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Single parents typically carry a lot of weight on their shoulders, paying for their child’s food, clothes, medical care, after-school programs, and more.

It can be challenging to make ends meet and avoid credit card debt. Saving for the future (including college) can be difficult.

But that doesn’t mean it’s impossible. There are smart strategies that help make it possible for single moms and dads and their kids to thrive. Establishing a basic budget, knowing how to handle taxes, and whittling down debt can all play a part in boosting your financial wealth.

Here, learn some important financial moves for single parents.

9 Ways to Budget As a Single Parent

Setting up a simple budget can be a smart move for a single parent. It can help you take control of your cash and also make your money work harder for you.

1. Crunching the Numbers and Creating a Single Parent Budget

A great way to get a better financial path is to first figure out where you currently stand and come up with a monthly budget.

How to budget as a single mom or dad is similar to what anyone else would do. You can do this by gathering your financial statements for the past several months, then using them to figure out your average monthly income (after taxes), including any child support or alimony you receive.

Next, you can tally up your fixed expenses (monthly bills) and variable expenses (clothing, food, entertainment) to see how much, on average, you are spending each month.

Ideally, you want your monthly inflow to be larger than the outflow — that way, you have money left over for savings and paying off debt. One smart technique can be the 50/30/20 budget rule, which divides your income into three parts: 50% for needs, 30% for wants, and 20% for savings and paying off debt beyond the minimum.

If your current income isn’t high enough to make that work, you can re-jigger the percentages and come up with a spending and saving plan that works for you.

2. Trimming Expenses in Your Single Mom Budget

Next, you need to figure out how to live on a budget.

If you find yourself breaking even or, worse, going backwards each month, you may next want to look hard at your list of expenses and start searching for ways to save money.

A key single parent budgeting move is to hone in on your recurring bills to see if there are any ways to lower them. You may now be living on a single income, which can involve some lifestyle tweaks. You might be able to switch to a cheaper cell phone, for example. Or, maybe you can find a better deal on car insurance or ditch your cable subscription.

You can also look for ways to cut everyday spending, such as breaking a morning coffee shop habit, cooking more often and getting less take-out, and using coupons (say, via RetailMeNot or Coupons.com) whenever you shop.

3. Opening an Interest-Bearing Account

Once you start freeing up some money each month, it can be a good idea to start siphoning it off into a high-yield savings account. This can help you create some financial security for your family, as well as help you reach short-term goals, like going on a vacation or putting a downpayment on a home.

Even if you can only afford to set aside $25 or $50 per month, it will begin to add up.

Some good places to stash cash you may need in the next two or three years include a high-yield savings account, an online savings account, or a checking and savings account. These accounts typically earn more interest than a standard savings account, yet allow you to have easy access to your money when you need it.

You may want to keep an eye out for fees, and shop around for financial institutions that won’t charge you monthly and other account fees (which can take a bite out of your hard-earned savings).

4. Prioritizing Emergency Savings

Expensive problems you can’t plan for often come up, like a car or home repair, taking a child to urgent care, or a sudden loss of income. Without a cushion, small money problems can quickly balloon into big ones if you are forced to run up high interest credit card debt to deal with them.

As you start building savings as part of your monthly single parent budget, it can be wise to prioritize emergency savings. Experts often recommend having at least three- to six-months worth of living expenses stashed away in a separate savings account where you won’t be tempted to spend it. That way it’s there when you need it.

5. Paying Off Your Credit Cards

A debt elimination plan can make a significant change in your monthly cash flow. When creating a budget for a single mom (or dad), it can be a good idea to leave room for credit card payments that are higher than the minimum.

You may want to start with the debt that has the highest interest first since borrowing from those creditors is costing you the most money. However, if you’re likely to get discouraged because it’s taking a long time to pay off that debt, you can start with the lowest balance debt. Getting some small debts paid off may motivate you to keep going.

Whatever debt you target, you can then pay more than the minimum payment on that debt while continuing to pay the minimum on others, with the goal to eliminate them one by one.

Another option: personal loans for single moms can help pay off the debt and substitute a lower-interest payment for what you were paying the credit card company. This may be an avenue to explore.

6. Planning for the Future

Once you’ve mastered your day-to-day finances, you may want to look toward your two big long-term financial security goals: retirement and your children’s college education.

If you can’t comfortably save for both at the same time, you may want to begin with retirement. While your kids can likely get loans for college, there aren’t loans for retirement.

You may want to start by contributing to any employer-sponsored 401(k) plan. If your employer is matching contributions, it can be a good idea to chip in at least enough to get the match (otherwise you’re turning away free money!). Or you can set up an IRA; even $25 or $50 a month at first is a start.

When you’re in the habit of regularly contributing to a retirement savings account, you may want to turn your attention to saving for college: An ESA (education savings account) or 529 college savings fund can help you save towards college expenses while getting a tax break.

7. Automating Your Finances

As a single parent, you may be super busy, making it easy to pay bills late simply because you forgot. Automating your finances can simplify your budget (and your life) and help ensure you don’t get slapped with expensive fees or interest charges for being late with payments.

A good place to start is to set up autopay for all your recurring bills, either through your service providers or your bank. This way you don’t have to stay on top of due dates and remember to make every payment.

Automating can also be a great idea when it comes to saving. Often referred to as “paying yourself first,” you may want to set up an automatic transfer of money from your checking to your savings account on the same day each month, perhaps right after your paycheck gets deposited. This prevents you from spending those dollars or having to remember to transfer the funds to your savings at a later time.

8. Increasing Your Income

If your budget is super tight even after cutting expenses, then you may want to find ways to increase your income. This can help take a lot of the stress off budgeting as a single mom or dad.

There are many ways you can increase your income. For starters, if you’ve been at your job for a while and are performing well, you may want to consider asking for a raise. It can be helpful to research what the industry average pay is for your position with your experience to get an idea of how much you should ask for.

Another way to increase your income is to start a side hustle, like walking dogs, becoming a virtual assistant, taking on freelance work in your profession, selling your crafts, becoming a tutor, caring for other people’s kids, or offering music lessons.

9. Taking Advantage of Tax Breaks

Tax credits for single vs. married people can vary. When you’re budgeting as a single mom or dad, it can be smart to be aware of all the tax benefits you may be entitled to. A tax credit is directly subtracted from the amount you owe in taxes, while an exemption means that amount is deducted from your total income before your taxes are calculated.

Here are few tax benefits that may be worth investigating:

•   Filing as “Head of Household” instead of “Single.” If you meet the requirements, you may be able to get a higher standard deduction.

•   The child tax credit. If you share equal custody with your child’s other parent, only one of you can claim this. You may want to consider alternating years.

•   The earned income tax credit. Single working parents with low to moderate incomes often qualify.

•   The child and dependent care credit. If you’ve been paying for childcare so that you can work (or look for work), you may be entitled to this. But only one parent can claim it each year.

The Takeaway

Budgeting as a single mom or dad can be challenging. With some simple financial planning, however, you can start to feel less stressed about money and get closer to both your short- and long-term goals.

Key steps for single moms and dads include taking a close look at your monthly cash flow, trimming expenses, paying off your credit cards, taking advantage of tax benefits for parents, and saving a little each month to create financial security. If you’re looking for a simple way to stay on top of your single parent budget, you may want to consider if you have the right banking partner.

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.

FAQ

How do single parents survive financially?

Single parents can survive financially by taking control of their money and budgeting, managing expenses, building up an emergency fund and savings, and minimizing debt. Budgeting for single moms and dads is important since you are likely the only income stream so every dollar counts.

How can a single parent afford everything?

To afford everything (meaning all the expenses related to raising a child), single parents can budget wisely, seek child support, bring in additional income, and seek government assistance if needed.

How much should a single parent have in savings?

It’s important for single parents to have an emergency with a minimum of three to six months’ worth of living expenses set aside. This can help if there’s an unexpected medical or car repair bill or if you are laid off; since you don’t have another income in the family, this is a very important move. Beyond that, experts recommend saving 20% of your salary if possible.

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.

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.

SOBK0723033

Some of the best things in life are worth saving for, from an incredible vacation in Asia to the down payment on your dream house. A long-term savings account can keep your money safe and pay interest as you accumulate funds over time. This is in comparison to, say, a checking account which may have money constantly flowing in and out.

Long-term savings accounts can help you reach goals that take at least a few years or possibly decades to attain. They may be a savings account at a financial institution, a certificate of deposit (CD), a retirement fund, or other financial products.

Here, you’ll learn more about these options, including:

•   What are long-term savings accounts

•   What are the pros and cons of long-term savings accounts

•   What types of accounts are considered long-term savings accounts

Pros and Cons of Long-Term Savings Accounts

If you are wondering about long-term savings, consider the potential upsides and downsides of this kind of account.

Pros of Long-Term Savings Accounts

Here are some benefits of long-term savings accounts:

•   Your money makes money. Compounding interest turbocharges the impact.

•   Your money is safe. Look for an account that’s insured by the Federal Deposit Insurance Corporation, or FDIC, or NCUA (The National Credit Union Administration), and you’ll be covered for $250,000 per depositor, per insured bank, for every account ownership category. Some financial institutions may offer ways to cover even larger amounts.

•   Savings accounts are widely available and typically very easy to open.

Cons of Long-Term Savings Accounts

As you might expect, there are also some disadvantages to long-term savings accounts. These include:

•   Relatively low interest rates. If you have your money in a traditional savings account, you may not earn that much. You might do better with a high-interest savings account or investing in the market.

•   There’s no tax advantage to putting your money in a savings account, while some retirement accounts may offer you an advantage on that front.

•   Restrictions and fees. Some savings accounts may limit you to six withdrawal transactions per month, and there’s a possibility that you’ll pay minimum balance or other charges.

4 Long-Term Savings Options

While savings accounts are one popular way to stash cash, they aren’t the only game in town. Here are five options, along with some pros and cons of each of them.

1. High-Interest Savings Accounts

This type of savings account can provide considerably higher interest rates than the average savings account.

You may hear it referred to as a high-interest, high-yield, premium, or growth savings account.

It’s generally just as easy to access a high-interest savings account as it is a standard checking account, although there may be limits on the number of withdrawals you can make per month with this type of savings account. They often offer ATM access, sometimes with fee reimbursement, mobile check deposit, and online account management via an app.

Financial institutions that offer these accounts include regional banks and local credit unions; online savings accounts will also often offer these benefits.

To open and maintain this type of account, there are often certain requirements that need to be met. This could include setting up a direct deposit, maintaining a minimum balance, or limiting the number of withdrawals per month. Some high-interest savings accounts also offer tiered interest rates for different balance ranges. For instance, a bank might offer a base tier on balances up to $25,000, and an upper tier with a higher rate on balances greater than $25,000.

One item to check for in the fine print: the balance cap on interest earned. If that’s included, this means that there’s a limit to the balance on which interest can be earned. For example, if the interest rate is 4%, but the balance cap is at $2,500, then the interest rate is only earned on money up to the cap. Any amount above the balance cap will not earn a high interest rate.

2. Money Market Accounts

A money market account is similar to a high-interest savings account, but it will likely have more requirements for keeping it open. For example, some accounts require initial deposit minimums, and a certain minimum balance may be required to prevent monthly fees from being charged.

With both high-interest savings accounts and money market accounts, funds can typically be deposited and withdrawn fairly easily.

3. Certificates of Deposit

A certificate of deposit (CD) is a deposit account that typically offers higher interest rates than a regular savings account and pays compounding interest. In other words, interest is paid on the interest.

One challenge with a CD, though, is that it’s a time deposit. You’ll usually know the interest rate in advance, but you must agree to keep the funds in the account for a predetermined amount of time. (The range is often from a few months to several years.) So this may not provide the liquidity — the ability to quickly turn the account into cash — that some people want and need. If funds are withdrawn before the maturity date, a penalty will likely be assessed.

Interest rates on CDs are typically structured in tiers, based upon how long a person agrees to keep the money in the account. A short-term vs. long-term CD will probably pay a lower interest rate. A six-month CD, for instance, will likely pay a bit less in interest than a two-year CD.

4. Retirement Accounts

Retirement accounts have one thing in common: they are investment vehicles designed to help people save for their post-working years. They typically have tax advantages. Here are three of the types.

1.    Traditional Individual Retirement Accounts (IRAs)

The account holder opens this account and makes contributions on their own instead of through an employer. There may be an income tax deduction allowed on contributions made, and the funds are tax-deferred, meaning the contributions aren’t taxed but the withdrawals are. For tax year 2023, the maximum allowable contribution amount is $6,500 annually or $7,500 if age 50 or older. If funds are withdrawn before the account holder is 59 and a half, there is a 10% penalty levied on the amount withdrawn in addition to the usual tax on the withdrawal.

Contribution limits and how much is tax-deductible will depend upon factors such as whether you are filing singly or jointly, how much you earn (your modified adjusted gross income, or MAGI), and whether you are covered by a retirement plan at work.

2.    Roth IRA

A Roth IRA is another type of individual retirement account that a person opens and funds without the involvement of an employer, this time using after-tax money to contribute. This means that account holders cannot deduct contributions on their income tax. However, the balance grows tax-free, and when funds are withdrawn during retirement, they are also tax-free. Annual contribution caps are the same as a traditional IRA.

To contribute to a Roth, the account holder must be earning an income. Once that person’s MAGI reaches a certain level — for the 2023 tax year, this is $153,000 — then the ability to continue to contribute will begin to phase out. If the account holder is filing joint federal income taxes, then the amount is $228,000 for the 2023 tax year.

As noted above, the maximum total annual contribution to all your IRAs when combined is $6,500 for those under age 50 in tax year 2023; $7,500 if you are 50 or older.

This type of account is typically best for someone who appreciates the ability to withdraw funds in retirement without paying taxes, and a Roth IRA can work especially well for people currently earning a lower income than they expect to earn in the future.

3.    401(k) Retirement Account

What is a 401(k)? It’s a retirement plan offered by an employer to qualifying employees. Contributions are made with pre-tax money, which means they will reduce the person’s taxable income. The money grows tax-free, with taxes paid when funds are withdrawn in retirement.

For the 2023 tax year, the maximum annual contribution amount is $22,500; an additional catch-up contribution of up to $7,500 can be made by account holders over the age of 50. These contributions are taken from the employee’s paycheck, and some companies provide matching funds up to a certain amount. Sometimes these accounts have fees that must be paid.

Although these are not the only kinds of retirement accounts available, they are among those most commonly used.

Long-Term Financial Goals

By setting long-term financial goals, people can create a plan for a more comfortable future and make a commitment to stay on track with savings goals. The reality is that, according to a recent survey, 37% of Americans have no retirement savings at all.

Creating a long-term financial plan and focusing on that plan can help people reach money goals. Keeping cash in a savings account long-term can help you reach those aspirations.

Steps include setting goals with these five components:

•   Clarity

•   Challenge

•   Commitment

•   Complexity

•   Feedback

These components are included in “A Theory of Goal Setting and Task Performance,” published by Edwin Locke and Gary Latham.

•   First, be clear about what, specifically, you want to accomplish — and don’t be afraid to dream big.

•   What challenges might you face? Break your goals into smaller parts to simplify the journey.

•   Prioritize them and make a commitment to follow shorter-term goals, one step at a time, which also helps to gain momentum on the longer-term ones.

•   The excitement that may be felt about this process can help to solidify a sense of commitment.

•   For some people, it can help to partner with another person and share goals, keeping one another accountable. Or perhaps a mentor can be helpful. Other people may find it more effective to reward themselves when certain goals are met. Whichever method is chosen, it typically works best when progress is regularly reviewed and adjusted, as needed.

Emergency Savings Account

Although saving for long-term goals is wise, it can make sense to prioritize creating an emergency fund if one doesn’t already exist. It’s usually wise to choose an account type that offers liquidity because this is one where you’ll want quick access if an emergency occurs.

A typical recommendation is to keep three to six months’ worth of living expenses in this account. That way, if someone in the household loses a job, an emergency home repair seems to come out of nowhere, or medical bills need to be paid, money in these funds can help to keep all on track or at least mitigate the impact of the expenses.

Opening a Savings Account With SoFi

If using separate savings accounts for different financial goals isn’t something you want or need to do, consider using one main account that lets you save for your financial goals, spend money, and earn money. You might want to take a closer look at what SoFi offers.

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.

FAQ

What type of account is best for long-term savings?

If you are interested in a highly liquid account that is insured, you might look for a high-yield savings account. These are typically found at online banks and can offer significantly higher interest rates than traditional banks.

What is a long-term savings account called?

You may see different terms used for long-term savings accounts, such as high-yield, high-interest, and premium savings.

What is considered long-term savings?

Long-term savings are typically money that is being set aside for a goal that is at least several years or possibly a few decades away. If you are starting to save for the down payment on a house, your child’s college education, or your retirement, those might be considered long-term goals.

Photo credit: iStock/AndreyPopov

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.

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.

SOBK0723057

College life is all about getting a great education, getting to know your roommates and classmates, exploring interests and activities, and forging your own adult identity. But it’s also a perfect time to establish some good money habits that will set the scene for success today and tomorrow.

From developing a budget to opening bank accounts, you’ll have ways to make your money work harder for you and grow over time so you can achieve your goals. And it can be pretty simple, too, so it won’t interfere with study sessions or hanging out at the student center.

Learn the 10 best strategies for good money management here.

10 Tips for Managing Your Money As a College Student

Here are 10 money management tips that help you spend less and save more both during and after college.

1. Setting up a Basic Budget

Budgeting may sound complicated, but making a budget is simply a matter of figuring how much is coming into your bank account each month and how much is going out, and making sure the latter doesn’t exceed the former.

To get started, you’ll want to list all of your sources of income, such as from a job or family contributions.

If you are going to be living off a fixed amount of money for each semester, say from summer earnings or money from your family, you may want to divide this lump sum by the number of months you need to make this money last.

Once you know how much you have to live on each month, you’ll want to make a list of fixed expenses that you will be responsible for paying, such as cell phone or car payment, or maybe even rent if you live off campus.

Next, you’ll want to subtract your fixed expense from your monthly spending allotment. This will give you the amount you have left over to cover variable expenses, such as eating out, buying clothes, and entertainment. You can then come up with target spending amounts for each category.

Doing your best to stay within these spending limits can help ensure that your money lasts until the end of the semester, and help you avoid running up costly credit card debt.

2. Opening up a Savings Account

You might feel like you don’t have enough income to start saving money yet, but even just putting a small amount away each month can add up over time.

For example, if you’re able to set aside $50 a month now, you may soon have a decent nest egg that can help pay for something fun, like a road trip over the next school break.

What’s more, being diligent about saving money each month can help cultivate a habit that will serve you later when you can afford to save more in your nest egg and also for retirement.

3. Buying Used Textbooks (and Selling Yours When Done)

Textbooks can be so expensive! Fortunately, there are a number of ways to save money here.

One option is to buy used whenever you can. You’ll want to be sure, however, that you are getting the version the professor wants. If you have an earlier edition, you might struggle to find the content if the book has since been modified. Getting the digital version of a book can also yield savings.

Another option is to rent what you need from a third-party bookseller, such as Amazon or Chegg. You can often rent textbooks for an entire semester for significantly less than buying new, and may even be able to highlight them.

For books that you purchase (new or used) that you won’t need to refer to in the future, consider selling them when you’re done to recoup some of the expense.

4. Using Credit Cards Sparingly

Credit card companies love college students, and many may try to lure you into applying for cards. You’ll want to proceed with caution, however.

While having a credit card as a student can be a good idea–for convenience, as a backup for emergencies, and to start building credit history (more on that below), you’ll want to be careful that you don’t run up credit card debt.

If you charge more than you can afford to pay off at the end of the month, you can end up paying a high-interest rate on the balance, which can make it even hard to pay off.

As a result, it can be easy for college students to find themselves digging a debt hole that can be hard to climb out of.

If you choose to sign up for a new card, you may want to look for a rewards credit card. These can let you rack up points you can use to get products or travel perks, but only charge what you can afford to pay back quickly.

If you choose to sign up for a new card, you may want to look for a rewards credit card that will let you rack up points you can use to get products or travel perks–and only charge what you can afford to pay back quickly.

5. Establishing Your Credit Score

A credit score is a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time.

Building your credit history might not seem like a priority when you’re still in school, but you’ll need it in the future if you want to finance a car, buy a house, or qualify for the best credit card offers. Your credit can even affect your job prospects and your ability to rent an apartment.

One good strategy is to use your credit card judiciously. If you make small purchases and regularly pay the balance off in full, you can avoid racking up interest charges but still get that boost to your credit score.

If you have student loans, you may also want to consider making small payments (even just $25 to $50) while you’re still in school to start paying down interest and have some positive repayment history on record.

If you start building a solid credit history now, you will likely be able to get better deals on lending products like mortgages, car loans, and credit cards in the future.

6. Finding Free Stuff

One highly effective way to stretch your money is to find freebies.

Facebook has groups where people can post items they no longer want. You might be able to score free clothes, furniture, or room decor.

Freecycle and NextDoor also have listings for things that people are giving away. You can also find free items on Craigslist (you’ll find the “Free” section under the “For Sale” heading on the main page for your city).

7. Learning to Cook and Eating out Less

You may find you get tired of cafeteria fare and ramen. At the same time, you may not want to don’t blow your budget on eating in restaurants every weekend.

If you have access to a kitchen, you might want to consider purchasing ingredients from your local supermarket and putting together some simple, tasty meals, instead of eating out. This can be a major way to save money on food.

If you’re not much of a cook, you may want to go to some food blogs and recipe sites like Allrecipes or Serious Eats to find some easy recipes and watch a few how-to videos. You could also find tons of cooking videos on YouTube.

Having some go-to recipes in your arsenal can pay off now, and also down the line when you’re working and living on your own (and don’t have to rely on expensive take-out or unhealthy fast food for dinner every night).

8. Starting an Emergency Fund

Starting an emergency fund or back-up savings fund is an important part of anyone’s long-term financial health.

Life can be unpredictable, and your emergency fund serves as a safety net that you can fall back on for those “rainy days” where you find yourself facing an unexpected expense or other financial setbacks.

Having an emergency fund can also help keep you from having to rely on credit cards to get through a financial challenge.

How much you should put aside for emergencies each month is up to you and your financial situation. The key is to start saving something each month, no matter how small the amount may initially seem.

When starting your emergency fund, it’s a good idea to fund the account regularly. Consider setting up an automatic transfer to your savings so you do not have to think about it.

Ideally, your emergency fund should also be set up in a separate savings account so you won’t be tempted to spend the money on something else.

9. Getting the Most out of Your Student ID

You may only think of your ID card as a form of identification and a way to get into college sporting events. But there are actually a number of additional benefits that come with a student ID, and many can help you save money.

You may find that businesses, especially those near universities, will offer students discounts when they show a student ID card.

Next time you go to the movies, shop for school supplies, or get a new haircut, it can be a good idea to ask if they offer any discounts for local college students.

In addition, many national and online retailers, including major clothing, sneaker, and computer brands, offer discounts to college students.

You may also be able to use your student ID to get a better deal on your cell phone plan and streaming services.

10. Getting Started with Investing

Investing when you’re young is one of the best ways to help your money grow over time.

That’s thanks to compound earnings, which means that any returns you earn are reinvested to earn additional returns. The earlier you start investing, the more benefit you gain from compounding.

Investing in the stock market also isn’t as complicated as you may think. You can open a retirement account, like a traditional or Roth IRA, or a brokerage account (for nonretirement investing) online, often with a minimal amount of money.

You may also be able to schedule automatic withdrawals from your bank account to your investment account each month.

It’s important to keep in mind, however, that all investments have some level of risk because the market moves up and down over time.

The Takeaway

College can provide a great opportunity to develop the money skills you’ll need after you graduate. By learning some basic money management techniques now, you can feel confident about your ability to handle your finances well after graduation.

In 10 years, you will likely thank yourself for putting in the effort to learn how to set and stick to a monthly budget, use credit cards wisely, save money, and build your credit score.

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.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOBK0823002

Wondering what a stipend is? It’s a fixed amount of money designed to offset expenses or provide financial support when you’re performing a service or contributing to a project. For instance, some gigs when you are in college may pay a stipend in one lump sum or it might be doled out in a series of smaller payments.

As you’re looking through employment opportunities, you may come across certain positions or experiences that don’t offer a salary but do offer a stipend. Stipends are also common in academia, where a stipend may be offered to grad students to TA classes, assist with research, or conduct research projects on their own.

Here, you’ll learn how a stipend works, whether you can negotiate the amount of a stipend, and how accepting this type of payment may impact your taxes.

How Does a Stipend Differ From a Salary?

A stipend is a fixed sum of money that may be used by an organization to incentivize employees, interns, researchers, teachers, and volunteers. It’s usually meant to help offset expenses for a specified period of time, such as one year or one semester.

Typically, stipends are used in internships or apprentice situations, where the recipient of the stipend is receiving training that benefits them more than an employer.

However, some employers may offer stipends to their employees as one-off payments to help offset work-related expenses, such as travel/commuting, meals, home office expenses, cell phone, professional training, or education.

A salary, on the other hand, is an annual amount agreed upon between a company and an employee that is paid out in regular increments, either monthly, bi-monthly, bi-weekly, or weekly.

A salary may also include benefits such as vacation, insurance, and other benefits within the overall compensation package.

Recommended: What is a Good Entry Level Salary?

Who Receives a Stipend?

Historically, stipends were primarily used as part of an internship or fellowship package. These days, however, it’s not uncommon for employers to use a stipend as a “fringe benefit” added to your overall compensation package.

The stipend may be earmarked for certain expenses and your employer may ask for specific records or notekeeping to access it. Fringe benefit stipends may include:

• Transportation stipends

• Travel stipends

• Education stipends

• Clothing stipends

• Entertainment stipends

• Food stipends

The type of stipends offered usually depends on the nature of your work. For example, if you have to travel frequently for your job, your employer may give a travel stipend to allow you to have flexibility in making your travel plans.

Are Stipends Taxable?

Stipend checks aren’t considered wages so you won’t pay Social Security or Medicare taxes on them. However, you may still have to pay some taxes on a stipend.

If you are offered a stipend for an internship or work in academia, it might be called a “living” stipend, which means it is being given to you to help pay for expenses.

Though taxes will not be taken out, this stipend is likely considered taxable income and you will need to set aside some of your stipend money to pay any taxes owed at the end of the year.

In some academic settings, however, a stipend may be what is considered a scholarship and earmarked for educational purposes only (rather than living expenses). In this case, the stipend may not be taxable.

If you’re offered a stipend for academic work, it can be a good idea to speak with a financial professional or your financial aid office to understand how the stipend is meant to be used and how it will be treated tax-wise.

Stipends offered by companies to their employers may or may not be taxable — it depends on how the company structures the stipend.

In order to keep a stipend non-taxable, a company must set up a reimbursement plan in which employees complete expense reports proving that all business-related expenses are being reimbursed through the payment of the stipend.

For example, if you’re given a travel stipend to go to a client meeting, then the stipend may not be taxable if you provide adequate expense documentation of how the stipend was used and how each payment was an acceptable business expense.

If expenses are not documented — or if the stipend is a “perk” of working at the company, such as a commuting stipend or stipend for in-office meals — then the stipend may be taxable.

If your company is offering you a stipend, it can be a good idea to ask your employer, as well as a tax professional, about any tax implications.

How to Use a Stipend

If you accept an internship or other position that offers a stipend to help cover expenses, it can be a good idea to consider how the money will be spent and set up a budget for basic living expenses.

Unlike a salary or wages, you may need to make a stipend stretch several months. A good first step is to assess your monthly expenses, including:

• Housing

• Food

• Transportation

• Amount set aside for potential taxes

• In case of emergency expenses

A stipend is not generally expected to cover all of the expenses you may incur, so you may need to find ways to stretch your money, such as moving in with a friend or relative, or bring in extra income by getting a side gig or part-time job.

Recommended: Why Having Emergency Savings Should Be a Financial Priority

Can You Negotiate a Stipend?

There may be some wiggle room, but how much (if any) will depend on several factors, including what the stipend is for, the field you’re in, and the reason for asking for an increased stipend.

For example, if you are a student who received a stipend to do international research, you may find that the cost of travel and lodging is more than the organization or school offering the stipend anticipated. This could be something you could bring to the organizer’s attention, to see if there’s any wiggle room in allocating more dollars.

In addition to assessing your expenses (to see if the stipend will be enough), you may also want to look at similar positions and review what their stipends are. If other positions are offering more, you may want to consider asking for that amount.

In some cases, however, a school, organization, or company may not have wiggle room to access more money and may offer the same stipend to interns or apprentices across the board.

Doing some research and framing the conversation respectfully can be helpful as you navigate the next steps and whether or not the stipend package makes sense for your financial needs. It can be wise to research salary negotiation tips in advance so you know good ways to phrase your request, if you do try to get a higher sum.

The Takeaway

A stipend is a predetermined amount of money that is often paid to certain individuals, such as trainees, interns, and students, to help offset some of their expenses. Stipends can have financial implications, so it’s wise to learn how the stipend may be taxed and what records are necessary for any incurred expenses during the stipend.

As you plan for life with a stipend, it can be a good idea to set up a budget and track your expenses to make sure you don’t run out of money mid-program. Your bank may offer a tool to help with this.

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.

Photo credit: iStock/Mykola Sosiukin

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.

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.

SOBK0823003

Figuring out how to pay your bills when your usual income stream is interrupted by job loss can be a difficult task. You probably know to cut back on dining out and movie nights, but what can you do about bills for your rent, student loans, and other vital expenses?

Plenty of people confront this situation, and there are ways to navigate this challenge. If you are wondering how to pay bills when you lose your job, it’s a matter of knowing how to recognize the most pressing bills, organize your assets, and seek additional income and assistance if needed.

Here, learn more, including:

•   Which bills to prioritize if you lose your job.

•   How to develop a survival budget.

•   Where to access funds until you find your next job.

What Bills Should I Prioritize?

If you’ve lost your job, you may feel as if you can’t pay all your bills. In this situation, it’s crucial to prioritize certain ones to make sure you can meet your basic necessities. This means looking at your list of bills and determining ones that should be at the top of your list (or close to it).

In addition to the bills that keep your daily life running, you also want to consider the damage unpaid charges can do to your credit rating. The goal is to balance these factors with the funds you do have available.

Bills you should probably prioritize include:

Rent

Having a roof over your head is important for you and those who live with you, so contact your landlord as soon as possible to discuss alternative payment arrangements. Perhaps you can negotiate lower payments for a window of time. Otherwise, if you don’t communicate and don’t pay, you could find yourself facing eviction.


💡 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.

Mortgage Payments

If you have a home loan, falling behind on payments can have serious consequences, one of which is foreclosure. Non-payment can lead to default and the bank has the right to recoup their property (aka the home) and sell it to attempt to make back the money it lost.

If you’re wondering what to do about loans when you’ve lost your job, contact your lenders as soon as possible. Many offer forbearance or alternative repayment programs.

Student Loans

Falling behind on student loans could mean you’ll go into default. In some cases, the lender may have the right to garnish your wages. If you’re handling student loans during a job loss, consider applying for an income-driven repayment plan for federal student loans or contacting your private lender to see what options are available.

Car Loans

You’ll most likely need your car to run errands or look for work. Staying on top of payments for your loan or lease can help ensure you won’t risk having your vehicle repossessed.

Insurance

Non-payment could result in denial of coverage, which might not be helpful if you need to see medical treatment or are in a traffic accident, for instance.

Utilities

Not paying these types of bills can result in your electricity, water, phone, and internet being shut off. These are obviously vital for daily life and, in terms of connectivity, job hunting.

How to Create a Survival Budget

If you’ve lost your job, it’s important to create a survival budget to help prepare for the lean times ahead. This type of budget only takes into account the bare necessities with whatever savings or income sources like unemployment benefits you currently have.

The main goals of a survival budget: to ensure you and your family are taken care of, and then turn your attention to any creditors as necessary. What this means is that even without a job, you pay the bills that will ensure you can survive first — such as food and housing.

Taking Stock of Your Expenses

To start, look at all of your current expenses and eliminate anything that isn’t really and truly a necessity.

•   You can’t get rid of your food expenses, but you can temporarily cut back on dining out. Cook your meals instead, and ditch your takeout coffee habit for now.

•   If you have a cell phone, you can consider downgrading your service for a cheaper plan to save some money.

Look at the funds you have available for the next couple of months as you job hunt. Deduct the priority expenses, and then evaluate what is left and how you can budget those funds. Be strict with yourself: Now is the time to unsubscribe from all those streaming services and save your money for what’s vital.

If you’re not sure if you have enough cash to pay for the necessities and debt payments, it’s best to seek options like forbearance and deferment — negotiate with your lenders to see what you can do.

Where Can I Turn for Money?

Here are some income sources you can turn to when you’re unemployed. It’s hard to pay bills with no job, but these resources may get you through a tough time:

Credit Cards

Using credit cards or even taking out a personal loan when unemployed can be a quick source of funds if you need to make purchases such as groceries and gas. While the interest rates tend to be high, you’ll have a grace period before your balance is due, giving you a buffer to get another income source.

Otherwise, you can make the minimum payment for the time being and make a plan to pay it back once you’re employed again.

Also, see if you can negotiate with your card’s issuing company; you might be able to delay credit card payments. You may also want to explore balance transfer credit card offers, which give you a window of low or no interest.

Retirement Accounts

Tapping into a retirement account like a 401(k) or an IRA is typically seen as the last resort because the downsides typically outweigh the benefits. However, if you’re running out of resources and you have a decent chunk in there, you may not have another choice.

You can choose to tap into your retirement accounts in the following ways:

•   Take out a 401(k) loan: Depending on the terms of your 401(k) plan, you may be able to borrow up to a certain amount — usually up to $50,000 or half of your vested amount — and pay it back within a predetermined amount of time (in most cases, five years). Keep in mind you could face additional penalties if you don’t pay back the loan, such as the loan amount being subject to taxes. In addition, loan and management fees may apply.

•   Withdraw from your retirement accounts: If you have an IRA or taxable brokerage account, you can make withdrawals. Keep in mind with IRA accounts, you may be subject to a penalty and taxes on the amount you withdraw.

Government Assistance

You’ll want to find out how unemployment works if you lose your job; it can help get some cash flowing your way. Those funds can help you pay for your necessities as you seek other work.

If you’ve been unemployed for a while or face mounting pressures on things like an unexpected medical expense, you may be able to seek other forms of government assistance. These sources can be helpful if you feel as if you’ve lost your job and can’t pay your bills. To see what you may qualify for, you can search on Benefits.gov , your local state or municipal office, and even local charity organizations and churches.

How Setting Up a Bank Account Can Help You When You Are Not Working

When you’re unemployed, setting up a bank account (if you don’t already have one or one you love) may seem like the last thing on your mind, but doing so can help. For one, it can help you to keep track of your finances and apply for products such as credit cards and loans if you need these sources of income.

Plus, many banks offer tools to help you budget your money, a useful feature considering you need to watch your money more carefully. These pros of opening an account can make this moment of unemployment a good one to explore your options.

How to Budget and Save with a Bank Account

Here are some ways in which you can make a budget and save using a bank account when you are unemployed and navigating the job market:

•   Divide money into multiple checking or savings accounts for each type of expenses so you can ensure you have enough money for necessities as well as bills.

•   Set up automatic transfers so you can ensure you’re setting aside money from any income to save or pay bills on time.

•   Set up direct deposit for unemployment benefits or government assistance.

•   Set up card controls or features from your bank to restrict spending.

•   Turn on balance alerts to notify you when your account falls below a certain balance, so you can decide to pause or delay certain purchases.

•   Earn interest with a high-interest savings account.

Alternative Sources of Possible Income

For some people, the above options for money won’t be a good fit; for others, additional funds will be needed. If you have learned how to apply for unemployment and taken other steps to get money but are still seeking other sources of income, consider these options to get cash flowing:

•   Borrow from friends and family.

•   Look for work on freelance marketplace sites like Upwork and Fiverr.

•   Sell things you own or make online via eBay, Etsy, or other sites.

•   Participate in paid market research.

•   Look locally for jobs like dog-walking.

•   Explore passive income ideas, including renting out your car or your tools.

Protecting Your Finances from Future Job Loss

There are also steps you can take to bring in income and prepare for any future financial setbacks you may endure. Consider these options:

Starting a Side Hustle

A side hustle is a gig you start that doesn’t have to be full-time but fits into pockets of time you have available. One of the key benefits of a side hustle is bringing in income.

Side hustles can include anything from driving a rideshare to delivering food. You might sell your nature photography online or help local businesses with their social media part-time.

Building an Emergency Fund

Starting an emergency fund can help protect your finances if you were to lose your job. This involves saving money so it’s there if you are laid off or encounter an unexpected expense, such as a major car repair or dental bill.

In terms of how much money should be in an emergency fund, aim for three to six months’ worth of basic living expenses. Of course, it’s fine to build that up over time versus coming up with the whole amount. Even putting aside $20 a month is a start. And by keeping the funds in a high-interest savings account, you’ll help it grow.

It’s important to know when to use an emergency fund. Losing one’s job is an emergency; it’s exactly what the money is there to pay for. However, the opportunity to travel at a deeply discounted rate or buy designer shoes for 50% off are not good reasons to tap this account.

Starting a Budget

Developing a budget and following it can help you get through challenging financial moments and thrive in good times. A budget helps you balance the money you have coming in, your spending, and your saving. It helps you get a better handle on your financial situation and make adjustments in real time.

•   One popular budget is the 50/30/20 budget rule. This says that, of your take-home pay, 50% should go to basic living expenses, 30% to spending on your wants (such as eating out), and 20% should go to savings and debt payments beyond the minimum.

•   If you have lost your job, you can minimize the 30% by trimming back your spending on wants as much as possible and then attributing more to the basic living expenses and debt payments.

•   The 20% saving figure can be a way to plump up that emergency fund that can help sustain you during a job loss.

The Takeaway

Paying bills when you lose your job can feel stressful, but it’s not impossible. Some key steps may include prioritizing your bills and focusing on budgeting for the bare necessities. It’s also wise to negotiate lower or delayed payments where possible and look for other interim streams of income while you look for your next job.

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.

FAQ

What happens to debt when you lose your job?

Your debt does not go away when you lose your job. You want to keep paying at least the minimum due. However, you may be able to negotiate a way to lower your interest rates or defer payment while you are out of work. Contact your creditors and see what can be worked out.

What bills should I pay first?

When you are unemployed and need to pay bills, prioritize basic living expenses, such as housing, food, and healthcare. It’s also important to stay current on loans, such as student or car loans.

How do you budget if you are unemployed?

If you are unemployed, focus your budget on paying for your basic living expenses (food, shelter, healthcare, etc.) and paying the minimum on your debt. Trim down your discretionary spending; negotiate with creditors to keep debt manageable; and look into borrowing or earning additional funds.

Photo credit: iStock/Delmaine Donson

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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.

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