Have you heard a “Make money while you sleep!” claim recently? They feel like they’re everywhere. But let’s be real — unless you hit the powerball, growing wealth doesn’t usually happen overnight. Making your money work for you is more like a marathon that requires planning, diligence, and financial smarts.
Thanks to the advent of online banking, 21st-century financial technology, and the democratizing notion that investing should be accessible to everyone, you no longer need to have money in order to make it. And that’s good news, because you work hard for your money. Check out these five ways your money can work just as hard for you.
Ways Your Money Can Work For You
1. Ditching the Fees
How do banks charge you? Let us count the fees. The list can include account maintenance fees, returned deposits, foreign transactions, falling below the account minimum, receiving paper statements, replacing a lost or stolen card, using a non-network ATM, overdrawing, making too many savings withdrawals, writing too many checks, closing an account, not using an account enough, speaking with a human, paying late, or even paying off a loan too early.
In fact, the FDIC released figures showing that in 2017, banks made $11.45 billion in overdraft fees alone. So it may not be surprising that they make up to 40% of their income from fees. That’s your money. Going into their pockets. Just for doing business with them. Ouch.
Paying a traditional financial advisor a percentage of your account balance to manage, monitor, and optimize your portfolio could be worth the expense, but it might not be an effective use of your money.
Financial advising is still a confidence-booster for the majority of investors who use it. But when advisors charge a typical fee of 1% a year based on your portfolio balance, your total return can be significantly impacted.
Fortunately, a growing number of competitors are offering the same types of advising service with little or no fees — and no humans. Robo-advisors are becoming more popular because they use algorithms to optimize portfolios, thus eliminating the overhead of live employees.
Still other products like SoFi Invest® offer the best of both worlds, with human advisors willing to help at the cost of an automated system.
At an average of $3 a pop , ATM fees can add up quickly. And “I just need to stop at the ATM really quick” is a phrase that’s likely uttered often, since 60% of Americans ages 25-34 and 51% ages 35-49 withdraw $40 8-10 times a month.
One way to avoid paying ATM fees is to always make sure that you’re using one of your bank’s designated ATMs. However, if you’re on the road or your bank only has a few networked ATMs, that can be a challenge.
Just like bank fees, however, more and more financial institutions are offering fee-free ATM usage as part of their perks. Especially if you use an online checking account, this can add up to hundreds of dollars in savings.
2. Making Debt Payoff a Priority
When you begin to repay a loan, it’s possible that your early payments could almost be entirely interest vs. the principal balance. And credit card payments can be even more complicated, with a minimum monthly payment that changes each month based on the balance and any accrued late fees or interest.
Several debt-payment philosophies can help you get out of paying and into saving, including the snowball, avalanche, and fireball methods.
Consolidating various debts into one low-interest personal loan can be another way to get out from under those high-interest payments and get on a fixed payment schedule.
3. Getting Rewarded for Saving and Spending
If banks can make you pay just to do business with them, why can’t you do the same? One way to turn the tables and make your money work for you is to open a high-yield savings account.
Then, instead of languishing in a traditional savings account that only offers 0.01% interest , you could earn as much as 2% APY or more. That’s an increase of around 20,000%.
You also can find several ways to get rewarded for spending, such as retailer loyalty programs, coupons, or rebate apps. Cashback or reward credit cards can also be an effective way to save at your favorite store, provided you pay your statement balance in full every time it comes due.
And while not everyone has the time to clip coupons and search through circulars before heading to the store, it can be a good way to get more from your money as often as time allows.
4. Eliminating Waste
Have you ever thought you were fine on your checking-account balance, only to have it overdraw? Where the heck did all that money go? Tracking where your money goes could help you identify and reduce (or even eliminate) areas where you’re overspending — you could think of it like keeping a food journal when you’re trying to eat healthier.
But how to make that an easy task? Especially for millennials, budgeting and saving are a top priority, but life also gets busy. A growing number of fintech companies are responding to that need with budgeting apps that categorize spending, automate bill payments and savings contributions, and even track goals.
Like SoFi Relay®, a new money-tracking app, lets you see all of your accounts in one central location so that you can easily see where the money is coming, where it’s going, and where you can shift things around.
5. Investing in Your Future
It’s true that you can’t take your money with you when you go. But with an average life expectancy at 78.6 years , it’s also likely to be a long time before you get there.
Creating a long-term investment plan is one way to work on having enough set aside to one day ditch the working world for good. Even if it’s just a few bucks here or there, a smart portfolio combined with the magic of compounding returns could help you get there.
Investing has the potential for a higher return on investment vs. a savings account, but the reward isn’t guaranteed. Unlike cash-based interest accounts, your portfolio balance is likely to fluctuate with the market.
Because of the risk associated with putting money into the market, some people may be hesitant to jump in, especially if they don’t fully understand how investing works. But if you start early and save often, it’s possible to head into retirement without regret.
Making Your Money Work for You
Everyone’s financial situation is different, and what works for one person may not work for another. But with some trial and error, you can figure out what works for you. If you’re ready to start saving and investing to meet your goals, consider SoFi.
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SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.