banks will investigate and overturn any fraudulent ACH transactions, should they happen.

Exposing Private Information

When you make or receive an ACH payment, you do have to give your bank’s routing and account information to the other party. That does run the risk of fraudulent use of your private information.

However, it is important to understand that these same routing and checking or savings account numbers also appear on the bottom of every paper check that you have.

Risk of Mistakes

You do run the risk of making a mistake in your routing or account number, perhaps especially if you are entering the information online. While it is common that you have to confirm your account and routing numbers when setting up an ACH transaction, it is still possible to make mistakes. It is very important to make sure that you are entering your checking account information correctly when setting up an ACH transaction.

Potential for Overdrafting

Because ACH transactions happen automatically, you may have an increased risk of overdrafting your checking or savings account. Make sure that you have set up a good budget and are regularly monitoring your accounts. This will help reduce the risk of overdrafting your accounts.

Forgetting to Cancel Services

One of the biggest potential disadvantages of using ACH payments is that it makes it easier to forget to cancel services that you are no longer using. Because it is easy to set up recurring ACH payments, you may find yourself getting ACH debits for services that you are no longer using or meant to cancel.

What’s the Difference Between ACH Debit and ACH Credit?

An ACH debit is when your account is debited (money taken out) and sent to a customer at another bank. An ACH credit is when you receive money into your account. Both ACH debits and ACH credits come through the automated electronic ACH system.

What’s the Difference Between ACH Debit and eCheck?

An electronic check or eCheck is another form of electronic payment that uses the ACH network. One big difference between ACH debits and eChecks is the time that it takes to process. eChecks often take between three and seven days to clear, while usually ACH debits process much more quickly (say, in one to three days).

What’s the Difference Between ACH Debit and Direct Deposit?

A direct deposit is generally credited to your account as an ACH credit. This means that money is moving into your account. On the other hand, an ACH debit is when money is electronically moved out of your account, generally to an account at another bank.

Is ACH Debit Safe?

Yes, the ACH system is generally very safe. ACH debits and other transactions are commonly considered safer than payments made by paper checks and other forms of payment. Check with your bank or credit union to make sure you understand the fraud protections that you have to secure your account against unauthorized ACH debits.

The Takeaway

The Automated Clearing House (ACH) is a system of interconnected banks that allows for safe, quick electronic payments between customers at different banks. An ACH debit is one form of electronic payment that allows you to pay an account at another bank. This may be a one-time payment or a recurring monthly payment, such as for an online subscription. To make an ACH debit payment, you will generally give the other party your bank’s routing and account information.

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


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

FAQ

Why did I get ACH money?

There are a variety of reasons why you might get money via ACH. It could be a refund of a transaction that you canceled or returned or a credit on a closed account. Check with the merchant in question or your bank if you’re not sure where an ACH transaction came from.

Do I have to pay back ACH credit?

Whether or not you have to pay back an ACH credit depends on what the credit is for and whether it was intended for you. If you received a legitimate ACH credit, then you generally do not have to pay it back. If you received an ACH credit that was not intended for you, you will likely have to pay back the money.

What is an ACH refund?

Above, you learned what is an ACH debit. An ACH refund, however, is typically an ACH credit to your account that you receive due to a refund of a transaction you made. This might be a refund of a transaction you canceled, items you returned in person, or another form of returned payment. Check with your bank or the source of the ACH refund if you don’t know where your ACH refund came from.


Photo credit: iStock/JLco – Julia Amaral

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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

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

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What to Do When You’re Running Out of Money

There’s no feeling in the world quite like running out of money before your next paycheck hits — and it’s not a good sensation. It can have you feeling stressed and unsure of your options.

But, the truth is, when you’re running out of money, you still have ways to move forward. There are also steps that’ll help prevent the problem from cropping up again.

Here, you’ll get a closer look at what happens when you’re running out of money, what options you have, and how to avoid this situation recurring.

Reasons for Running Out of Money

In order to fix a problem, we first have to understand why it’s happening. That means it’s time to take a good, hard look at your finances to learn why you’re running out of money in the first place. Here are some common causes.

Spending Too Much on Fixed Expenses

Major budget line items, like a rent or your car payment, can take a serious chunk out of the funds you have available for everything else. Although trading in your car for a bicycle or enlisting a roommate might seem like huge changes, they can also make huge differences in your financial life.

Spending Too Much on Living Expenses

Where and how you live can make a big difference in your personal finances. A person who lives in a small town with a couple of roommates will probably be able to stretch their paycheck a lot further than someone who has their own place in a major city where the cost of living is significantly higher.

Also, people vary: According to the USDA’s monthly estimates, a single adult might spend as little as about $275 to as much as $450 or more per month on groceries. Finding ways to cut down on non-fixed living expenses, like groceries, can pack a big punch in terms of not running out of cash before your next pay day.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

Spending Too Much on Discretionary Purchases

Don’t beat yourself up: We live in a world in which we’re the subject of constant advertisement. (According to some estimates, we see as many as 10,000 ads each day.) So it makes sense that we often grab that new pair of boots or book a quick weekend getaway. However, making a habit out of treating yourself or making impulse purchases can wreak havoc on your bank account.

Not Earning Enough

If you’ve cut back in every way that feels comfortable (and perhaps even some ways that do not) and still feel you’ve run out of money, the answer may be to increase your income. While starting a side-hustle can make a dent, finding a better-paid full-time job or making a career change might be a more sustainable course of action.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Tips for When You’re Running Out of Money

Once you’ve figured out exactly where your monetary life is going awry, you can take concrete steps to make your personal finances better. Here are some ways that can help you get off the paycheck-to-paycheck roller coaster.

Create a Budget That Fits Your Needs

As you’ve doubtless noticed by now, if you don’t make a plan for your money ahead of time, it pretty much develops a mind of its own and walks away. Creating a budget is exactly the anecdote to this problem: planning ahead for where your money is going. And don’t worry, it doesn’t have to be tedious or boring.

Using one of the many online apps built for this purpose or a plain old pencil and paper, start the process:

•   List your monthly income at the top, and then deducting your fixed living expenses. (Think: rent or mortgage payment, insurance, any car payments or other loans you pay.)

•   Next, budget for living expenses whose amounts can change (like utilities and groceries.)

•   It’s also a good idea to set aside at least a little bit of your money each month towards your savings goals, which is an objective that you can boost when you open a high-yield savings account.

•   Finally, the rest of the money is yours to do with as you please, so be sure to budget for items and activities that are meaningful to you. You can have just about anything you want on a budget, just not everything.

Pay Your Most Important Bills

The next idea for what to do when you’re running out of money: Know how to handle bills that are threatening to go unpaid.

Not being able to pay your bills is indeed a sad and scary circumstance, but it’s not actually the end of the world. Stay calm, and prioritize. Important bills to put first include:

•   Housing

•   Health insurance and healthcare expenses

•   Food

•   Utilities.

Keep in mind, too, that you might be able to negotiate with your creditors or put your student loans in forbearance. Either way, it’s worth the phone call to find out.

Spend Money on Essentials Only

When money is (very) tight and you’re scraping the bottom of the bank account barrel, it’s not the right time to splurge on any fun extras.

Until you can build up a bit of a cushion (even a $1,000 emergency fund is better than none at all), limit your spending to only the essentials: the stuff you need to live. It may feel like a sacrifice today, but you’ll thank yourself in a few weeks when you’re breathing easier.

Limit Borrowing and Taking Out Loans

When you’re out of money, there are plenty of companies who are happy to give you some… in exchange for even more money they’ll expect you to pay them (aka interest).

As tempting as it is to borrow money or take out a loan when your well has run dry, in the long run, it can exacerbate the problem. So if you’re already in dire financial straits, it may actually be a bad time to take out a loan.

Use Credit Cards Sparingly

Similarly, you want to avoid racking up interest charges by breaking out your plastic when money is tight. Credit card debt is high-interest debt and can be a real challenge to pay off. Whenever possible, pay for items with cash or a debit card.

Also consider a balance transfer credit card if you already have an amount of credit card debt that is making you uncomfortable. It can give you a period of low or no interest that can help you pay down your balance.

Make Time to Make Extra Income

As mentioned above, your problem might be improved by earning more. Picking up a side gig, like driving for Uber or selling crafts on Etsy, is one road forward. Training and applying for a more lucrative career could be another path through this tough time.

Look at Government Benefits

Nobody should have to forego medical care, food, or shelter because of their financial situation. That’s why government benefits like the SNAP program (previously known as food stamps) and low-cost health care options exist.

Specifics vary by state, but your local government website should have details available and phone numbers to call. If your income is under a certain threshold, you may qualify for programs that can make it a lot easier to budget what you’re earning on other needs.

Downsize When Possible

Moving or changing your favored mode of transportation are big life changes, for sure… but they can also make big changes in your financial life, for the better. If you downsize your cost of living, you won’t have to struggle quite so hard to pay for it, which could be well worth the sacrifices.

Sell Items You Don’t Need

Selling things you don’t need can help you downsize and line your pockets with some extra change in the short term. You could have a yard sale, offer them on eBay or another online platform, or see if a local second-hand store will purchase them, among other options.

Take Care of Yourself

No matter how dire your financial circumstances get, don’t neglect your personal needs. Going outside for a walk, sitting down to eat nutritious foods, and talking to loved ones are imperative for your mental and physical well-being, and none of them are exorbitantly expensive. In addition, you might look into low-cost or no-fee financial counseling from a nonprofit to help you pull through this challenge.

Managing Finances with SoFi

You’ve just learned ways to cope when you’ve run out of money. Also make sure that the funds you do have are easily managed and earning some interest to help your cash grow.

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


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

FAQ

What options are available if I can’t afford to pay my bills?

If you can’t afford to pay a credit card bill, auto loan, or student loan payment, consider calling your creditor or lender and asking about ways to negotiate the payment amount or file for forbearance. Debt consolidation loans are another option if your debt is spiraling out of control, but they should be approached with caution.

Which budgeting methods are helpful for people that are running out of money?

One popular budget is the 50/30/20 budget rule, which says, of your take-home pay, to allocate 50% towards the musts in life, 30% to the wants, and 20% to savings and additional debt payments.

Should I contribute to my retirement fund if I don’t have the money?

As important as it is to save for a comfortable retirement, if you don’t have the money to live today, it’s hard to be focused on the money you’ll need to live tomorrow. If you’ve made all possible budget cuts and still don’t have any money to contribute to your retirement fund, so be it for the present. Consider using “windfalls” like your tax refund, bonuses, or birthday gifts to pay into your retirement accounts when they show up.


Photo credit: iStock/miniseries

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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

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

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How Much Do You Have to Make to File Taxes?

How Much Do You Have to Make to File Taxes?

If you are wondering if you made enough money to file taxes this year, the answer will depend on more than just your income. There are other qualifying factors, such as age and marital status. What’s more, even if you are not required to file taxes, it’s often wise move to do so anyway.

Here, you’ll learn what you need to know about tax-filing requirements based on your income and other aspects of your filing status. In addition, you’ll find some smart tips for filing your tax return this season. Read on for answers to such questions as:

•   How much do you need to earn to file taxes?

•   At what point do you have to start paying taxes?

•   What are some tips for making the tax-filing process easier?

What Factors Determine If You Have to File Taxes

“How much do I have to make to file taxes?” is a valid question, but the answer is, “It depends.” While gross income (not adjusted gross income) is important, it’s not the only factor to consider. Determining whether you need to file taxes depends on your:

•   Gross income (earned and unearned)

•   Filing status

•   Age

•   Dependent status

Note: Regarding age for the 2023 tax year, you’re considered to be 65 or older by the Internal Revenue Service (IRS) if you were born before Jan. 2, 1959.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


How Much Do You Need to Make to File Taxes?

Gross income is the number-one consideration when determining if you should file taxes. But this minimum income requirement also varies by filing status and age.

Below is a breakdown of gross income thresholds listed by filing status. You’ll also learn about instances of when dependents may need to file their own tax return.

Single

For the 2024 tax season, filing requirements for single taxpayers vary based on age:

•   Single filers under 65 must file a return if their gross income was $13,850 or more.

•   Single filers 65 or older must file a return if their gross income was $15,700 or more.

Head of Household

Similarly, those with a head of household filing status have varying thresholds based on age:

•   $20,800 for heads of household under 65.

•   $22,650 for heads of household 65 or older.

Married Filing Jointly

Married couples who file a joint return have slightly more complicated requirements since the two spouses could be in different age categories:

•   If both spouses are under 65, they must file if their gross income is $27,700 or more.

•   If one spouse is under 65 and the other is 65 or older, they must file if their gross income is $29,200 or more.

•   If both spouses are 65 or older, they must file if their gross income is $30,700 or more.

Married Filing Separately

Regardless of the age of either spouse, taxpayers who are married but filing separately must file if their gross income is just $5 or more, according to IRS guidelines.

Qualifying Surviving Spouse

If you’re a qualifying surviving spouse, the minimum gross income requirements for filing depend on your age:

•   $27,700 for filers under 65

•   $29,200 for filers 65 or older

If you earn that amount or more, you need to get your tax return in on time. (Remember, if you miss the tax-filing deadline, you may incur penalties.)

Dependent Filers

If you are a dependent claimed on someone else’s taxes, you may still have to file your own return. The minutiae of determining file requirements can be complicated and depends on:

•   Your age

•   Your marital status

•   Your vision (those who are blind have different qualifying guidelines)

The IRS Publication 501 contains a helpful table in determining file requirements, but if you’re unsure, it may be helpful to work with an accountant.

The following chart summarizes answers to “Do I have to file taxes?” in visual form. It breaks down minimum gross income amounts based on age and filing status for most taxpayers. Dependents are a notable exception. Read on for an overview of income thresholds for tax filing.

Filing Status

Age

Required to File If Gross Income Was at Least…

Single Younger than 65 $13,850
65 or older $15,700
Head of household Younger than 65 $20,800
65 or older $22,650
Married filing jointly Both younger than 65 $27,700
One spouse 65 or older $29,200
Both 65 or older $30,700
Married filing separately Younger than 65 $5
65 or older
Qualifying surviving spouse Younger than 65 $27,700
65 or older $29,200

If you’re still not sure if you should file, you can use the IRS’s free online tool for determining filing requirements. You’ll need some basic info to accurately complete the assessment, but this tool can come in handy.

Recommended: What Are the Different Types of Taxes?

Should I File Taxes Even If I Don’t Have to?

Above is an outline of when you’re legally required to file taxes. But just because you don’t have to file doesn’t mean you can’t.

Even if you know how much you need to make to file taxes and are below that number, the IRS encourages everyone to file if they can get money back. This may apply if:

•   You had taxes withheld from a paycheck but didn’t make enough money to have had that money withheld.

•   You made estimated quarterly payments but didn’t make enough money to have to file.

•   You qualify for refundable tax credits that could result in your receiving funds back from the government, like the Earned Income Tax Credit.

Recommended: What Tax Bracket Am I In?

Tax-Filing Tips to Help You This Season

Filing your taxes for the first time or just in need of a refresher? Here are a few tax tips to help you file correctly this season:

•   Be prepared: Preparing for tax season before it’s time to file can make the process much easier. It may be helpful to make a list of all the forms you’re expecting, like W-2 forms and 1099 forms, and keep them located in a safe place until it’s time to file.

•   Check out IRS Free File: No need to pay for professional tax software or an accountant if you qualify for guided tax preparation through the IRS and its partners. As long as your adjusted gross income is $79,000 or less, you’ll qualify.

•   Don’t forget about state and local taxes: We often think of the IRS and our federal tax returns, but depending on where you live, you may also need to pay state and local taxes.

•   File early if possible — and use direct deposit: The sooner you file, the sooner you’ll get your tax refund. If you file electronically and choose direct deposit, the IRS says you can typically expect your refund within three weeks. The IRS also says this is safer than a paper check!

•   Understanding extensions: Sometimes, life happens, and it’s just about impossible to meet a deadline. If that’s your situation, you can file for a tax extension and have an extra six months to file your return. Just note that any taxes you owe are still due on Tax Day; it’s only the return itself that can be sent in later.

•   Don’t be afraid to ask for help: Taxes can be overwhelming. While it may not be ideal to pay for an accountant, it could mean earning a larger refund if this tax professional can identify additional tax deductions and credits for which you qualify.

Recommended: How to Make a Budget in 5 Steps

The Takeaway

Tax time can be confusing. It’s not just a matter of knowing how to file but also if you need to file at all. Depending on your income and other factors, you may not be legally required to file your taxes come April. Even if you don’t meet minimum income requirements for filing, however, it might be a good idea to file anyway if you think you may be owed money from previous withholdings or through a refundable tax credit.

And if you do get a juicy refund? Consider depositing it into a high-interest bank account where it can grow.

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


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

FAQ

What happens if I don’t file my taxes?

If you don’t file your taxes but were legally required to, the IRS can charge you a Failure to File Penalty, assessed at 5% of your unpaid tax liability every month that the liability goes unpaid (up to 25%).

If you were owed a refund, you won’t be charged a penalty — but you could miss out on that money owed to you. (You have three years to file to get the refund you’re owed.)

The IRS can take additional steps if you fail to file, including criminal prosecution.

Do I have to file taxes on gifts?

As the recipient of a gift, you generally don’t have to worry about paying taxes on the gift. Instead, the person who gave you the gift would pay the taxes.

However, the IRS has several exclusions, including gifts to your spouse, gifts to a political organization, and tuition and medical expenses that you pay for someone else. Note: The IRS has an annual exclusion on gifts. For the 2023 tax year, you don’t have to pay taxes on the first $17,000 in gifts to each person you give a gift to. For most taxpayers, that means they won’t pay taxes on things like birthday and Christmas presents.

Can I file taxes even if I am under the necessary income?

Yes, you can still file taxes if you’re under the necessary income. In fact, the IRS encourages many people to file even if they don’t have to because they might still be eligible for money from the government, perhaps via refundable tax credits.


Photo credit: iStock/Fortgens Photography

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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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