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Many people believe you must have a college degree to land a secure, high-paying job and build a successful career. However, going to college can be expensive in its own right and require taking on significant debt.

That’s why it may be wise to consider the rewarding and well paying jobs that are possible without a degree. Instead of requiring an associate’s or bachelor’s degree, these careers often vet interested candidates through a certificate program, an apprenticeship, and on-the-job training.

Read on to learn about nine careers that pay well but don’t require a college degree.

1. Elevator Technician

Though it may appear as a niche industry, there are approximately 23,200 people employed as elevator and escalator installers and repairers in the United States.

To enter the field, the National Association of Elevator Contractors offers two types of certification: Certified Elevator Technician (CET) and Certified Accessibility and Private Residence Lift Technician (CAT). Completing CAT Education Program involves two years of coursework and paid on-the-job training, whereas the CET Education Program is a four-year program.

Both programs require applicants to be at least 18 years of age and possess a high school diploma or equivalent.

Although the training and certification requirements parallel the time it takes to earn an associate’s or bachelor’s degree, this field has some of the best jobs without a degree from a financial standpoint. In the most recent survey, the median salary for elevator technicians was $97,860, according to the U.S. Bureau of Labor Statistics (BLS).

💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.

2. Computer Programmer

Obtaining a bachelor’s or associate’s degree in computer science or a related field are common paths to computer programmer jobs. However, it’s still possible to forgo a formal degree program to enter this career path with the right skills and knowledge of programming languages, such as Java, Ruby, and Python.

There are a variety of platforms offering free coding classes for beginner and experienced programmers, including Coursera, Udemy, Codecademy, and edX. In some cases, these courses are drawn directly from top universities.

With a median salary of $93,00, computer programming is one of the top-earning jobs without a degree.

Recommended: How to Automate Your Finances

3. Commercial Pilot

There are several levels of certification for pilots, ranging from recreational purposes to a career flying commercial and passenger aircraft. Becoming a commercial pilot requires a high school diploma or equivalent and a commercial pilot’s license from the Federal Aviation Administration (FAA).

The commercial pilot certification process involves a minimum of 250 hours of flight time in varying conditions and in-depth training requirements.

Commercial airline pilots are able to operate charter flights, rescue operations, and aircraft used in large-scale agriculture and aerial photography. To work for an airline, such as Delta or JetBlue, pilots generally need a bachelor’s degree and an Airline Transport Pilot (ATP) certificate.

The median annual wage for commercial pilots was $134,630. This is competitive with many of the highest paying jobs out of college.

4. Real Estate Broker

Looking for high paying jobs without a degree or serious mechanical or tech skills? A career in real estate could be an option worth considering.

Every state has its own set of requirements for obtaining a real estate license. Generally speaking, this entails taking a set module of coursework and passing an exam.

Once certified, real estate agents are authorized to help clients buy, sell, and rent real estate for a sponsoring broker or brokerage firm. Depending on the state, real estate salespersons may also need to complete additional training or work a certain number of years to become a real estate broker.

The median salary for a real estate sales agent is approximately $65,850.

5. Flight Attendant

The airline industry offers other high-paying jobs, with no degree required. Working as a flight attendant can be a well-paying job that also affords the ability to travel.

Requirements can vary somewhat between airline carriers, but some universal qualifications include being at least 18 years old, passing a background check, and holding a valid passport.

Flight attendants may also need to pass physical and medical evaluations and meet certain vision and height requirements based on the airline.

Once hired, flight attendants will complete training with the airline, which typically runs from three to six weeks. Training can cover emergency procedures, first-aid, and soft skills related to customer service.

The median flight attendant salary was $61,640.

💡 Quick Tip: When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for a bank that doesn’t charge you for overdrafting.

6. Electrician

Instead of finding a job that pays for your college degree, how about getting paid for learning on the job? Through paid apprenticeship and education programs, that’s exactly what most electricians do to begin their careers. Typically, apprenticeships span four to five years and include a combination of classroom instruction and paid on-the-job training every year.

Rules for electrician apprenticeship programs vary by state and location. A handful of industry groups, such as Independent Electrical Contractors and the National Electric Contractors Association, provide resources for finding apprenticeship programs.

Electrician earnings are impacted by specialization and location, but the median wages for the industry totaled $60,040.

Recommended: 22 High Paying Trade Vocational Jobs

7. Plumber

Installing and repairing piping and plumbing fixtures can be counted among jobs that pay well without a degree. Plumbers accounted for 469,000 people in the workforce.

The path to becoming a plumber parallels the apprenticeship and training requirements for electricians. A standard plumber apprenticeship spans four to five years and 2,000 hours of on-the-job training and classroom coursework. In most cases, a high school diploma or its equivalent is required to be accepted into a program.

Apprentices can be sponsored by plumbing companies or trade unions. This map , managed by Explore the Trades, is a helpful tool to find apprenticeships by state in plumbing, HVAC, and electrical professions.

Plumbers can be called in on evenings and weekends to respond to emergencies, such as burst pipes. This, among other factors, is why the median annual pay for plumbers ($59,880) is higher than some other trades.

8. Wind Turbine Technician

Considering careers without a degree but worried about long-term prospects? A job in wind energy could be a safe bet. Between 2021 and 2031, the BLS projects wind turbine technician jobs to grow by 44%, making it one of the fastest growing occupations in the United States.

Wind turbine technicians may perform tasks related to maintenance, repair, inspection, and analysis of wind energy systems. Community colleges and technical schools often offer associate’s degrees and certificates in wind energy technology that can improve a candidate’s prospects.

Recommended: Pros and Cons of Going to College

Upon hire, technicians usually complete about 12 months of on-the-job training related to electrical safety, equipment operation, and climbing wind towers. Wages can vary by location, but the median pay for wind turbine technicians was $56,260 in the most recent survey.

💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.

9. Court Reporter

Court reporters type word-for-word transcriptions of a trial, deposition, or other legal proceeding, using shorthand, machine shorthand, or voice writing equipment. They may also be asked to read back portions of the transcript by judges.

Court reporters often work with private law firms or local, state and government agencies. There is some training required, but not a four-year college degree. Court reporting programs may be offered at community colleges, technical schools, or court reporter schools.

To enter a program, you may need to take an entrance exam that tests typing and English language skills. The most recent median income for a court reporter was $60,380 per year.

The Takeaway

Finding a high-paying and meaningful job doesn’t always require going to college.

But, while you may not need a bachelor’s degree for many of these rewarding careers, you will likely need some kind of education, such as an associate degree, some trade school, or other specific certifications or apprenticeships.

Whichever career path you choose, it can be a good idea to factor in education costs, and to start saving up these expenses as early as you can.

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.

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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.

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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When it comes to figuring out how much you’ll pay to the IRS, it helps to understand the difference between marginal and effective tax rates. Marginal tax rate is the rate of tax imposed and is based on your income. Your effective tax rate is the percentage of your income you actually pay in taxes.

Knowing how to calculate marginal vs. effective tax rate can give you perspective on how much you’re paying in taxes. You can also use the comparison between the two to look for opportunities to maximize tax savings.

Marginal vs Effective Tax Rate: What’s the Difference?

Comparing effective vs. marginal tax rate can be a useful way to see what you’re paying in taxes compared to how you’re being taxed. In terms of the key differences, here are some of the most important things to know when assessing marginal tax rate vs. effective tax rate.

•   Purpose. Marginal tax rates determine the tax rate that you’re subject to, based on your income. Your effective tax rate reflects the percentage of income you pay in taxes.

•   Calculation. Your marginal tax rate is calculated by applying the appropriate tax rate to each level of income you have. Effective tax rates are calculated by dividing your tax liability by your taxable income.

•   Range. Marginal tax rates range from 10% to 37%. There is no upper or lower limit for effective tax rates; they’re typically lower than marginal tax rates.

•   Application. Your marginal tax rate can give you an idea of how much tax you’re likely to pay in dollar amounts, based on your filing status and what you earned for the year after deductions and exemptions are taken out. The effective tax rate lets you see how big (or small) a share of your income went to taxes.

Marginal Tax Rate	Effective Tax Rate
•   Marginal tax rates determine how much you pay in taxes, based on income. •   They’re calculated by applying tax rates to each level of income. •   The highest marginal tax rate is 37% while the lowest is 10%. •   Marginal tax rates can help you estimate how much tax you owe.	•   Effective tax rates reflect the percentage of income paid in taxes. •   They’re calculated by dividing taxes paid by taxable income. •   There is no highest or lowest effective tax rate. •   Effective tax rates can help you see how much of your income goes to taxes.

What Is a Marginal Tax Rate?

The marginal tax rate is the amount of tax that applies to each additional dollar of income earned. The higher your income, the higher your marginal tax rate ends up being.

The U.S. uses a progressive tax system in which your tax rate increases as your taxable income increases. Taxable income is the amount of income subject to tax, after deductions and exemptions are factored in. Your marginal tax rate corresponds to your tax bracket, which is determined by your income and your filing status.

As of 2023, there were seven tax brackets, ranging from 10% at the lowest end to 37% at the highest. Marginal tax rates increase once you cross certain income thresholds. A difference of just one dollar can determine whether you land in a higher or lower tax bracket.

How Does Marginal Tax Rate Work?

Marginal tax rates work by determining which tax rate applies at various income levels. As mentioned, they’re based on taxable income only. The more tax credits and tax deductions you’re able to claim, the more you can reduce your taxable income for the year.

When you file your tax return, your taxable income, minus deductions and exemptions, is what determines which marginal tax rates you pay. Different marginal tax rates can apply for each tier of income you have across different tax brackets.

Are you wondering, What tax bracket am I in? Here’s how marginal tax rates add up for tax years 2022 and 2023.

2022 Tax Brackets
Tax Rate	For Single Filers	For Married Individuals Filing Joint Returns	For Heads of Households
10%	$0 to $10,275	$0 to $20,550	$0 to $14,650
12%	$10,276 to $41,775	$20,551 to $83,550	$14,651 to $55,900
22%	$41,776 to $89,075	$83,551 to $178,150	$55,901 to $89,050
24%	$89,076 to $170,050	$178,151 to $340,100	$89,051 to $170,050
32%	$170,051 to $215,950	$340,101 to $431,900	$170,051 to $215,950
35%	$215,951 to $539,900	$431,901 to $647,850	$215,951 to $539,900
37%	$539,901 or more	$647,851 or more	$539,901 or more

Here are marginal tax rates for the 2023 tax year.

2023 Tax Brackets
Tax Rate	For Single Filers	For Married Individuals Filing Joint Returns	For Heads of Households
10%	$0 to $11,000	$0 to $22,000	$0 to $15,700
12%	$11,000 to $44,725	$22,000 to $89,450	$15,700 to $59,850
22%	$44,725 to $95,375	$89,450 to $190,750	$59,850 to $95,350
24%	$95,375 to $182,100	$190,750 to $364,200	$95,350 to $182,100
32%	$182,100 to $231,250	$364,200 to $462,500	$182,100 to $231,250
35%	$231,250 to $578,125	$462,500 to $693,750	$231,250 to $578,100
37%	$578,125 or more	$693,750 or more	$578,100 or more

Calculating Marginal Tax Rates

Calculating marginal tax rates is a simple process that requires you to do two things.

•   Calculate your total taxable income for the year

•   Apply the appropriate marginal income tax rates to each level of taxable income

For example, say that you and your spouse made $100,000 in 2022. You file a joint return and claim the standard deduction, which is worth $25,900. That reduces your taxable income to $74,100.

Here’s how your marginal tax rates would apply:

•   $20,550 x 0.10 = $2,055

•   $53,550 x 0.12 = $6,426

In this example, you’d be subject to two marginal tax rates: 10% and 12%. Your total tax owed based on the marginal tax rate calculation would be $8,481. The higher your income, the more tax rates you’d be subject to.

What Is an Effective Tax Rate?

The effective tax rate, also referred to as average tax rate, is the total tax paid divided by taxable income. Average tax rates tell you how much of your income you paid in taxes overall.

Your effective tax rate includes federal taxes but excludes other taxes you pay, such as:

•   FICA taxes (which stands for Federal Insurance Contributions Act payroll taxes)

•   State and local taxes

•   Self-employment tax

Compared to marginal tax rates, determining your effective tax rate can be a simpler calculation. Average tax rates are usually lower than marginal tax rates due to the way each one is determined.

How Does Effective Tax Rate Work?

Effective tax rates tell you what percentage of your income you paid in taxes, after deductions are taken out. In other words, they’re a way to gauge how much of your money the IRS takes for taxes each year relative to what you earn.

There’s no standardized chart that breaks down effective tax rates. They’re different for every person, since they’re dependent on your income, the deductions and exemptions you claim, and the amount of tax you pay based on your marginal tax rate.

You can, however, compare your effective tax rate vs. marginal tax rate charts to get a sense of how they differ. Again, you will likely see that even though you may be in a higher tax bracket, the actual percentage of income you pay in taxes is a lower number.

💡 Recommended: 7 Types of Income: All You Need to Know

Calculating Effective Tax Rates

Determining your effective tax rate is a fairly simple calculation. It requires you to know two things:

•   Your annual income

•   Your federal tax liability

To get your effective tax rate, you’d divide your federal taxes paid by your taxable income. Again, this is income after deductions which reduce your taxable income.

Going back to the previous example, a married couple had an income of $100,000 which was reduced to $74,100 after taking the standard deduction. If you divide the $8,481 they paid in taxes by their $74,100 in taxable income, you’ll see that their effective tax rate works out to 11.44%.

Tips for Paying Your Taxes

Knowing how to prepare for tax season can make the process of filing your return easier. Here are a few tips that can help you get ready for tax filing with less stress.

•   Get organized. Keeping track of receipts, paystubs, and other forms means you’ll have everything you need to file once tax season begins. Starting the process early can prevent a potentially anxiety-provoking rush to figure out what is a W-2 and whether you received the 1099s you need to complete your return.

•   Track income. If you’re self-employed or have a side hustle, it’s a good idea to keep your own records for income even if you expect to get one or more IRS Form 1099.

•   File early. Filing early can help you get your refund faster if you’re owed one since you’re beating the rush. It might also reduce the risk of being targeted by scammers looking for potential tax fraud victims. Once your done, those fraudsters’ messages won’t distract you.

•   Get help if you need it. If you need tax season help, tax filing software programs can make putting your return together easier. Or you might want to work with a professional tax preparer.

If you’re looking for free or low-cost options, you can find a list of resources at the IRS website.

•   Choose direct deposit. If you’re getting money back when you file, direct deposit can be the fastest way to get paid. For example, a refund from an electronically filed return could be with you in less than three weeks.

The Takeaway

Understanding the difference between marginal tax rate vs. effective tax rate can give you perspective on where your hard-earned dollars go. Marginal tax rates show you the different percentages of taxes you may pay on your income, while effective tax rate tells you how much of your income you paid in taxes overall.

While you’re working on your return, consider how you can make the most of a refund if you expect to get one. One smart move: Deposit it into a SoFi Checking and Savings account. When you open an online bank account with us, you’ll earn a competitive annual percentage yield (APY) and pay no account fees, both of which can make your money grow faster. What’s more, you will spend and save in one convenient place and also have features like Vaults and Roundups which can further help your financial life flourish.

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

Between marginal and effective tax rates, which one is higher?

Marginal tax rates are usually higher than effective tax rates. Your effective tax rate takes into account taxes you’ve paid as well as amounts you deduct. For example, you might have a marginal tax rate of 35% but an effective tax rate of 27%.

How can I lower my effective tax rate?

Claiming more deductions can lower your effective tax rate. For example, if you normally claim the standard deduction, you might consider how you could reduce your taxable income by itemizing things like charitable contributions or interest paid on a mortgage loan.

What does it mean if the effective tax rate is negative?

A negative effective tax rate means that you have no income the IRS can tax or that even after tax was applied, you got money back in the form of a refund. Getting a tax refund isn’t necessarily a bad thing. However, it does mean that you’ve effectively lent the government your money tax-free all year. You can avoid getting a refund by adjusting your tax withholding on your W-4 form.

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Photo credit: iStock/FG Trade Latin

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.

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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An emergency fund can help you cover life’s curveballs when an unexpected financial situation comes your way. You may be wondering where to keep your emergency fund until you actually need it.

You could stuff your emergency savings under the mattress or in a piggy bank, but a bank account can be a smarter way to save. The best account for emergency fund savings is one that offers you convenient access to your money, a competitive rate on deposits, and minimal fees.

Weighing some of the different banking options can help you decide where to put emergency funds.

Where to Keep Emergency Funds

Now, where to keep an emergency fund? There are different places you could keep your rainy-day money. When making a decision, it’s important to consider what works best for your lifestyle. And you’ll also want the security of knowing your money is safe, so it can be best to bank at a financial institution that is insured by the FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration).

With that in mind, here are five possibilities you might consider when looking for the best account for emergency funds.

💡 Trying to figure out how much to save? Check out the emergency fund calculator for help.

1. Traditional Checking or Savings Accounts

You might consider keeping emergency savings in a traditional checking account or savings account at a brick-and-mortar bank. On the pro side, that could make it easier to access your money in an emergency. However, you may not get the best rate for your money. Also, checking accounts often don’t earn you any interest, and their accessibility can make it tempting to dip into the funds for something that isn’t a true emergency.

Traditional banks are not known for offering the highest annual percentage yields, or APYs, on savings accounts either. You’re also more likely to pay a monthly maintenance fee for a traditional savings account than one at an online bank.

2. High-Yield Savings

High-yield savings accounts offer above-average rates on balances. For example, you might find a savings account with an APY that’s five, 10, or even 20 times higher than the national average.

It’s more common to find high-yield savings accounts at online banks vs. traditional banks. That’s because online banks tend to have lower overhead costs so they’re able to pass on savings to their customers. You’re also less likely to pay a monthly fee for a high-yield savings account.

Of course, you won’t have branch banking access with an online savings account. You may, however, be able to access your account via an ATM card or debit card, or by transferring funds to a linked account.

3. Bonds

A bond is a type of debt instrument. When you buy a bond, you’re agreeing to let the bond issuer use your money for a set time period. In return, the issuer agrees to pay interest back to you.

Bonds can be attractive since you can earn decent interest rates on savings. However, they’re not great for accessibility since you have to wait for the bond to mature to get your money back.

You could cash out a bond early but that might mean forfeiting some of the interest you could earn. So you may want to consider bonds for money that you’d like to invest, versus money that you might need to tap into for emergencies.

4. Certificate of Deposit (CD) Accounts

A certificate of deposit or CD is a time deposit account. When you put money into a CD, the bank agrees to pay interest on your balance over a set time period. Once the CD matures, you can either withdraw your initial deposit and the interest or roll it all over to a new CD.

CDs can be a reliable way to save, since interest rates are guaranteed. However, your money is locked in for the entire maturity term. If you need to break into a CD early, your bank may charge an early withdrawal penalty. That could cost you some or all of the interest earned.

If you’re interested in using CDs for emergency savings, you might consider a CD ladder. Laddering CDs means opening multiple CDs with different maturity terms. That way, you always have a CD maturity date on the horizon. CD laddering could also help you to capitalize on rising interest rates since you can roll expiring CDs into a new account with a higher APY.

5. Money Market Accounts

Money market accounts combine features of savings accounts with checking accounts. For example, you can earn interest on balances and you might also get a debit card or paper checks that you can use to access your money.

A money market account can offer flexibility since they’re easier to access than bonds or CDs. And you might find money market accounts at online banks that offer rates comparable to what you could get with a high-yield savings account or CD. However, read the fine print: There may be minimum account opening and balance requirements as well as monthly fees to be paid.

If you’re considering a money market account for your emergency fund, consider the fees. An online money market account might be preferable for minimizing what you pay in fees while getting a competitive rate. Remember, the best account for an emergency fund will be the one that suits your specific needs.

The Takeaway

Having an emergency fund can help you sleep easier at night if you know that you’re covered should an unexpected expense crop up. If you’re looking for the best emergency fund savings account option, you can start with your current bank then compare it to other banks. Look for a combination of high APY and low (or no) fees to make the most of your money.

For instance, you might consider opening an online bank account with SoFi. With our Checking and Savings account, you can spend and save in one convenient place, plus you’ll earn a competitive APY on balances while paying no account fees, which can help your cash grow faster. One other terrific benefit: Qualifying accounts can get paycheck access 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 type of account is the safest for emergency funds?

A bank account at an FDIC-member bank is the safest option for holding your emergency fund. FDIC insurance protects your deposits in the rare event that your bank fails. Accounts that can be FDIC-insured include savings accounts, money market accounts, checking accounts, and CD accounts. NCUA serves a similar function insuring credit union accounts. Both offer $250,000 coverage per depositor, per account type, per insured institution.

Should I open a separate bank account for my emergency fund?

Opening a separate bank account for an emergency fund can be a good idea if you’re worried that you might be tempted to spend savings that are mingled with other funds. Having a separate savings account that’s linked to your checking account can allow for easy transfers. You’ll also continue earning interest until you need the money.

Should emergency funds be kept in cash?

Keeping an emergency fund in cash can be problematic as it increases the risk of the money being lost or stolen. You’re also not earning any interest by keeping emergency funds in savings. What’s more, certain emergency expenses might need to be paid using a check or debit card, which would still require you to deposit your cash into a bank account at some point.

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Photo credit: iStock/dobok

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.

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

SoFi 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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If you have a retirement account or a life insurance policy, you’re probably familiar with the process of naming a beneficiary, but did you know that bank accounts can have beneficiaries as well?

The point of designating beneficiaries is to specify who will inherit your assets when you die. When you open a new bank account, you may have the option to add one or more beneficiaries. You can name a beneficiary for a checking account, savings account, or money market account.

Naming beneficiaries to bank accounts is something you might consider as part of a broader estate plan. Learn more about this here, including:

•   What is a beneficiary?

•   Do bank accounts have beneficiaries?

•   What are the pros and cons of adding a beneficiary to a checking or savings account?

•   How do you add a beneficiary to a bank account?

•   What are POD accounts?

What Is a Beneficiary?

A beneficiary is someone who’s entitled to inherit assets from someone else. The types of assets that can allow you to name someone as beneficiary include:

•   Life insurance policies

•   401(k) plans and similar workplace retirement plans

•   Individual Retirement Accounts (IRAs)

•   Trusts

•   Bank accounts

Primary beneficiaries have first claim to assets. Contingent beneficiaries can be named to inherit assets should the primary beneficiary die or not be able to be located.

Beneficiaries can be a person, organization, or entity. For example, you might name your spouse as the beneficiary of a life insurance policy while naming your favorite charity as beneficiary of a trust you’ve created.

Beneficiaries vs Writing a Will

A will is a legal document that allows you to specify how you’d like your assets to be distributed among your heirs after you pass away. You can also use a will to leave funeral or burial instructions or name a legal guardian for your minor children.

Wills can name beneficiaries who are to receive assets from your estate. State law determines who can and cannot be excluded as a will beneficiary. For example, disinheriting a spouse is usually prohibited but you might be able to exclude your children from your will.

Assets that have a designated beneficiary generally supersede a will. So, if you’ve named your spouse as beneficiary to your 401(k), for example, you wouldn’t be able to leave that asset to someone else in your will.

Should You Add a Beneficiary to Your Bank Account?

Can checking accounts have beneficiaries? Yes. Do you need to add a beneficiary to your bank account? It depends.

Naming a beneficiary for a bank account allows that person to inherit those assets once you pass away without having to go through probate. Probate is a legal process in which a deceased person’s estate is divided up among their heirs. Assets can be divided according to the terms of a will. If there isn’t a will, then state inheritance laws can determine what happens to the deceased’s estate.

Probate can be time-consuming and costly. Adding a beneficiary to a bank account allows them to sidestep all of that. Your beneficiary can collect the money in the account without a lengthy wait. They may need to verify their identity and provide a death certificate, but it’s a much simpler process than probate.

You might choose to add a beneficiary if you want to make sure that they’re able to access those assets right away. Your beneficiary designations for a bank account won’t affect your designations for life insurance policies, retirement accounts, or other assets.

Steps for Adding a Beneficiary to Your Bank Account

Banks typically don’t require or perhaps even request that you add a beneficiary to an account. It’s a good idea to check with your bank first to find out if you can add a beneficiary to a checking account or savings account. If so, the bank should be able to tell you what you’ll need to do next to do so.

Typically, the process works something like this.

1. Decide which accounts will have a beneficiary

The first thing to consider is which accounts to name beneficiaries for. You might have a checking account, savings account, and money market account at the same bank, for instance. Since the accounts are separate, you’d have to decide which ones will have beneficiaries and whether the beneficiary for each one will be the same person.

You’ll need to tell the bank which bank account number or numbers you’re referencing when adding a beneficiary. It’s a good idea to double check the number to make sure you’re giving the right account information.

2. Choose your beneficiaries

Next, you’ll need to decide who will be the beneficiary for your bank accounts. If you’re married, that might be your spouse. If you’re unmarried or widowed, you might choose to name one of your children, another relative, or a close friend.

Keep in mind that you may not be able to name minor children as beneficiaries. If you’d like to ensure that your bank account goes to a minor child, you may need to first choose an adult to act as their custodian should something happen to you. You could then name the custodian as beneficiary on behalf of the children.

3. Update your beneficiary preferences

The actual process for naming a beneficiary to a checking or savings account will vary by bank. At some banks, it may be as simple as logging in to online banking, navigating to your account settings, and entering your beneficiary’s information. That may include their name, address, date of birth, and Social Security number.

Other banks may require you to submit a beneficiary designation form, either online or in person at a branch. Again, you’d need to provide the beneficiary’s identifying information to add them to your account.

Note that adding a beneficiary designation does not grant that person access to your account during your lifetime. They would only be able to access the money in the account upon your death.

Consider Creating a POD Account

A payable on death or POD account is a bank account that has a named beneficiary. That beneficiary is entitled to automatically receive the assets from the account when the original account owner passes away. They do not have access to the account during the primary account owner’s lifetime.

Creating a POD account allows your beneficiaries to bypass probate. You can name one or more beneficiaries for a payable on death account. In terms of how to create a POD account, you’d need to tell your bank that you either want to open a new account for that purpose or convert an existing account.

Keep in mind that if you need to change your beneficiaries later, the bank may require you to close the account and redeposit the money into a new POD account. A POD beneficiary designation will override instructions left in a will. When there are multiple beneficiaries to a payable on death account, assets in the account are split between them equally.

How Marriage Impacts POD Accounts

Marriage can add a wrinkle to your will or estate planning efforts if you’re creating a POD account. If you live in a community property state, your spouse would be entitled to half of the assets in the account, excluding ones you owned before the marriage or ones that you inherited.

Keep in mind that if you named your spouse as beneficiary to a bank account and you end up getting divorced, they would still be entitled to receive assets from the account. You’d need to contact your bank to update your POD beneficiary designations to make sure those assets where you want them to once you pass away.

Alternatives to Adding a Beneficiary to Your Bank Account

Adding one or more beneficiaries isn’t the only option for managing a checking account or savings account. You might also consider setting up a joint account with someone else or specifying how you want your bank accounts to be divided in your will. Setting up a joint bank account might be easier, though there are some pros and cons.

Opening a Joint Bank Account

Opening a joint bank account is something you might consider if you’d like the person you’d otherwise choose as a beneficiary to have access to the account while you’re alive. For example:

•   You might choose to set up a joint account with a spouse if you have a high level of financial trust between you.

•   If you’re unmarried, then you might choose to open a joint bank account with your adult child, a parent, or a sibling.

•   You might be asked to open a joint bank account with someone else if you’re assuming responsibility for managing their finances. For instance, an aging parent might want to set up a joint account so you can help them with managing bills.

Can you open a bank account for someone else? Yes, but only in limited situations. Generally, you can open a bank account for someone else if:

•   They’re a minor child.

•   They’ve granted you power of attorney.

Before opening a joint account, consider the relationship you have with the other person and how much control you’re comfortable allowing them to have. For instance, what if you’d like them to inherit the assets in your bank account but not be able to make withdrawals right now? You may be better off naming them as a beneficiary instead or setting up a POD account.

💡 Recommended: Joint Bank Accounts vs. Separate Bank Accounts in Marriage

The Takeaway

Do checking accounts have beneficiaries? Some of them do or can upon request. Whether you’d like to add a beneficiary to your account can depend on your financial and personal situation. In some cases, a POD or joint account might better suit your needs.

If you’re interested in opening a new bank account, SoFi could be a good option. SoFi’s online Checking and Savings account lets you spend and save in one convenient place. You’ll also earn a competitive annual percentage yield (APY) and pay no account fees, which can help your money grow faster. Plus, you can get paycheck access up to two days early with a qualifying direct deposit.

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 if there is no beneficiary on a bank account?

If there is no beneficiary on a bank account and the account holder dies, the assets in the account will be combined with other assets from the estate during probate. All assets, including bank accounts, would then be distributed according to the terms of a will or, if there is no will, state inheritance laws.

How many beneficiaries can you have on one bank account?

Banks can decide whether to limit the number of beneficiaries you can have on a bank account. When naming multiple beneficiaries, keep in mind that they’ll each be entitled to an equal share of those assets. If you’d rather divide the account up differently, you may want to leave it to your heirs in your will instead.

How does a beneficiary receive their money?

A bank account beneficiary will typically need to verify their identity and the death of the account owner before receiving any money from the account. The bank may cut them an official check for the account balance or transfer the money to their bank account electronically.

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Photo credit: iStock/Alessandro Biascioli

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.

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

SoFi 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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Can I Direct Deposit into a Savings Account?

Yes, you can direct deposit into a savings account. And it can be a good idea: Putting direct deposits into a savings account vs. checking account allows you to sock away money without manually transferring cash from your checking to your savings account. As a result, direct deposit can automate your savings strategy and get your money to the right place as soon as your employer pays you.

This can optimize your financial gains and help keep you from overspending out of your checking account. Money sitting in checking can tempt you to go shopping or head out to a pricey restaurant dinner.

Here’s how to set up direct deposit to your savings account and a closer look at the perks you’ll enjoy.

Read on to learn:

•   What is direct deposit?

•   Can direct deposit go into a savings account?

•   How do you set up direct deposits into savings?

Direct Deposits Explained

Direct deposit is how you can receive payments, such as a paycheck, without a physical check, electronic check, or cash. Instead, funds go from the payer directly into your bank account. The electronic processing of your paycheck saves you a trip to the bank and is typically quicker than physical forms of payment.

You probably receive payment via direct deposit, as more than nine out of ten workers in the United States do. This automatic process gets money to your bank account with minimal effort by the employee and a lower cost to the employer. What’s more, you can split your paycheck between your checking and savings accounts to optimize your finances.

How direct deposit works:

•   Your employer uses your bank account number and routing number to set up direct deposit.

•   At the end of every payment period (typically two weeks), your employer’s payroll department communicates with the Automated Clearing House (ACH) network.

•   The ACH receives information and deposits money into your account according to your employer’s instructions.

💡 Recommended: What Happens if a Direct Deposit Goes to a Closed Account?

How to Set Up Direct Deposits Into Your Savings

Whether you recently started a new job or have worked for the same employer for years, you can put direct deposits into a savings account in a similar way to how you direct money into your checking account.

Step 1. Getting a Direct Deposit Form

As a new hire, you usually complete paperwork during your first week of employment, including a form to set up direct deposit. If you’re not new to your workplace, you can request a new form from your HR or payroll department to add or update your direct deposit information. You’ll then fill out the forms with the necessary information, such as Social Security number and account information.

Step 2. Determining How Much to Send to Savings

Next, designate the percentage of your paycheck you’d like to go into your savings account versus your checking account. For example, you may want 20% of your paycheck in your savings account and the rest deposited in checking.

Step 3. Submitting the Form to Your Employer or Bank

Finally, provide the form along with, if requested, a voided check for your checking account and a deposit slip from your savings account. These documents can help your employer verify the deposits will go to the right place.

Is It Better to Direct Deposit to Savings or Checking?

Direct depositing into your different account types isn’t an “either-or” proposition; it may be a “both-and” scenario. In other words, depositing money into both accounts has advantages, so it’s a matter of what amount to deposit. Here are some points to consider:

•   Depositing funds into your checking account allows you to access your money to pay for both essentials, like rent and food, to fun purchases like clothes and entertainment.

•   A direct deposit into a savings account allows you to build up your savings and earn more interest on the cash you don’t touch. You might even have multiple savings accounts for different goals, such as putting money in an emergency fund or towards a down payment on a house.

Therefore, it can be an excellent idea to deposit as much into your savings account as you can afford. You might follow the 50/30/20 budget rule and allocate 20% of your take-home pay towards your savings.

It can be hard to save money today with the rising cost of living, so automating the process can help you be successful in achieving this goal.

In addition, your deposit allocations should ensure your checking account has the minimum balance your bank requires, if any, so you can avoid banking fees.

Difference Between Checking and Savings Accounts

Understanding the difference between checking and savings accounts is critical to deciding how much to deposit to each account. A quick overview of checking accounts:

•   Checking accounts are for spending money. Your bank gives you a debit card linked to your checking account so you can make purchases in person and online with funds from your checking account. You also receive checks you can use to pay for purchases and expenses.

•   Because checking accounts have no transaction limits, they are ideal for regular purchases.

•   You can withdraw cash from your checking account by using your debit card at an ATM; you will also probably be able to deposit cash in an ATM.

•   Many checking accounts don’t pay any interest or perhaps a minimal annual percentage yield (APY).

Savings accounts are quite different:

•   Savings accounts are for stockpiling cash and earning compounding interest on your account balance. For example, a savings account with $5,000 and a 3.00% compounding interest rate will earn over $150 annually. It’s advantageous to put money in a savings account because anything you don’t spend will earn a higher interest rate than your checking account.

•   Savings accounts often have transaction limits, meaning you can only withdraw money from your account several times a month (typically six times a month). As a result, it’s best to deposit money you don’t plan on withdrawing into your savings account.

💡 Recommended: See the complete comparison between checking and savings accounts.

Direct Deposit With SoFi

Direct deposit is an excellent way to grow your savings account. Once you submit your direct deposit information to your employer, you’ll automatically receive payments. You can define the percentage of your paycheck you’d like to go to your checking and savings account every time you’re paid. This way, you can accumulate savings without having to transfer money between accounts or risk spending too much from your checking account.

If you’re looking for a way to bank smarter, now is a great time to check out what SoFi offers. When you open a new online bank account with SoFi, you can receive a direct deposit bonus, plus you’ll earn a competitive APY and pay no account fees, which are all good ways to help your cash grow faster. Plus, you’ll spend and save in one convenient place, because we think banking should be easy.

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

How do I automatically deposit into my savings account?

You can automatically deposit into your savings account by assigning a percentage of your paycheck to your savings account when you set up direct deposit with your employer. In addition, you can update your direct deposit preferences with your employer if you want to start automatically moving money into your savings account.

Can I automatically transfer money from checking to savings?

Most banks offer automated savings for customers. This feature allows you to arrange for your bank to automatically transfer a specific amount from your checking to your savings account every month.

Can I deposit monthly in a savings account?

Direct deposit allows you to contribute a percentage of your paycheck to your savings account. As a result, your savings account will receive a specific amount as often as your employer pays you. If this doesn’t suit you, you can check with your bank about setting up automatic monthly transfers from checking into savings.

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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.

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

SoFi 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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