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Oct

2022

What Is Neobanking and How Does It Work?

Neobanks are online-only financial technology (“fintech”) companies that offer traditional banking services in a digital-first format. Though they are called neobanks, these fintechs are not banks at all. Instead, they offer bank-like financial products, often designed for lower-income consumers and borrowers with a spotty credit history.

But how do neobanks work, and how do they make money? We’ll examine these and other topics — like the pros and cons of neobanks — below.

What Is a Neobank?

A neobank, also called a “challenger bank,” is a fintech that offers traditional banking services through a digital platform, usually online and via a mobile app. Neobanks typically do not operate physical locations or branches, meaning they’re a digital-only experience. This lack of physical branches means their overhead is lower — which may allow them to offer higher APYs on bank accounts and lower fees for consumers.

The big caveat with neobanks: They aren’t banks at all. Instead, they offer access to banking services and products that are overseen by true, federally regulated and insured banking institutions.

Recommended: Is Mobile Banking Safe?

How Do Neobanks Work?

Because of their digital-first strategy, neobanks are able to keep costs low and pass those savings on to consumers. Often, neobanks target their services at those who are frustrated with the traditional banking experience — those who may not qualify for a traditional credit card or loan or who have been burned by a mountain of fees on past checking accounts.

Tech-savvy users are often drawn to the advanced apps and platforms of neobanks in the same way they’ve been drawn to other digital disruptors, like Uber and Lyft in the rideshare space and Airbnb and VRBO in the lodging space.

Here’s an important distinction to note when thinking about what a neobank is: Just because a bank operates online doesn’t mean it’s a neobank. There are online-only banks that are fully regulated and directly offer FDIC insurance on deposit accounts. They provide an easy-to-use digital app and a full suite of banking services, and should not be considered neobanks.

But as we’ve pointed out, neobanks are not actually banks. So what does that mean?

• While you can access traditional banking features like checking accounts, high-yield online savings accounts, and credit cards through a neobank’s mobile app, the neobank typically partners with larger traditional banks to offer those services.

• Notably, neobanks do not typically offer a full suite of services, such as loans and investments, that full-fledged banks do.

• Neobanks exist in a regulatory gray area. Many offer FDIC insurance through their partner banks, but the neobanks themselves do not answer to a primary regulator. The Consumer Financial Protection Bureau (CFPB), however, recently announced that it will enact stricter supervision of nonbank fintechs going forward. And in recent years, the CFPB and state regulators have investigated certain neobanks for isolated events.

That said, a neobank must typically comply with its partner bank’s own standards and practices, dictated by federal and state regulation. Thus, indirectly, neobanks may face some regulation.

Pro Tip: While many neobanks offer consumers FDIC insurance through the banks with which they partner, it’s always a good idea to read the fine print before opening a deposit account to make sure it offers insurance. While bank failures are rare, that insurance can provide real peace of mind.

How Do Neobanks Make Money?

While each neobank is unique and likely to have its own varied revenue streams, these challenger banks commonly make money through merchant fees from card purchases. Such fees are also called “interchange fees.” Consumers don’t pay these fees; instead, businesses bear the burden.

As long as consumers regularly make transactions with their neobank debit or credit card, it can pay off big time for fintechs. Why? Smaller fintechs can charge merchants interchange fees seven times higher than larger banks that have more than $10 billion in assets.

Neobanks are relatively new, and many are still in the startup phase. As such, promising fintechs often receive millions of dollars in venture capitalist funding to get off the ground. Which players will be around for the long haul remains to be seen.

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Pros and Cons of Neobanks

Neobanks may make sense for some consumers, but they’re not for everybody. Before opening an account, it’s a good idea to weigh the pros and cons:

Pros	Cons
Lower fees	Less regulated (not chartered with state or federal regulators)
Higher interest rates on deposit accounts	May not offer FDIC insurance
May offer credit card without credit check	May not offer a full suite of banking services (mortgages, auto loans, etc.)
Easy-to-use mobile app (mobile check deposit, peer-to-peer payments, etc.)	Typically no brick-and-mortar branches
24/7 account access — and on the go	Untested in the market (no long history of success to instill confidence in consumers)

Examples of Neobanks

In the last decade-plus, the fintech market has been teeming with myriad newcomers. Here are six examples of popular neobanks, whose names you may recognize:

• Varo Bank

• Chime

• GoBank

• Aspiration

• Current

• Daylight

Recommended: How to Manage a Checking Account

Neobanks vs Traditional Banks

So how do neobanks compare to traditional banks? The table below breaks down common differences, but remember: Each bank (or neobank) is different and offers varying levels of services, rates, and fees. These are broad generalizations and may not apply to every financial institution.

	Neobanks	Traditional banks
Fees	May offer lower and fewer fees	May charge higher and more fees
Interest on deposits	May have higher interest rates on deposit accounts	May have lower interest rates on deposit accounts
Offerings	Typically offer checking and savings accounts; may offer a credit card	Typically offer multiple checking vs. savings accounts and credit cards, as well as personal loans, home loans, auto loans, and mortgages; may offer investment and retirement accounts
Mobile app/online banking	Typically have high-rated mobile app and online banking platforms	May lag in app and online quality compared to neobanks (especially true for traditional, brick-and-mortar banks)
Physical location	Typically do not have physical locations	Typically have physical locations
Insurance	May offer FDIC insurance through a larger bank	Typically carry FDIC insurance (or NCUA insurance for credit unions)
Regulation	May not be regulated	Typically chartered and regulated

What About Online Banks?

The previous table does not capture all the nuances of online banks. The differences between online banking and neobanking were briefly noted above. However, it’s worth taking a closer look at how online banks compare to traditional brick-and-mortar ones. While they may offer the same breadth of products, online banks typically offer better rates and lower fees than traditional banks. Online banks also usually offer leading-edge mobile apps as well as FDIC insurance.

Online banks can afford to pay those higher interest rates and charge lower fees because, compared to traditional banks, they don’t have to pay for physical locations and on-premises staff. They can then pass some of those savings on to their customers.

Wondering if an online bank is right for you? Do your research on the pros and cons of online banking before making your decision.

Recommended: Online Banking vs. Traditional Banking

The Takeaway

Neobanks may be appealing to tech-savvy consumers who want high interest rates, low fees, and easy-to-use apps. Traditional banks, however, may offer more stability and confidence — and are formally regulated. The convenience of in-person banking and the full suite of banking services offered by traditional banks can also be appealing.

Online banks like SoFi can offer the best of both worlds. For example, when you open an online bank account with us, you have the security of knowing we’re FDIC-insured and the convenience of an easy-to-use mobile app, plus a Checking and Savings account that lets you spend and save in one place. What’s more, when you sign up with direct deposit, you’ll earn a hyper competitive APY, and pay no fees.

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’s the difference between a traditional bank and a neobank?

Traditional banks usually offer in-person branches, are federally regulated, and offer FDIC insurance directly. They typically offer a full suite of banking services, including loans. Many neobanks are more narrowly limited to checking and savings accounts delivered digitally only, but they often offer more competitive interest rates and lower fees.

Are neobanks regulated like regular banks?

Neobanks do not face the same regulation as regular banks simply because they are not charted as banks with federal and state regulators. Instead, neobanks often partner with chartered banks. That said, the Consumer Financial Protection Bureau has announced that it will increasingly supervise and regulate the activity of neobanks.

Is your money FDIC-insured with a neobank?

Some neobanks offer their banking services through chartered financial institutions. Through those institutions, the neobanks may be able to offer FDIC insurance for their accounts and services, but some don’t. It’s therefore a good idea to read the fine print of a neobank before opening an account so you know where you stand.

Photo credit: iStock/Prostock-Studio

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.

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©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.

SOBK1022017

Oct

2022

How to Make Passive Income with Cryptocurrency

12 Ways to Make Passive Income With Cryptocurrency

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

There are numerous ways to earn passive income with cryptocurrency, such as staking, lending, and even yield farming. Like many other investments, crypto presents the opportunity to not only earn a return through trading cryptocurrency, but also by putting your investment to work to earn passive income.

Earning passive income generally means utilizing your assets, without active involvement, to generate additional dollars, and it can be done in the crypto space. The concept is the same as compounding interest or reinvesting dividends in the traditional financial world or earning rent on investment properties. Continue reading to learn how to earn passive crypto income.

Can You Generate Passive Income with Cryptocurrency?

It is possible to earn passive income with crypto, but keep in mind that any returns will depend on the method chosen and the amount of crypto you have to start with. Also, given the crypto market’s volatility, there’s no guarantee that any crypto strategies will deliver returns at all.

Still, those holding large amounts of crypto have several potential avenues to make money with crypto. However, it’s up to you to weigh the risks of trying to earn a yield on your crypto, and its potential rewards, versus the risk/reward ratio of simply holding for potential long-term gains.

12 Ways You Can Earn Passive Income With Crypto

Many of the potential ways to earn passive income with crypto involve lending and borrowing. Other methods, including running a node, mining, or staking coins, are more technical.

Here are twelve ways to earn passive income with different types of crypto.

1. Proof-of-Stake (PoS) Staking

Proof-of-stake is a consensus method used in blockchain technology that serves as an alternative to Bitcoin’s proof-of-work. PoS networks agree on which transactions are valid through a process that involves nodes locking up, or “staking,” large amounts of tokens for a time. Crypto staking replaces the role of mining in a proof-of-stake system, and is, effectively, like sticking your assets in a locked savings account in order to earn interest.

Instead of “miners” receiving new block rewards, like in a PoW system, “validators” receive new block rewards in PoS. Validators do not need expensive computer hardware, but they do need to have sufficient tokens to have a chance at adding the next block to the chain. Many networks require an initial investment before allowing staking.

2. Interest-Bearing Digital Asset Accounts

A number of service providers allow users to deposit their crypto and earn a yield on it, as they might with depositing cash in a savings account. To do so, simply open an account and deposit your crypto or stablecoins. You can do an internet search to find companies that provide these types of accounts.

In exchange for the deposit, users earn interest on crypto. Stablecoins like U.S. Dollar Coin (USDC) and Dai (DAI) often have the best interest rates. Note that there might be a “lockup period” involved, where users can’t access their funds for a fixed amount of time. And there are risks associated with these types of accounts, as they aren’t offered the same government protections as standard bank accounts.

3. Lending

There are several ways that investors can lend out crypto. The main draw of lending is that you can charge interest to a borrower. The amount earned will depend on a few things, including:

• The total value of crypto being lent

• The duration of the loan

• The interest rate

Higher rates, longer loan terms, and larger loan quantities can lead to more income from the interest paid by borrowers. In some cases, those earning crypto passive income through lending get to choose the terms of the loans they create. In others, a third party negotiates the terms ahead of time. Here are some of the main forms of crypto lending:

Margin Lending

Margin lending is lending crypto to traders who want to use borrowed assets to increase their leverage through margin trading. This allows traders to amplify their positions with those assets and repay the loans with interest. Crypto exchanges handle most of the details on the lender’s behalf, in this case. Users only need to make their digital assets available.

💡 Recommended: Learn more about margin trading and how it works

Centralized Lending

Centralized lending involves relying on the lending infrastructure and terms set by a third party. In this case, the interest rates and lock up periods will be fixed ahead of time. Users must deposit their crypto to the lending platform before earning interest.

Decentralized Lending

Also known as DeFi lending, this option involves using lending services directly through the blockchain. There are no intermediaries, and lenders and borrowers interact through smart contracts that automate interest rates.

Peer-to-Peer Lending

Platforms that enable peer-to-peer lending make it possible for people to borrow directly from one another. Users first deposit their crypto into the lending platform’s custodial wallet. They can then set the interest rate, terms of the loan, and decide how much they’d like to lend. This gives users some control over the crypto lending process.

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*Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

4. Cloud Mining

Mining proof-of-work cryptocurrencies typically requires substantial investment in computing hardware, along with the necessary technical knowledge. Cloud mining contracts offer an alternative.

Instead of setting up a new mining rig, people can simply “rent” hashing power from an established operation through the internet. In exchange for a fixed fee, people can buy cloud mining contracts that entitle them to a certain hash rate for a certain period of time. The contract owner receives new coins in proportion to the size of their contract.

Be warned, however: Many cloud mining scams exist. Those interested in cloud mining would do well to do as much research as possible to try and make sure the company offering the contract is legitimate.

5. Dividend-Earning Tokens

Tokenized stocks are cryptocurrencies backed by shares of equity in a company. Sometimes, these tokens offer dividend payouts in the same manner that shareholders receive dividends. Dividends are usually paid on a quarterly basis.

Owning and holding some of these tokens could prove to be yet another way to earn passive income with crypto.

6. Yield Farming

Yield farming is one of the more complex options listed here and will require a lot of additional research for those interested. But it can also be one of the most lucrative options available to make passive income with crypto.

To yield farm, investors deposit tokens into a special smart contract called a liquidity pool. Those who provide liquidity in this way receive a portion of the fees generated through traders accessing the pool.

Yield farming often requires some Ethereum (ETH) along with a DeFi token of some kind like Uniswap (UNI) or Pancake Swap (CAKE) or possibly a stablecoin like Tether (USDT).

The term “yield farming” became popular in 2020 and 2021 with the rise of decentralized exchanges, which rely on smart contracts and liquidity provided by investors.

7. Run a Lightning Node

The Bitcoin Lightning network is a layer-2 scaling solution that allows for lightning-fast affordable micropayments at scale. Lightning nodes facilitate these transactions, and those who run nodes receive a small portion of each transaction fee that gets routed through their node.

Unfortunately, running a Lightning node usually generates very little income. Because fees tend to be low, those who run a node might only make a few dollars per month in Bitcoin, or less.

Most participants who do run Lightning nodes do so to support the use of Bitcoin as a medium of exchange. And as the Lightning network grows and more transactions get routed through it, the income for node operators could presumably rise as well.

8. Affiliate Programs

Affiliate programs exist for many different business models, one of them being crypto-related products and services. Some exchanges offer affiliate programs, which reward participants for getting others to sign up or open accounts.

In general, to participate, users simply have to:

• Sign up, submit an application, or share an affiliate link

• Introduce a platform or product to their friends, family, or social media followers

• Earn rewards when someone takes a certain action, like signing up for an account on a given exchange

As an example, an exchange may offer a small Bitcoin incentive to those who get a new user to sign up for an account through their affiliate link. Affiliate programs might not be the fastest way to generate passive income with crypto, but they could be one of the easiest. (Make sure to check the company’s terms of service before bulk sharing an affiliate link.)

9. Master Nodes

Some blockchain networks contain a specific type of node referred to as “master nodes.” Those who run these nodes can receive large payouts, as masternodes receive a portion of the block rewards each time a new block is mined.

The chance to run one of these nodes probably won’t be available to the average person, however, as running a master node often requires holding a significant amount of the network’s cryptocurrency.

10. Forks and Airdrops

Forks happen when an existing coin branches off into a new chain. Airdrops happen when new coins are created and “dropped” onto users as a type of reward.

Users don’t have any control as to when or if these events might occur. But being active in the crypto ecosystem increases the odds.

In 2017, for example, everyone who held Bitcoin (BTC) received an equivalent amount of Bitcoin Cash (BCH) when the network hard forked. Someone who had 1 BTC, for example, would have received 1 BCH.

Similarly, in 2021, users of the KeepKey hardware wallet (among other groups) received an airdrop of FOX tokens from the company that runs the ShapeShift platform. Those who had logged into ShapeShift during a certain time period automatically received the tokens in their crypto wallets.

11. Sun Exchange

Sun Exchange is a South Africa-based company that crowdsources funding for solar power projects. Investors can purchase solar cells used for community projects in South Africa and receive a regular payout once the projects begin producing solar power.

Customers can pay for solar cells in either fiat currency or Bitcoin, and can also receive their payouts in fiat or Bitcoin. This method of generating passive income with crypto differs from the others in that there’s a tangible investment. While the other options are financial products, Sun Exchange allows people to invest directly in renewable energy projects built in South Africa.

The returns from solar projects are typically small, paid out monthly, and spread out over many years. The projects involve 20-year leases, so buying in is a long-term commitment. (Currently, there is no secondary market for trading your solar cells.) But more than any potential profit, investors may be drawn to the clean energy tax incentives and the idea of providing affordable renewable energy to South Africa.

12. Crypto Games

As online gaming continues to grow in popularity and spills into the metaverse, the opportunities to earn passive income through crypto games should grow, too. There are many crypto games out there, and a lot of them reward players for participating with various types of crypto.

Some of the numerous games out there include Axie Infinity, The Sandbox, Gods Unchained, Ethermon, and Pegaxy.

Pros and Cons of Passive Income Generation With Crypto

Even when it comes to potential passive income generation, it’s wise to weigh the potential risks against the potential rewards.

Here are some of the pros and cons of learning making passive income with crypto.

Pros	Cons
Some options can be rather simple.	Most options come with considerable risk.
Allows investors to put off capital gains.	Some options can be difficult to navigate for beginners.

Pros

There are several benefits to generating passive income via crypto.

• Some options can be rather simple. Most interest-bearing digital asset accounts are straightforward. Users deposit stablecoins and start earning interest, in most cases. Centralized lending might involve little more than putting crypto assets into a custodial wallet and giving permission to an exchange to lend them out.

• Allows investors to put off capital gains. Instead of selling a large amount of crypto that has gone up in value since the time of purchase, investors might consider keeping those holdings in the crypto ecosystem and using it to generate a yield. The yield would still equate to taxable income, but would likely result in less of a tax burden than selling a large amount of crypto outright.

Cons

There are also drawbacks that crypto traders must consider when contemplating passive income.

• Most options come with considerable risk. Losing all of your crypto assets is a real possibility in some cases. This can happen as a result of hacks, smart contract bugs, or because the lending platform goes bankrupt.

• Some options can be difficult to learn to navigate. Getting involved in DeFi requires setting up and using an Ethereum (ETH) wallet, then becoming familiar with one or more DeFi protocols. This could prove difficult for those who don’t yet hold any ETH and haven’t used crypto wallets before.

The Takeaway

Some of the numerous ways that crypto investors can generate passive income with their holdings are by staking, lending, and even participating in crypto games. Of course, some methods of earning passive crypto income are simpler than others, and for beginners, it can be as easy as depositing coins into an account and earning interest. Others could try their hand at running a node.

FAQ

Is staking crypto passive income?

Yes, staking crypto provides a type of passive income. However, it’s important to understand that when you stake crypto, you receive the income in the native token of a specific network. This creates an additional risk, and if the price of that token falls, losses could still be realized even if users earn a significant yield from staking.

What are the risks of trying to create passive income with crypto?

In many cases, users are assuming 100% risk when earning passive income with crypto. While it is possible to earn a high rate of return, total loss of principle is also a possibility. There’s also the risk of tokens losing value. If yields are earned in an altcoin, the rate of return relies on that token’s value. There is also a risk of protocols being hacked.

Photo credit: iStock/Deklofenak

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

²Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount		Bonus Payout
Low	High	Bonus Payout
$50	$99.99	$10
$100	$499.99	$15
$500	$4,999.99	$50
$5,000+		$100

SOIN0722038

Oct

2022

How Does Non-Farm Payroll (NFP) Affect the Markets?

Nonfarm Payroll: What It Is and Its Effect On the Markets

By Brian O'Connell | Financial Independence, invest, Terminology | Comments Off

The nonfarm payroll report measures the number of jobs added or lost in the United States. The report is released by the Bureau of Labor Statistics (BLS), usually on the first Friday of every month, and is closely watched by economists, market analysts, and traders. The nonfarm payroll report can have a significant impact on financial markets. A strong jobs report may lead to higher stock prices as investors feel confident about the direction of the economy. A weak jobs report may have the opposite effect, as investors become concerned about the health of the economy.

The nonfarm payroll report is just one of many economic indicators that investors can use to gauge the economy’s strength. However, market participants often pay attention because it provides a monthly snapshot of the U.S. economy’s health.

What Are Nonfarm Payrolls?

Nonfarm payrolls are a key economic indicator that measures the number of Americans employed in the United States, excluding farm workers and some other U.S. workers, including certain government employees, private household employees, and non-profit organization workers.

Also known as “the jobs report,” the nonfarm payrolls report looks at the jobs gained and lost during the previous month. This monthly data release provides investors with an understanding of the health of the labor market and the economy as a whole.

The US Nonfarm Payroll Report, Explained

The nonfarm payroll report is one of two surveys conducted by the BLS that tracks U.S. employment in a data release known as the Employment Situation report. These two surveys are:

• The Establishment Survey. This survey provides details on nonfarm payroll employment, tracking the number of job additions by industry, the average number of hours worked, and average hourly earnings. This survey is the basis for the reported total nonfarm payrolls added each month.

• The Household Survey. This survey breaks down the employment numbers on a demographic basis, studying the jobs rate by race, gender, education, and age. This survey is the basis for the monthly unemployment rate reported each month.

When Is the NFP Released?

The Bureau of Labor Statistics usually releases the nonfarm payrolls report on the first Friday of every month at 8:30 am ET. The BLS releases the Establishment Survey and Household Survey together as the Employment Situation report, which covers the labor market of the previous month.

4 Figures From the NFP Report to Pay Attention To

Investors look specifically at several figures within the jobs report:

1. The Unemployment Rate

The unemployment rate is critical in assessing the economic health of the U.S., and it’s a factor in the Federal Reserve’s assessment of the nation’s labor market and the potential for a future recession. A rising unemployment rate could result in economic policy adjustments – like changes in interest rates that impact stocks, both domestically and globally.

Higher-than-expected unemployment could push investors away from stocks and toward assets that they consider more safe, such as Treasuries, potentially triggering a decline in the stock market.

2. Employment Sector Activity

The nonfarm payroll report also examines employment activity in specific business sectors like construction, manufacturing, or healthcare. Any significant rise or fall in sector employment can impact financial market investment decisions on a sector-by-sector basis.

3. Average Hourly Wages

Investors may consider average hourly pay a barometer of overall U.S. economic health. Rising wages may indicate stronger consumer confidence and a more robust economy. That scenario could lead to a rising stock market. However, increased average hourly wages may also signify future inflation, which could cause investors to sell stocks as they anticipate interest rate hikes by the Federal Reserve.

Investors may take a weaker hourly wage figure as a negative sign, reducing their stock market positions and seeking shelter in the bond market or buying gold as a hedge against a declining U.S. economy.

4. Revisions in the Nonfarm Payroll Report

Nonfarm payroll figures, like most economic data, are dynamic in nature and change all the time. Thus, investors watch any revisions to previous nonfarm payroll reports to reevaluate their own portfolios based on changing employment numbers.

How Does NFP Affect the Markets?

Nonfarm payrolls can affect the markets in a few ways, depending on the state of the economy and financial markets.

NFP and Stock Prices

If nonfarm payrolls are unexpectedly high or low, it can give insight into the economy’s future direction. A strong jobs report may signal that the economy is improving and that companies will have increased profits, leading to higher stock prices. Conversely, a weak jobs report may signal that the economy is slowing down and that company profits will decline, resulting in lower stock prices as investors sell their positions.

NFP and Interest Rates

Moreover, nonfarm payrolls can also affect stock prices by influencing the interest rate environment. A strong jobs report may lead the Federal Reserve to raise interest rates to prevent an overheated labor market or curb inflation, leading to a decline in stock prices. Conversely, a weak jobs report may lead the Federal Reserve to keep interest rates unchanged or even lower them, creating a loose monetary policy environment that can boost stock prices.

Investors create a strategy based on how they think markets will behave in the future, so they attempt to factor their projections for jobs report numbers into the price of different types of investments. An unexpected jobs report, however, could prompt them to change their strategy. Surprise numbers can create potentially significant market movements in critical sectors like stocks, bonds, gold, and the U.S. dollar, depending on the monthly release numbers.

How to Trade the Nonfarm Payroll Report

While long-term investors typically do not need to pay attention to any single jobs report, those who take a more active investing approach may want to adjust their strategy based on new data about the economy. If you fall into the latter camp, you’ll typically want to make sure that the report is a factor you consider, though not the only one.

You’ll want to look at other economic statistics and the technical and fundamental profiles of individual securities you’re planning to buy or sell. Then, you’ll want to devise a strategy that you’ll execute based on your research, your expectations about the jobs report, and whether you believe it indicates a bull or a bear market ahead.

For example, suppose you expect the nonfarm payroll report to be positive, with robust job growth. In that case, you might consider adding stocks to your portfolio, as share prices tend to rise more than other investment classes after good economic news. If you believe the nonfarm payroll report will be negative, you may consider more conservative investments like bonds or bond funds, which tend to perform better when the economy slows down.

Or, you might take a more long-term approach, taking the opportunity to buy stocks at a discount and invest while the market is down.

The Takeaway

Markets move after nonfarm payroll reports, but long-term investors don’t have to change their portfolio after every new government data release. That said, active investors may use the jobs report as one factor in creating their investment strategy.

Whatever your strategy, a great way to build and maintain your financial portfolio is with a SoFi Invest® online brokerage account. The SoFi app allows you to trade stocks, exchange-traded funds (ETFs), and IPOs. You can get started with an initial investment of as little as $5.

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Oct

2022

15 Ways to Save at the Movie Theater

By Emily Greenhill Pierce | Budgeting & Goals, Family Finances, money | Comments Off

A movie theater can be the perfect place for a date, a family outing, or an escape from life’s worries. But for many, rising ticket costs and expensive concessions aren’t worth the price of admission.

Fortunately, you can save money at the movies with discount tickets, price clubs, loyalty programs, and other savvy cinephile tips that allow you to sit back and enjoy the show.

Going to the Movies in 2022

Going to the movies has been a beloved American pastime since the 1920s, when the average ticket cost around $0.25.

Flash forward to 2022: The average price of a movie ticket has reached around $9.17, running as high as $16 in places like NYC. Concession prices have also been on the rise, with a small popcorn costing more than $7 in some theaters.

These days, many people are trying to prioritize saving money. With the popularity of streaming services like Netflix, Hulu, and others, coupled with saving money on at-home snacks, it can be hard to justify the price of a night out at the movies.

Movie theaters may be expensive, but there’s nothing like the smell of buttery popcorn, the thrill of the lights dimming, and the communal experience of movie watching.

Recommended: How to Save Money on Food

15 Clever Ways to Save Money at the Movies

Many of us don’t want to give up on that big-screen experience of going out to the movies. If you’re the kind of person who’s focused on easy ways to save money, you’ll probably be interested in how to spend less at a movie theater.

Here are 15 cost-cutting tips to inspire you to get off the couch and into the cinema without bungling your budget.

1. Avoiding Premium Formats

While it’s understandable to want to see the latest superhero film in 3D or a summer blockbuster in an IMAX theater to feel more immersed in the experience, the additional price of a premium film format ticket can add up.

On average, a 3D film can cost $4 dollars more than a regular adult movie ticket, with an IMAX experience running an additional $6 dollars. You might want to save those extra bucks for a box of Milk Duds.

Be sure and check the movie listings. It’s easy to buy tickets to a 3D or IMAX showing without even realizing it, spending extra dollars unnecessarily.

2. Catching a Matinee

Many theaters offer discounts on matinee movies, to encourage attendance during off-peak hours. Matinee times can start anywhere from 9 am to 11 am and run from 3:30 pm to 6 pm.

Matinee ticket prices can be 30% less at some chain movie theaters and (bonus) you could have the theater all to yourself.

Recommended: How to Save Money on Streaming Services

3. Attending on Discount Days

In addition to cheaper seats at matinees, you can also save money at the movies by attending on certain days. Many movie theaters advertise price deals on certain weekdays. Some theaters have “Discount Tuesdays,” for instance, offering $5 dollar tickets all day, including for the evening showings.

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4. Eating Beforehand

Eating a meal or a snack before the movie may not sound like a radical way to save money, but since concessions can run more than the ticket prices, it’s a sure-fire way to cut costs. Remember, sneaking food into the theater is still against the rules.

5. Sharing the Snacks

Can’t stand the thought of a movie without popcorn? Consider sharing the concession spoils with a friend or family member. Say yes to spending the additional dollar on the extra-large popcorn, and consider bringing individual brown lunch bags to divvy up the kernels.

6. Buying at the Box Office

It might be convenient to buy a movie ticket in advance online, but many movie websites charge an additional fee (typically between $1 and $2) for the service. Avoid that: You can still buy your tickets early at the box office, then kill time by filling up on inexpensive candy from a drug store.

7. Using Price Clubs

Some wholesale price clubs sell discounted cinema tickets and gift cards for big-name movie chains. If you have a membership at Sam’s Club or Costco, you can pick up some movie savings along with your bulk toilet paper.

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8. Finding Customer Loyalty Programs

Many megachain and independent movie theaters like to reward repeat customers with loyalty programs. They can offer membership cards where you can receive and use points on tickets and concessions. The more you go, the more you save.

9. Purchasing a Membership Pass

In addition to loyalty programs, some movie theaters, such the Alamo Drafthouse, offer seasonal membership deals. Depending on where you live, you could pay $16.99 to $29.99 a month for unlimited movies. (One showing per day.)

Other memberships offer discounted tickets for a year, and special deals on companion tickets and concessions.

10. Signing Up for Local Theater Newsletters

With a few clicks on the keyboard, you can sign up for online newsletters and email alerts from your favorite movie theaters. Doing so can ensure you won’t miss out on the latest ticket and concessions deals.

Recommended: Does Couponing Save You Money?

11. Finding Deals for Groups

Movie theaters want to fill their seats, so many will offer discounts on large purchases for groups of 25 or more. This could help you save up to $1 per ticket for a company outing or birthday party.

12. Finding Specialty Discounts

Almost all movie theaters offer discounts for different groups. In addition to a reduced-price child ticket, there are customarily lower prices for senior citizens, students, and military discounts for active and retired veterans.

13. Finding Summer Movie Programs

Kids need things to do in the summer, and their parents need them to do things! Some movie theaters, like Regal Cinemas, offer special $2 dollar tickets on certain summer weekdays for animated and family films. The offers can vary by region.

14. Going to a Drive-In

Another summer pastime is a night at the drive-in. Since the pandemic, drive-in movie theaters have made a comeback, opening up in dense metro areas as well as in rural ones.

Drive-in tickets and concessions can be cheaper than at a traditional movie theater. And if the drive-in charges by the car, call your buddies! You can split the entry fee and save some dough.

15. Taking Advantage of Credit-Card Cashback Benefits

While you won’t see immediate savings when buying that large diet soda, using a credit card with cashback benefits at the movie theater can yield rewards down the line. Some credit cards can offer up to 5% cash-back rewards on entertainment purchases.

The Takeaway

The price of movie tickets and concessions can be a bit shocking. But if you’re willing to look for discounts, attend off-peak showings, save money by snacking at home, and try some of the other suggestions above for saving money at the movies, you can lower your costs. That way, the only shock you’ll get is from a really good plot twist.

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FAQ

What day is cheapest to go to the movies?

Weekdays can be the cheapest days to go to the movies. Some movie theaters offer reduced prices Monday through Wednesday.

What’s the best time to go to the movies?

In terms of cost, a weekday matinee generally offers cheaper movie tickets — from opening time until 3:30 pm or 6 pm, depending on the venue. Theaters also tend to be less crowded during matinee showings.

Is it illegal to bring outside snacks to the movies?

Almost all movie theaters don’t allow outside food. While not illegal, the theater could deny you entry into the venue.

Photo credit: iStock/bombermoon

Oct

2022

Life Skills That Can Help You Save Money

By Timothy Moore | Budgeting & Goals, Financial Independence, money | Comments Off

With rising inflation and stagnant wages, being frugal with your spending is a good idea. But you can go a step further: By learning some valuable life skills and DIY-ing more activities, you can save money.

Mastering skills like cooking, cleaning, riding a bike, and doing your own taxes mean you don’t have to pay professionals for expensive services. While it can be time-consuming, harnessing new skills can make you more independent, help you keep more of your money, and maybe even inspire a few new hobbies.

In this article, we’ll take a look at 20 basic money-saving skills that almost everyone can learn. They can be fun to dig into, build confidence, and free up funds to put towards your financial goals.

How Life Skills Are Essential to Your Financial Freedom

Life is built on financial transactions. We pay for food at the restaurant, spend money on a haircut, reach deep into our wallets at the gas station, and shell out for repairs when something in our home breaks.

While we can’t possibly learn enough life skills to replace all these transactions, it is possible to take up a few new savings skills, like cooking, painting, and sewing, so that you can hoard a little more money each month.

That little bit of money adds up — honing several life skills can be an important step toward your financial freedom. The money you save can go towards your emergency fund, paying down student loan debt faster, or gathering the down payment on a house.

20 Life Skills That Can Help You Save Money

So which life skills are worth learning? We’ve rounded up 20 of the top money-saving skills that, when mastered, can help you avoid spending your cash on basic goods and services. They’ll help put you on the path to becoming financially disciplined.

1. Cooking

Eating out now and then is perfectly fine — a well-deserved reward after a long week at the office or a celebratory dinner for a major milestone. But eating out for lunch or dinner every day can be unhealthy (those portion sizes!) and can get quite expensive. Learning the basics of cooking can keep you out of the pricey restaurants and in your own kitchen instead.

Cooking can require an investment in the proper cookware and staple ingredients, but overall is bound to be cheaper than getting food to go or at an eatery. Just think about the price difference between avocado toast whipped up in your kitchen and what you’d pay at a cute cafe. Search for recipes online, and follow tips to save money on food before you head out to the grocery.

2. Painting

Ready to pick up a paintbrush and unlock another savings skill? According to HomeAdvisor, homeowners spend more than $3,000 on average to paint the exterior of their home, and renters and homeowners alike might pay painters even more to paint the interior. The current rate typically runs from $2 to $6 per square foot.

While painting the exterior of your home can be a little more challenging, painting the interior is not complicated at all. If you are willing to take the time to learn, you can save yourself thousands of dollars every time you want to change up the inside of your living space.

3. Gardening

Yes, professional landscapers can weave a certain kind of magic. But doing your own gardening can be a tremendously satisfying and creative pursuit, not to mention that it can save you a lot of moolah. Spending time learning the basics about what zone you live in and which plants will thrive, plus wandering around nurseries and garden centers, can provide plenty of inspiration.

You can grow fresh produce for the small price of starter seeds and the occasional watering, which means less money spent at the grocery store.

What’s more, when selling your house, landscaping is an important part of curb appeal. A well-cared-for garden might attract potential buyers and help your home sell more quickly.

4. Plumbing

Plumbing emergencies like a flooded basement or a broken water heater are probably still better left to a licensed contractor, but teaching yourself to be handy with a wrench and a screwdriver might save you on smaller problems, like a leaky faucet or a running toilet.

This money-saving skill can serve you well over the years. Calling a plumber for every small problem that your house encounters over the years can add up. In fact, most plumbers charge $45 to $200 an hour and may charge a flat rate of $350 just for a service call.

Beyond plumbing, you can teach yourself basic electrical and carpentry skills so that you can tackle some easy home improvement projects for beginners.

5. Budgeting

Knowing how to make a budget — and sticking to it — is a crucial life skill. When you are able to analyze your monthly expenses against your monthly income in an easy-to-read format, you can quickly discover which spending habits you need to scale back. Many people like the 50/30/20 rule, which spells out that you should spend 50% of your after-tax income on needs, 30% should be put towards wants, and 20% should go into savings.

And you don’t even need to pay for fancy budgeting software. Many online banking platforms make it easy to see all of your transactions in one place, and you can use a simple spreadsheet to design a budget that works for you.

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6. Haggling

Not every price is negotiable, but when it is, it’s important to know how to haggle with confidence. While you might immediately think of haggling at a used car lot (and that’s a great place to do it), you can also haggle over things like your monthly cell phone bill, your rent, and even credit card interest rates. Politely asking, “Is there any flexibility on the price?” may yield a surprising positive response.

Even if you’re only successful in lowering one expense, that’s money in your wallet that you wouldn’t otherwise have had.

Recommended: How to Negotiate Medical Bills

7. Sewing

You might not ever create your own clothes from scratch (though you certainly can!), but knowing how to sew can come in handy when you get a rip in your favorite shirt or a parka’s zipper starts to detach. Instead of throwing out clothes with holes or lost buttons, sew them back together. Mending the torn back pocket on your favorite jeans, for instance, and you’ll save yourself from dropping $50 or much more on a new pair.

8. Cutting Your Family’s Hair

Haircuts at chain salons are certainly not cheap, often ranging from $30 to $70+, but boutique salons are even more expensive. Learning to cut your family’s hair (or your own, if you’re brave) can cut out one monthly expense. Check out the tutorials on YouTube and other video platforms and see if you can’t hone your skills.

9. Investing

While the stock market may not be performing wonderfully right at this moment, the average stock market return over the last 10 years has been nearly 15%. And though you can certainly pay a traditional broker to manage your portfolio, it’s totally possible to do it yourself.

In fact, there are many platforms for investing to choose among, some of which enable automated investing, and fractional shares. Plus, you can build your financial know-how by reading blogs and books on investing, as well as listening to podcasts or taking an online class to sharpen your skills.

10. Changing Your Car’s Oil

According to KBB, the average oil change costs from $65 to $125 (for synthetic oil), but the actual cost of the synthetic oil and filter replacement is just $45. Being able to change your car’s oil by yourself (typically twice a year, depending on how much you drive) can mean you pocket an extra $20 to $80 every time. It’s a great life skill to learn and then stash the cash you save, year after year.

11. Cutting Firewood

If you have ample trees in your yard — or a generous neighbor has just taken down a tree and doesn’t mind sharing the spoils — you can chop the wood yourself for an outdoor firepit or your fireplace. If your home has a fireplace, you can use that wood to heat a single room while leaving the heater setting lower in the rest of your home, cutting down on your utility bill.

12. Doing Your Own Taxes

If you have a complicated tax situation, an accountant might be a good investment, especially if they can help you maximize your credits and tax deductions even if you’re a student. However, if you have a straightforward income and financial situation, it might be beneficial to skip the accountant fees and file by yourself.

Check out the IRS Free File hub to find programs that will help you do it all by yourself.

13. Bartering

The time-honored tradition of bartering, or trading goods and services, can help you lower your expenses. Let’s say there’s a spinning class you love that’s beyond your budget. Could you offer to swap your digital savvy (say, filming videos and posting on social media for the studio) in exchange for no-cost sessions? Think creatively about the skills you have and how you might use them to get some freebies. It never hurts to ask about such arrangements, and it could help.

14. Roasting Your Own Coffee

Buying a latte at a coffee shop every morning may be convenient (and relaxing), but it also gets expensive. If you spend $5 every day on a cup of coffee, that’s more than $1,800 a year. Instead, learn how to save on coffee expenses. Brew coffee at home — and better yet, learn how to grind and roast your own coffee beans for maximum savings. You’ll find that whole beans are typically less pricey than pre-ground ones at the supermarket.

15. Baking

Going to the bakery when you said you’d bring a dessert to your family’s holiday get-together may be convenient, but buying fresh cakes and cookies can get expensive. Baking can be a little more challenging than cooking, but it’s certainly a great way to save money. And it can be a wonderful creative pursuit and a new pastime. Need inspiration? Just watch any of the addictive shows on TV, like The Great British Baking Show.

16. Upcycling

Upcycling is a buzzword for reusing an item instead of buying something totally new. For example, you might use reclaimed wood or an old door to make a desk or table, turn a sweater with torn elbows into a vest, or use old towels as cleaning rags for a while before tossing them. Upcycling can help you save on common expenses, and it’s great for the environment; less goes into the trash.

17. Cleaning

Most people probably don’t like to clean, but it’s a big part of being an adult. Whether it’s scrubbing the bathroom, vacuuming the rug, or wiping down kitchen counters, these are chores that just need to be done.

It might be tempting to pay for a cleaning service, but doing so is expensive. Cleaning professionals typically charge $30 to $50 per hour — or more than $600 for a large home over 3,000 square feet.

Don’t give into that temptation to farm it out. Grab a rag (or an upcycled towel), a bottle of cleaning solution, and a monthly house maintenance checklist. You’ve got this!

18. Riding a Bike

Gas is expensive (and you probably know its impact on the environment). While you probably can’t bike everywhere you need to go, each trip on a bike you make — to work, to school, or just to a friend’s house — means you won’t be spending money on gas or bus fare.

19. Hosting

Hanging out with friends at your favorite bar is nice, but a fun night out adds up quickly when you do it every weekend. Instead, host your next friend or family gathering at your own home. Stock some wine, cold beer, and snacks, and you’re good to go. (You can be next-level and make a pitcher of a signature cocktail; it’s a fun way to build your mixology skills.)

Or switch things over to a morning meet-up with a pot of coffee and some home-made muffins. You’re likely to save big.

20. Doing It Yourself

Our final life skill ties all the rest together: Do things yourself instead of paying someone else to do them. If you don’t know how to do something, research online or find someone who does and learn. Once you’ve mastered the skill, share your knowledge with others.

Whether mowing your lawn, washing windows, or doing yoga or Pilates at home, you can really open up room in your budget when you DIY.

Banking With SoFi

Honing these valuable money-saving skills is a great way to establish financial freedom, and having a quality bank account will elevate your efforts. A SoFi bank account can do just that: It allows you to spend and save in one convenient place. When you open one with direct deposit, you’ll earn a terrific APY and pay no fees, both of which can help your money grow faster.

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FAQ

Is saving money a life skill?

Saving money is an important life skill. By learning to do various tasks yourself around the house and in your daily life, you can avoid paying for a lot of expensive goods and services. Also, being a smart consumer and comparison-shopping will help you save money. This is especially important when making a big purchase; look around for the best price, coupons, and other discounts.

How do I find the time to develop these life skills?

Most of these life skills can fit into your regular day. If you normally spend a couple of hours going out to dinner, you can instead spend that time finding a recipe and trying to cook it at home. You may also find that some of these tasks (cooking, gardening) become hobbies in which you happily invest time.

What is the most valuable life skill?

Learning to do things yourself, from cooking to filing taxes to changing your car’s oil, can be the most valuable life skill. This can give you confidence, know-how, and self-reliance, plus it requires you to be curious and willing to educate yourself, all of which are important traits.

Photo credit: iStock/blackCAT