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When it comes to maintaining a strong financial plan and healthy financial behaviors, people’s brains can sometimes work against them. Unconscious habits, mental shortcuts, and emotional drivers can all get in the way of setting and meeting financial goals.

Consider recency bias, which is the tendency for people to look to recent events to make decisions about the future. Just because a stock has skyrocketed recently, that doesn’t mean its upward trajectory will last forever. In fact, jumping into the market during a rally could mean you end up buying when prices are high, right before investors bail and prices fall.

Another mental tendency to consider is ego depletion. It’s the idea that people can only exert their willpower for a limited time, and after that, it’s harder to practice self-control. If you have an important financial decision to make, it may make sense to wait until you are no longer feeling depleted.

Here’s a closer look at the ego depletion theory, what it could mean for your finances, and how to overcome it.

What Is Ego Depletion?

The concept of ego depletion hinges on the idea that a person’s willpower reserves are finite, and when people exert self-control for too long, they use up those reserves. Once those are depleted, it is harder to exert self-control, and we’re more likely to make poor decisions.

The term was coined by American social psychologist Roy Baumeister in the late 1990s, though the idea of ego depletion has become popular in recent years. This may be in part because it makes sense intuitively. For example, the experience of eating a healthy breakfast and lunch only to get home from work and eat a bag of chips for dinner is pretty easy to relate to.

However, not everyone agrees with the concept of ego depletion. Some scientists report a lack of consistent data to support the idea. Instead, they have found that motivation is not finite. Rather, it can be subjective, and there are ways to increase it. That can be a good thing as you begin to set long-term financial goals.

If you’re looking to build your long-term financial plan, a money tracker app can help. The SoFi app connects all of your accounts in one convenient dashboard. From there, you can see all of your balances, spending breakdowns, and credit score monitoring. Plus, you can get other valuable financial insights.

Causes of Ego Depletion

There are a variety of factors that may play a role in ego depletion, including:

•   Low blood sugar: If you haven’t eaten and your blood sugar has dropped, it may be more difficult to exert willpower.

•   Emotional distress: Temptations may be harder to resist if you’re experiencing a state of mental anguish.

•   Unfamiliar tasks: If you are doing something for the first time, you may need to exert more mental energy, which can lead to ego depletion.

•   Lack of choice: If you are forced to do a task not of your choosing, you may be more likely to become depleted.

•   Illusory fatigue: If you think that a task will be mentally tiring, you may experience ego depletion faster. In other words, ego depletion happens more often when you expect it to. If you think a task won’t tax you too much, you may be able to exert more self-control.

•   Cognitive dissonance: If you’re in a situation in which you do or say something that contradicts your beliefs, it can tire you out and diminish your self-control.

•   Variable heart rate: Those who experience a variable heart rate have been found to have less self-control.

The Effect of Ego Depletion on Your Finances

If tasks that require self-control weaken your willpower, you may be less likely to make good decisions when you experience ego fatigue. When it comes to your finances, for instance, you may be more likely to spend money on things that you can’t afford.

Ego depletion could also mean you’re less equipped to make important decisions, such as how to invest your money. For example, if the market is experiencing a downturn, you may find yourself more prone to panicking and potentially pulling out your money. But in doing so, you’ll lock in losses and potentially miss out on a subsequent upswing.

Ego depletion could also mean you miss important deadlines, such as deadlines for funding your 401(k) or IRAs or tax deadlines.

Recommended: Personal Finance Basics for Beginners

How to Overcome Ego Depletion

Luckily, there are ways to overcome ego depletion and improve your money mindset.

Get Enough Sleep

Lack of sleep makes self-control difficult. Sleep counteracts fatigue and helps reset your willpower reserves, so practice good sleep hygiene. Go to bed at a consistent time. Make sure your bedroom is quiet, relaxing, and dark. Avoid large meals, caffeine, and alcohol before bed.

Manage Stress

Managing stress can help you address the causes of ego depletion as well as its effects. Consider strategies such as deep breathing, mindfulness exercises, healthy eating, and regular exercise.

Set Goals

Clear financial objectives and the steps you need to reach them can help overcome ego depletion. Consider using SMART goals, or goals that are specific, measurable, achievable, relevant, and time-bound. With these in place, you’ll know what you need to do to accomplish your objectives, and you’ll also be less likely to make moves that stray from your plan.

Plan for the Long Term

Long-term financial plans take your goals, risk tolerance, and time horizon into consideration. They are built to account for the natural cycles of volatility. With a long-term plan to refer to, you may be less likely to make rash decisions in the short term, such as panic selling when markets are down or buying when market prices are peaking and may be nearing a fall.

Recommended: Guide to Money Affirmations

Tools to Help You Reach Your Goals

There are a variety of tools out there that can help you set and meet your goals and make financial freedom a reality. It’s worth shopping around to find the ones that work best for you and that you’re more likely to stick with.

One to consider is a spending app, which can help you set up a budget, categorize and track spending, make bill payments on time, and track your credit score.

The Takeaway

The idea of ego depletion centers around the idea that when people exert self-control for too long, they use up their willpower reserves and are more likely to make poor decisions. Learning the causes of ego depletion is a first step in helping you head off rash financial decisions that may work against you. If you recognize that your willpower is fading, take a breather. And when in doubt, refer back to your long-term financial goals and plans.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What is the cause of ego depletion?

Ego depletion can be caused by a number of factors, such as emotional distress, fatigue, low blood sugar, or unfamiliar tasks. Anticipating that a task will be difficult can also contribute to ego depletion.

What are the symptoms of ego depletion?

Symptoms include a lack of mental energy, less ability to focus, and lower self-control.

Some people may also lose their temper more easily.

What is an example of ego depletion?

An example of ego depletion might be spending the day hard at work and then coming home, sitting on the couch, and turning on the television instead of pursuing other healthier activities, such as going to the gym. Giving up on a diet or exercise routine is another example of ego depletion.

How do you deal with ego depletion?

There are a number of strategies to combat ego depletion, such as getting enough rest, managing stress, and eating healthy foods. It’s also important to set and stick to long-term goals.

How does ego depletion affect financial decisions?

Managing your finances takes some self-discipline, so if you’re feeling worn out mentally, you may make poor financial decisions. This can include overspending, panicking over market changes, and missing deadlines.

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Photo credit: iStock/Delmaine Donson

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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.

SORL-Q326-054

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Salary will always be an important factor in any career decision, whether you’re looking for a new job or choosing which offer to accept. And yet, few questions in the job application process are more uncomfortable than the basic “What is your desired salary?”

Not sure what to put for a desired salary on a job application? Keep reading for some helpful insights and templated responses.

How to Answer Desired Salary on an Online Application

If you’re not sure what to put for your desired salary on an application, you likely need to do some research and then think carefully about your answer. It’s true that listing too high a salary can immediately eliminate a candidate if the company can’t afford to pay that much. But it’s equally true that lowballing can impact a candidate financially for years.

When deciding what to put for your desired salary on a job application, it’s important that candidates don’t simply list the number they want to earn. A salary number should be based heavily on research. Spend time looking into the cost of living in the area, as well as what typical salaries look like for the role, seniority level, and industry you’re applying for. Education level, years of work experience, and special skills should also be taken into account.

When completing an online job application, it’s common for the candidate to be asked whether the salary listed is negotiable. This is usually done in a checkbox format, but if you are open to negotiation and don’t see an option to highlight that fact, there is usually a notes section where you can mention your flexibility.

Recommended: What Are the Average Monthly Expenses for One Person?

How to Answer the Desired Salary Question in Interviews

Salary requirements can come up at any stage of the application process, including during the interview. To avoid feeling put on the spot, it’s smart to have an answer ready to go beforehand. As nerve-racking as interviews can be, they’re a great time to discuss salary with a potential employer to make sure both parties are on the same page.

Again, a salary number should be backed by careful consideration and research. Be ready to share the basis for the number you choose. If you’re flexible on salary, that can also be expressed here. Many candidates factor the benefits, title, signing bonus, growth potential, and other elements into their decision to accept a job.

If a candidate is pitching a number higher than the employer’s budget but they’re willing to accept a lower salary if they can work from home three days a week, then they should share that during the job interview.

How to Answer the Desired Salary Question in Emails

Some employers may not ask about a candidate’s salary requirements until after an interview or two, and they may then do so over email. When it comes to figuring out what to put for the minimum salary desired, many candidates list their current salary or a number slightly higher than that to increase their disposable income.

Some employers may ask for a range. Here, it’s important for candidates to choose a minimum salary they feel is worthwhile enough for them to continue the application process.

Candidates may include a note in the email about salary being negotiable if that is true. But if the candidate really does have a minimum figure they need to consider the job offer, they should make that clear in writing. We all have different expenses and budgets that impact how much we need to make. A spending app can help candidates determine what salary they need in order to pay all their bills.

Recommended: The Most Rewarding Jobs in America

Declaring a Salary by Email: Templates

If you’re feeling uncomfortable about salary negotiations and you’re not sure what to put for the minimum salary desired, it can help to practice writing it out. You can use these email templates as a script for in-person or phone conversations, depending on how either party brings up salary:

•   Template 1: Salary Range: “Based on market research and cost of living in our area, I’m looking for a new role that will pay in the $80,000-90,000 range. I am flexible and open to negotiation, but I can only make a move for a salary in that range.”

•   Template 2: Minimum Salary: “The average salary for my role in the greater Los Angeles area is $65,000. I am currently looking for roles that can accommodate a salary of $65,000 or more.”

•   Template 3: Flexibility: “With ten years of industry experience and a recently earned MBA, I am looking to make a move to a more senior position. Compensation is important to me, and I would like to make between $100,000 and $135,000. However, I am also looking for a role that provides schedule flexibility and would be willing to discuss a lower salary in exchange for a minimum of three remote work days a week.”

These templates give candidates an idea of how to get started. But it’s important to customize and flesh them out based on your own research.

When to Discuss Salary

Once you decide how much to quote for your minimum desired salary, you also need to be prepared to discuss it. There is really no wrong time to discuss salary during the job application process. While many candidates wait for the employer to bring it up, it is possible for the candidate to jumpstart the conversation. Some employers will wait until they make an offer to even mention salary.

While it’s generally not advisable to try to negotiate a salary before receiving a job offer, it is perfectly acceptable to ask what salary range they have in mind for the role.

If a candidate has concerns that the company’s budget is not in line with the salary the candidate is aiming for, inquiring early on about the salary range can help them avoid committing to multiple rounds of interviews for a role that isn’t the right fit.

What to Put for Desired Salary: Examples

At some point during a job search, you might encounter a request to share your salary requirements. Once you feel confident about what to put for a desired salary, you can turn to one of these examples to help format your request:

•   “I need to make a minimum of $XX in order to consider making a move from my current role/company.”

•   “I am looking for a new role that pays in the $XX-XX range.”

•   “I am hoping to make $XX in my next role, but am open to negotiation for the right role.”

It’s totally fine to keep salary requirements simple and straightforward to help eliminate any miscommunication.

SoFi Coach℠ Chat is a tool designed to help you view and analyze your financial data, get personalized insights, learn about SoFi products, troubleshoot issues, and take certain actions in chat. Coach responses are information for you to consider and not financial advice. Coach responses are based on limited information from your connected accounts and may have inaccuracies. The insights are meant to help you think about your finances and options —they are not advice or recommendations, and they do not guarantee results. Coach may offer you options to explore SoFi products on which SoFi would earn revenue. You are solely responsible for any financial decisions you make. Coach is offered by Social Finance, LLC.

The Takeaway

When you’re not sure what to put down for a desired salary, you’ll need to conduct market research into standard ranges for that role, industry, and experience level. You may also want to take your local cost of living into account. Once you feel confident with what to put for your desired salary on a job application, communicate that amount clearly and concisely.

Take control of your finances with SoFi Coach. You can easily view all of your accounts in one convenient dashboard: bank and investment balances, current debts, spending breakdowns, and credit score. Easily set up budgets and spot upcoming bills. And get personalized insights on everyday money questions and take action with Coach chat, the AI guide that’s powered by the playbooks of SoFi Financial Planners, so its guidance comes from expert knowledge.

Meet SoFi Coach, your smart personal guide to getting your money right.

FAQ

What should I put for desired salary per hour?

When deciding what to put for your desired salary for an internship, part-time job, or other hourly role, you’ll need to research what the going rate is in your area. You also need to know what number works for your budget.

What should I put for desired salary for a part-time job?

Not sure what to put for a desired salary for a part-time job? Do some digging online to see the pay for other roles in the same industry and locality to get an idea of a fair number to ask for.

Is desired salary hourly or yearly?

Whether or not someone’s desired salary is hourly or annual typically depends on the type of role they’re applying for or the company’s preference. It can be helpful to have a number in mind for both.

How can I determine my desired salary?

When choosing your desired salary, consider factors such as the typical pay for the role, your location, industry, level of experience, education, and relevant skills. You may also want to consider the cost of living in your area and whether the position includes benefits or flexible work arrangements.

Should I consider benefits when deciding my desired salary?

Benefits and other forms of compensation can be important when deciding what salary you would be willing to accept. Benefits such as a signing bonus and flexible work options can add significant value to a job offer.

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About the author

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Photo credit: iStock/Prostock-Studio

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

SORL-Q326-063

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The general trend is that the older you are, the better your credit score. The average credit score for Gen Z is 678. That rises to 747 for baby boomers. This is largely because boomers have had more time to build a credit history. Your credit history shows how well you manage your debt over time and how much of a risk you are to a lender.

You can improve your credit score by paying bills on time, not using more than 30% of the credit available to you, and using a variety of loans responsibly.

Here’s an in-depth look at credit scores by age and how you can maximize your score regardless of age.

What Is a Credit Score?

Your credit score is a measure of how well you manage your debt. Lenders can access your credit score from the three main credit reporting agencies: Equifax®, Experian®, and TransUnion®. The scores you receive from each bureau vary because each bureau may have different information about your credit.

Your credit reports, on which your scores are based, show information such as loan-paying history and the status of your credit accounts. When you apply for a loan or financing, lenders use your credit score to establish how risky you are as a borrower. The riskier you are, the lower your score, and the more interest you may pay for a loan.

SoFi Coach℠ Chat is a tool designed to help you view and analyze your financial data, get personalized insights, learn about SoFi products, troubleshoot issues, and take certain actions in chat. Coach responses are information for you to consider and not financial advice. Coach responses are based on limited information from your connected accounts and may have inaccuracies. The insights are meant to help you think about your finances and options —they are not advice or recommendations, and they do not guarantee results. Coach may offer you options to explore SoFi products on which SoFi would earn revenue. You are solely responsible for any financial decisions you make. Coach is offered by Social Finance, LLC.

Recommended: How to Check Your Credit Score for Free

Average Credit Score by Age

Here’s the average credit score by age and generation as of the third quarter of 2025, according to Experian.

Generation	Age	Average Credit Score
Gen Z	18-28	678
Millennials	29-44	689
Gen X	45-60	709
Baby Boomers	61-79	747
Silent Generation	80+	760

How Does My Age Affect My Credit Score?

While age doesn’t have a direct effect on your credit score, older generations tend to have higher scores because they’ve had more time to establish a solid credit history. Factors that affect your credit score include your payment history, your credit utilization, the length of your credit history, your credit mix, and how often you’ve recently opened a new line of credit.

However, according to OpenLending and TransUnion’s “Financing the Future” report, Generation Z and millennials are more likely to move up to higher credit tiers at a faster rate than older generations because of their borrowing habits.

What Factors Affect My Credit Score?

There are five main factors that make up your FICO® credit score, each with varying weights.

Payment History

Your payment history makes up 35% of your FICO Score. It includes how promptly you pay your credit card bills, your mortgage, and any installment loans. A few late payments on credit cards or a mortgage won’t ruin your score, but any bankruptcies or collections may.

Credit Utilization

Your credit utilization makes up 30% of your FICO Score. It measures the amount of revolving credit you use versus the total amount of credit you have available (credit card limits, lines of credit, etc.).

Length of Your Credit History

The length of your credit history accounts for 15% of your FICO Score. The longer your credit history, the better, assuming you manage your credit well. Your credit history includes how long your credit accounts have been open, the age of your oldest account, the age of your newest account, and the average age of all your accounts.

Credit Mix

Your credit mix, or the diversity of your debt, accounts for 10% of your FICO Score. This includes credit cards, mortgages, home equity lines of credit (HELOCs), installment loans, student loans, and car loans. If you are successfully managing a variety of financing types, it will be reflected in your FICO Score.

New Credit Applications

When you apply for a new credit card, the lender will do a hard inquiry on your credit that could cause your score to dip slightly. New accounts also reduce the average age of your accounts, which could lower your score as well. On the flip side, a new credit card account increases the amount of credit available to you, which might lower your credit utilization rate. It might also diversify your credit mix, and if you make payments on time, it could help build your credit score.

Recommended: How Long Does It Take to Build Credit?

Average FICO Score by State

The state with the highest average credit score is Minnesota at 741, and the state with the lowest average score is Mississippi at 677, according to Experian. Average credit scores are typically influenced by demographics, unemployment rates, poverty levels, education, and income.

State	Average Credit Score
Alabama	689
Alaska	720
Arizona	709
Arkansas	693
California	721
Colorado	729
Connecticut	724
Delaware	713
District of Columbia	711
Florida	704
Georgia	692
Hawaii	730
Idaho	729
Illinois	720
Indiana	710
Iowa	728
Kansas	720
Kentucky	704
Louisiana	686
Maine	731
Maryland	714
Massachusetts	731
Michigan	717
Minnesota	741
Mississippi	677
Missouri	712
Montana	730
Nebraska	728
Nevada	699
New Hampshire	735
New Jersey	722
New Mexico	701
New York	719
North Carolina	707
North Dakota	730
Ohio	713
Oklahoma	693
Oregon	730
Pennsylvania	720
Rhode Island	719
South Carolina	699
South Dakota	731
Tennessee	703
Texas	692
Utah	728
Vermont	737
Virginia	721
Washington	734
West Virginia	699
Wisconsin	737
Wyoming	722

FICO vs VantageScore

FICO and VantageScore® are the two leading companies in the credit score industry. Both use slightly different criteria in their scoring models to determine your credit score.

The VantageScore models and the base FICO models are generic credit scores created for use by a wide range of creditors, such as private student loan companies, online lenders, and credit card issuers. FICO also creates industry-specific auto and bankcard scores, which are built on the same criteria as the base FICO Scores but are tailored for auto lenders and card issuers.

Both VantageScore and FICO update their scoring models regularly to keep up with technology and industry changes but also to ensure they remain predictive as consumer behavior changes.

With all credit scores, the lower your score, the more risk you pose to lenders. That’s why borrowers with the highest credit score get the best loan terms.

Both the base FICO Scores and the base VantageScores range from 300 to 850, while FICO’s industry-specific scores range from 250 to 900.

What Is a Good Credit Score?

According to Experian, 670-739 is considered good. Credit scores above 740 are very good, and scores above 800 are exceptional.

Here is how credit scores are categorized:

•   Poor: 300-579

•   Fair: 580-669

•   Good: 670-739

•   Very good: 740-799

•   Exceptional: 800-850

Average Credit Score by Income

Your income is not considered as part of your credit score. However, some studies, including a 2018 Federal Reserve study, found that your income may have a “moderate correlation” to your credit score.

Average Credit Score by Income (according to the latest data from American Express)
Annual Income	Average Credit Score
Low Income	658
Moderate Income	692
Middle Income	735
High Income	774

The reason your income might affect your credit score is that the higher your income, the likelier you will be able to pay your debts on time and build a strong payment history. For example, if you earn $120,000, it will be easier to pay down a debt of $10,000 than if you earn $50,000.

Nevertheless, you don’t have to be a high-income earner to build credit over time. Paying bills and debt payments on time is the most important thing.

Tips for Building Your Credit Score

•   Make on-time payments. Consistently paying bills on time is one of the most effective ways to build and maintain a strong credit score.

•   Keep credit utilization low. Aim to use no more than 30% of your available credit to show responsible credit management.

•   Limit new credit applications. Avoid frequent credit applications, as each inquiry can temporarily lower your score and indicate potential financial strain.

•   Pay down debt. Reducing outstanding balances on existing debts can improve credit utilization and positively impact your score.

•   Maintain old credit accounts. Keeping older accounts open contributes to a longer credit history, which is favorable for your score.

•   Review credit reports regularly. Check your credit report for errors and dispute any inaccuracies that could be lowering your score.

•   Use a mix of credit types. A blend of credit types, such as installment loans and credit cards, shows you can manage different forms of credit.

Practicing good fiscal management will help keep your credit score from dropping and slowly help to build your credit score over time.

The Takeaway

The general trend is that the older you are, the better your credit score. That’s because older individuals have had more time to demonstrate that they can use debt responsibly. With a higher credit score, lenders consider you less of a risk and may charge you a lower interest rate on a loan.

You can build your credit score by paying bills on time, not using more than 30% of the credit available to you, and using a variety of loans responsibly. Also, don’t apply for new loans too often, as this can lower your score.

Take control of your finances with SoFi Coach. You can easily view all of your accounts in one convenient dashboard: bank and investment balances, current debts, spending breakdowns, and credit score. Easily set up budgets and spot upcoming bills. And get personalized insights on everyday money questions and take action with Coach chat, the AI guide that’s powered by the playbooks of SoFi Financial Planners, so its guidance comes from expert knowledge.

Meet SoFi Coach, your smart personal guide to getting your money right.

FAQ

How rare is an 800 credit score?

According to Experian, nearly a quarter (22.9%) of Americans have a FICO Score of 800 or higher. The credit scoring company describes this as exceptional.

What is the average American’s credit score?

The average credit score in the U.S. was 713 in 2025, decreasing by two points from its 715 average in the third quarter (Q3) of 2024, according to Experian. Despite the slight decrease, consumers are still better off than they were 10-15 years ago.

Is 750 a good credit score for a 25-year-old?

Yes, a 750 credit score is excellent for a 25-year-old, showing responsible credit management at an early age. With this score, you’re likely to receive favorable terms on loans and credit products, setting a strong foundation for future financial goals.

What is a good credit score to buy a house?

While credit score requirements vary based on loan type, lenders generally require a credit score of at least 620 to buy a house with a conventional mortgage. Meanwhile, you can secure an FHA loan with a credit score of 580 with a 3.5% down payment or even a 500-579 credit score if you put down 10%.

What is a good FICO Score to buy a car?

You will likely need a credit score of 661 or above to get an auto loan at a good interest rate. If you have poorer credit, you can still get a loan, but you will probably have to pay more for it or find a cosigner.

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Photo credit: iStock/Jacob Wackerhausen

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SORL-Q326-061

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Whether you want to retire a few years early or feel more financially secure, building your wealth can help you meet your financial goals. But what if you want to build generational wealth, or the type of lasting wealth that can be passed down to your children and grandchildren? While there is no one-size-fits-all path, there are some steps you may consider taking to start accumulating generational wealth.

What Is Generational Wealth?

Generational wealth refers to anything with monetary value that’s passed from one generation to the next. This might include cash, property, investments, jewelry, family businesses, or other financial assets. Typically, this type of wealth sets up future generations to financially benefit from what previous generations built.

Over the past 30 years, the generational wealth gap in the United States has been widening. What is a generational wealth gap? This simply refers to the difference between the wealth one generation accumulates relative to the wealth another generation accumulates. Factors such as income, education, race and ethnicity, age, and generation could all impact how much wealth someone builds and how much they’re able to pass down to the next generation.

Why Is Generational Wealth Important?

Whether you have new money or old money, building lasting wealth can help your family remain financially stable in the long term. This, in turn, could help give future generations a leg up in life. After all, when you don’t have to live paycheck to paycheck or stay in an unsatisfactory job, you tend to have more options in life. If you’re the one passing on the wealth, you can have the satisfaction of knowing you’ve helped give your children and grandchildren that level of freedom.

Pros and Cons of Generational Wealth

Generational wealth comes with clear advantages along with some potential drawbacks.

Pros:

•   Future generations can enjoy some degree of financial security.

•   Generational wealth can provide support and resources for family members who are just starting out.

•   The extra financial assistance can help create room for innovation and free up family members to pursue their dreams.

•   It’s an opportunity to solidify your legacy.

Cons:

•   Those who inherit wealth often have a responsibility to manage the money so there’s enough for the next generation.

•   Anticipating an inheritance could cause some people to lose the motivation to work hard and build their own wealth.

•   Some families lack a clear plan for transferring wealth from one generation to the next.

How to Start Building Generational Wealth

When it comes to building lasting wealth, there’s no strategy or template that will work for everyone. A spending app can give insights into your financial picture, which can help you keep your finances on track. Here are other steps you can take to better position yourself and your family.

Focus on Education

Generally speaking, education increases your earnings and reduces unemployment. But having a financial education is important, too, especially if you want to create and grow generational wealth. Discuss financial topics with your children and younger family members and pass on what you know. That way, they can be better prepared to manage the wealth they inherit.

It’s Never Too Early to Start Saving

Accumulating financial assets takes time and planning, so consider starting early. Building wealth in your 30s, for example, is possible and something you can continue to build upon as you get older. It’s also a smart idea to save consistently. By setting aside a certain amount on a regular basis, you can make the most of compound interest, which is interest that’s earned on the initial principal and the interest that accrues on it.

In addition to your paycheck, you may be able to passively earn money. This is money you make without active involvement. If that’s an option you want to explore, it can be quite useful to know how to manage passive income streams.

Make a Plan With Family Members

Considering working with other family members to build and preserve generational wealth? It’s a good move to discuss short- and long-term goals and strategies with them so you’re all on the same page. As part of those discussions, you may also want to decide how the money will be allocated.

Consider Homeownership

Homeownership for generational wealth is another strategy to explore. When you buy a home and its value rises, you can sell it for a higher price and possibly use that money to move into a larger home or invest in other assets. Not planning to sell anytime soon? You could still benefit from price appreciation, as it adds to your home equity and overall financial assets.

Explore Investment Opportunities

Investing could help your money grow over time, even if you start out small. Your investment strategy will depend on a number of factors, including your goals, how much you have to invest, your tolerance for risk, and your age.

Although no two situations are ever alike, there are nevertheless best investment strategies for each generation. People who dream of an early retirement, for instance, may subscribe to the “financial independence, retire early” (F.I.R.E.) movement. Achieving this goal may call for a more concentrated investment strategy.

Recommended: Pros and Cons of the F.I.R.E Movement

Protect Your Wealth

Having a team of trusted financial, tax, and legal experts on your side can help you protect your growing wealth and maximize the amount you’re able to pass along. You may decide to create a trust or estate plan, for example, which details how you want your financial assets to be distributed and invested and designates a trustee.

What Are Some Challenges to Building Generational Wealth?

Not surprisingly, building and maintaining generational wealth doesn’t typically happen overnight. It’s often the result of years of hard work and planning, and it helps to understand how to strategically save, invest, and spend. Depending on how much you already know, achieving this level of financial literacy can take time.

Another potential challenge is creating a clear plan for how the wealth will be transferred from one generation to the next. Some families avoid having conversations about money, and there’s a chance not everyone shares the same vision for how the wealth should be distributed.

In addition, disparities in pay among different racial and ethnic groups and genders could impact each generation’s ability to grow and maintain generational wealth. According to the U.S. Census Bureau, White and Asian workers have higher median earnings than Black or African American, Hispanic or Latino, American Indian and Alaska Native, Native Hawaiian and Other Pacific Islander, and multiracial workers.

How to Pass Down Generational Wealth

There are steps you can take to ensure your financial assets are handed down the way you want. Creating an estate plan, for example, can help ensure the assets are distributed according to your wishes. Establishing a trust lets you set the terms for how assets are managed and can help your heirs bypass the probate process and potentially lower their tax burden. When you’re creating an estate plan or a trust, you will likely want to enlist the help of a professional, such as a trust attorney. These professionals can help ensure the right legal documents have been created and signed and will be easily accessible to your heirs when the time comes.

Recommended: The Difference Between Will and Estate Planning

The Takeaway

What is considered generational wealth? As the name implies, it’s financial assets, such as cash, jewelry, real estate, investments, and more, that are passed down from one generation to the next. Generational wealth can give heirs a sense of financial security and more freedom to pursue their dreams, though it often comes with a responsibility to manage the money so there’s enough for the next generation. There are potential ways to start building your wealth, such as focusing on education and financial literacy, saving consistently, exploring investment opportunities, considering homeownership, and taking steps to protect what you’ve earned.

Take control of your finances with SoFi Coach. You can easily view all of your accounts in one convenient dashboard: bank and investment balances, current debts, spending breakdowns, and credit score. Easily set up budgets and spot upcoming bills. And get personalized insights on everyday money questions and take action with Coach chat, the AI guide that’s powered by the playbooks of SoFi Financial Planners, so its guidance comes from expert knowledge.

Meet SoFi Coach, your smart personal guide to getting your money right.

FAQ

How do you build generational wealth?

Although no two paths to generational wealth are exactly the same, strategies often include focusing on education to prepare for a higher-paying job and to gain financial literacy, saving early and consistently, investing in a home or other real estate, and making sound investments. It’s also a good idea to work with a professional to create an estate plan or trust so your financial assets are more efficiently passed along to the next generation.

What are examples of generational wealth?

Generational wealth can include cash, investments, jewelry, and other financial assets. This can, but doesn’t have to, include a family business.

How does a family start building generational wealth?

As a family, it can make sense to discuss goals for generational wealth and brainstorm strategies to achieve them. You may also want to talk about how the wealth will be distributed and make sure everyone is on the same page. It’s also important for you and the next generation of your family to understand how to strategically save, invest, and spend, so whatever wealth that’s passed down can continue to grow.

What are the benefits of investing in generational wealth?

Building generational wealth can provide future family members with financial security and resources to pursue opportunities. It can also help create a lasting family legacy when assets are managed and passed down strategically.

How can an estate plan help with generational wealth?

An estate plan can outline how you want your financial assets to be distributed and managed after your death. A trust may also help heirs avoid probate and potentially reduce their tax burden.

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Photo credit: iStock/kate_sept2004

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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You may have heard of both FICO® and Experian®, but the two companies serve different purposes.

FICO is a credit scoring model developed by the Fair Isaac Corporation (FICO) that lenders often use when assessing a borrower’s creditworthiness, or how likely they are to repay debts.

Experian, on the other hand, is one of the three major credit bureaus (along with Equifax® and TransUnion®) that collect credit and debt information and use it to create individual credit reports. These credit reports offer more details about an individual’s credit history than FICO’s three-digit score.

Take a closer look at what separates FICO vs. Experian, which credit score is the most accurate, and how to keep tabs on your credit score.

What Is the Difference Between Experian Score vs FICO?

As mentioned previously, Experian is a major credit reporting agency. It does not have its own credit scoring model. However, in 2006, it partnered with Equifax and TransUnion to create the VantageScore credit score model. Like FICO, VantageScore provides three-digit credit scores for consumers, though it uses slightly different factors and weightings.

The credit score Experian provides — sometimes called an “Experian score” — relies on both VantageScore and FICO Score.

FICO works differently. As a credit scoring model, it uses a proprietary algorithm to evaluate your credit risk. Specifically, the following factors affect your credit score:

•   Your payment history

•   The amounts you owe

•   The length of your credit history

•   How much new credit you have

•   The diversity of your credit mix

While FICO is used in the majority of lending decisions, some lenders use VantageScore.

SoFi Coach℠ Chat is a tool designed to help you view and analyze your financial data, get personalized insights, learn about SoFi products, troubleshoot issues, and take certain actions in chat. Coach responses are information for you to consider and not financial advice. Coach responses are based on limited information from your connected accounts and may have inaccuracies. The insights are meant to help you think about your finances and options —they are not advice or recommendations, and they do not guarantee results. Coach may offer you options to explore SoFi products on which SoFi would earn revenue. You are solely responsible for any financial decisions you make. Coach is offered by Social Finance, LLC.

Which Credit Report Is Most Accurate?

It’s common to have multiple credit reports, including ones with Experian, Equifax, and TransUnion. It’s also common to have minor differences in your credit file from bureau to bureau. That’s because lenders don’t always report the same information at the same time to every bureau. But rest assured, credit reports from all three credit bureaus are widely considered to be accurate.

That said, it’s a good idea to regularly review your credit report. You can access yours for free via AnnualCreditReport.com or through tools such as a money tracker app.

If you find any errors or inconsistencies in your credit report, be sure to dispute them with the relevant credit bureau so the incorrect information can be removed.

Why Is My Experian Credit Score Different From FICO?

You may notice that your so-called Experian score is slightly different from your FICO Score. That’s because both scores are based on different scoring models. FICO uses its own algorithm, while Experian’s score uses both FICO and VantageScore.

While some variations are to be expected, if one score is drastically higher or lower than the other, it’s a good idea to review your credit reports and address inaccuracies.

Is Experian Better Than FICO?

No credit score is better than another. Some lenders prefer FICO, while others rely on VantageScore. Each model can provide lenders with different insights about a person’s financial habits.

The good news is that FICO and VantageScore generally calculate their scores with similar information, which means you can improve both scores simultaneously. Smart strategies include paying bills on time, keeping credit utilization low, and paying down balances.

Recommended: How Long Does It Take to Build Credit?

Is a FICO Score the Same as a Credit Score?

When comparing a FICO Score vs. a credit score, it’s important to understand that a FICO Score is a type of credit score. But of course, it’s not the only type of credit score.

VantageScore, for example, issues credit score models such as VantageScore 4.0, VantageScore 4plus™, and VantageScore 5.0. Experian, Equifax, and TransUnion also provide credit scores based on data in your credit report.

What Is My Real Credit Score?

There is no one true credit score. Instead, banks, lenders, and other companies may use different credit scores when they check your credit. And they could see different figures, depending on which credit score they use.

Fortunately, it’s relatively straightforward to check your credit score without paying. That way, you can get an idea of what your credit score is and what lenders might see when they check your credit.

What Score Do Lenders Use?

Lenders can and do consider a variety of credit scores, depending on which scoring model works the best for their specific lending criteria. Unfortunately, it’s often difficult or even impossible to know which model a particular lender uses. However, the factors that impact your credit score generally hold true regardless of the credit score model used.

Understanding Various Credit Score Models

While most credit score models start with some of the same basic data, each one uses different information and weighs credit history information differently. This can mean that the different credit score models, such as FICO and VantageScore, come up with different credit scores, even for the same consumer.

Recommended: What Is the Starting Credit Score?

How Can You Check Your Credit Score?

Keep in mind that your credit score updates at least once a month as new information comes rolling in from lenders., If you’re working on boosting your three-digit number, you may want to check on your progress every so often.

There are a few different ways that you can keep tabs on your credit score. You can sign up for a credit score monitoring service, which can provide regular credit score updates.

Another way is by using a spending app or credit card that provides access to your credit score as a feature or benefit. You may also have free access to it through your bank.

The Takeaway

FICO and Experian may be common names, but that’s where the similarities end. FICO is a widely used credit scoring model that creates a three-digit score based on reports provided by credit bureaus, including Experian. In addition to creating those detailed credit reports, Experian generates a credit score using data from FICO and another scoring model, VantageScore. Lenders may use both VantageScore and FICO when determining an individual’s creditworthiness.

Credit scoring models usually rely on a similar set of information, which means you can take the same actions to boost both scores. Making on-time payments, paying down what you owe, and diversifying your credit mix are all ways to help build up your credit score.

Take control of your finances with SoFi Coach. You can easily view all of your accounts in one convenient dashboard: bank and investment balances, current debts, spending breakdowns, and credit score. Easily set up budgets and spot upcoming bills. And get personalized insights on everyday money questions and take action with Coach chat, the AI guide that’s powered by the playbooks of SoFi Financial Planners, so its guidance comes from expert knowledge.

Meet SoFi Coach, your smart personal guide to getting your money right.

FAQ

Is Experian or FICO more reliable?

Your VantageScore and your FICO Score are two different credit scores that use two different credit models. Both are considered to be reliable. But lenders may prefer to use one model over the other, depending on which one best fits their needs.

Why is my FICO Score different on Experian?

Though it does not have its own credit scoring model, Experian generates a score using data from VantageScore and FICO. FICO, on the other hand, creates its score using only its own calculations.

How close is your FICO Score to your credit score?

People have multiple credit scores, and your FICO Score is just one of them. Most credit scores use a similar set of data, which means credit scores usually vary by only a few points. If you spot a large discrepancy between your scores, take a look at your credit report and dispute any errors or inaccuracies you see.

Which credit score is most accurate?

No one credit score is considered more accurate than the others. Rather, different credit scores may provide lenders with different insights on spending or borrowing habits.

What is a good FICO Score?

FICO Scores are generally divided into five different categories, from Poor to Exceptional. A “Good” FICO Score falls between 670 and 739. Having a FICO Score that is Very Good (740-799) or Exceptional (800-850) is even better.

Why is my FICO Score higher than my credit score?

Your FICO Score is just one of many credit scores that you may have. It may be higher or lower than other credit scores depending on the calculations used, including how the information in your credit report was weighted. As long as your various scores are within a few points of each other, there is usually no cause for alarm.

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Photo credit: iStock/Prostock-Studio

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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