You work hard for your money, so your money should work hard for you. But let’s be real—unless you receive a life-changing windfall, 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 existing wealth to build future wealth. Check out these five ways your money can work just as hard for you as you work for it.
How to Make Your Money Work for You
1. Ditching the Fees
Yes, financial professionals should make a living. But, no, they don’t have to do so by diminishing your ability to accumulate wealth.
Bank Fees
How do banks charge you? Let us count the fees. The list can include fees for account maintenance, returned deposits, foreign transactions, falling below the account minimum, receiving paper statements, replacing a lost or stolen card, using a non-network ATM, overdrawing your account, 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.
Federal Deposit Insurance Corporation figures show that from 2015 through 2019, the amount of overdraft fees reported by banks increased by 4.5%, from $11.18 billion to $11.68 billion. So it may not be surprising that, on average, the reporting banks made nearly 40% of their income from fees. One reporting bank made nearly 90% of its income from overdraft and insufficient funds fees. That’s your money. Going into their pockets. Ouch.
The average overdraft fee in 2020 was $33.47, but there is no federal law that places a maximum amount a bank can charge for an overdraft. Banks must get a customer’s permission before charging overdraft fees on ATM or debit card transactions, meaning a customer must “opt in” to this arrangement. It’s a good idea to ask your bank about their “opt-in policy.”
Investment Fees
Paying a traditional financial advisor a percentage of your account balance to manage, monitor, and optimize your portfolio could be worth the expense, but what fee you’re comfortable paying is really dependent on your financial situation and the time you have to put into managing your own investments.
A 1% per-year fee based on your portfolio balance is considered reasonable for financial advice. Seeking out a fiduciary financial advisor whom you feel comfortable working with is recommended. They are legally obligated to work in their clients’ best interests, instead of working just to earn the highest fee possible for themselves.
A growing number of financial companies are offering financial advising services 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 without extra cost to the consumer.
ATM Fees
At an average of $4.64 a pop , out-of-network 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 to 34 and 51% ages 35 to 49 withdraw $40 eight to 10 times a month.
One way to avoid paying ATM fees is to always make sure that you’re using an ATM in your bank’s network. However, if you’re on the road or your bank only has a few networked ATMs, that can be a challenge. Federal law requires ATM operators to notify consumers, before they complete their transaction, that they may be charged a fee. So any fee you may be charged won’t be a surprise on your monthly bank statement. Fee amounts for electronic transactions, such as ATM fees, are not specifically regulated by the federal government, however. Some of the guidance given by federal banking authorities is that banks’ fees should be competitive with other banks in the area and not made as a result of any agreement with other banks, and that banks should take their costs of providing the service into consideration. That leaves a lot of room for interpretation.
Just like bank fees, however, more and more financial institutions are offering fee-free ATM usage as part of their perks. If you also use a checking account that doesn’t charge other fees, this can add up to hundreds of dollars in savings for an average user.
2. Making Debt Payoff a Priority
When you begin to repay a loan, it’s possible that your early payments could be almost entirely interest vs. the principal payment. And credit card payments can be 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.
Using a credit card interest calculator can be helpful to get a realistic idea of how much interest you’ll likely pay and how long it may take to pay off the amount of debt you have. For instance, paying $200 per month on a $5,000 credit card balance with an interest rate of 25% will take three years to pay off and cost $2,136 in interest charges. But increasing the monthly payment will decrease both payoff time and total interest paid.
3. Getting Rewarded for Saving and Spending
If banks can charge you just to do business with them, you might as well find a way to make some money on your end of the deal. One way to turn the tables and make your money work for you is to open a high-yield savings account.
Instead of keeping your money in a traditional savings account that may offer only very low interest rates, considering a high-yield savings account that might pay interest rates 15 to 20 times the current national average could boost your savings in a significant way.
Other ways to get rewarded for spending are retailer loyalty programs, coupons, or rebate apps. Rewards credit cards can be another effective way to save at your favorite store. Depositing any cash rewards earned from cashback credit cards straight into that high-yield savings account is an easy way to boost your savings. Using rewards credit cards can be a good financial move, provided you pay your statement balance in full every time it comes due.
4. Eliminating Waste
Have you ever thought you were keeping up with your checking-account balance, only to realize you’re overdrawn? 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—much like keeping a food journal when you’re trying to eat healthier.
But how can that be an easy task when life gets busy? Using a budgeting app that categorizes spending, automates bill payments and savings contributions, and even tracks goals might be an option, as entries and adjustments can be made while you’re out and about. Keeping all the numbers available quickly may keep you motivated to stick to your financial goals.
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 77.3 years , it’s also likely to be a long time before you get there. The average American worker expects to retire at age 65, but some people leave the workforce earlier and some people leave later. Data compiled by the Bureau of Labor Statistics projects a slight increase in the percentage of workers aged 55 and older by 2029—25.2% up from 23.4% in 2019.
Only 29% of people surveyed in the 2021 Retirement Confidence Survey® , conducted annually since 1990 by Employee Benefit Research Institute (EBRI) and the independent research firm Greenwald & Associates, indicated they feel “very confident” that they will be able to retire comfortably. Even if you plan to work later than the average retirement age, being confident in your ability to retire with a financially comfortable lifestyle is a good goal to strive for.
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 diversified portfolio combined with the magic of compounding returns could help you get there. Investing has the potential for a higher return 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 having made good progress on your financial goals.
The Takeaway
Everyone’s financial situation is different, and what makes sense for one person may not work for another. But with some careful planning and solid financial advice, you can figure out how to make your money work for you. Using financial technology tools to set goals and work toward them can make it easier to get to where you want to go, financially speaking.
Looking for Something Different?
If you’re ready to start saving and investing to meet your goals, one option may be a cash management account like SoFi Money®. With no-fee overdraft coverage for qualifying accounts and no fees for in-network ATMs in the Allpoint® Network, you can keep more of the money you work hard to earn. Also, SoFi Money is an interest-bearing account, so it’s another way your money can work for you.
SoFi Money®
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 Money Debit Card issued by The Bancorp 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.
As of 6/9/2020, accounts with recurring monthly deposits of $500 or more each month, will earn interest at 0.25%. All other accounts will earn interest at 0.01%. Interest rates are variable and subject to change at our discretion at any time. Accounts opened prior to June 8, 2020, will continue to earn interest at 0.25% irrespective of deposit activity. SoFi’s Securities reserves the right to change this
policy at our discretion at any time. Accounts which are eligible to earn interest at 0.25% (including accounts opened
prior to June 8, 2020) will also be eligible to participate in the SoFi Money Cashback Rewards Program.
The SoFi Money® Annual Percentage Yield as of 03/15/2020 is 0.20% (0.20% interest rate). Interest rates are variable subject to change at our discretion, at any time. No minimum balance required. SoFi doesn’t charge any ATM fees and will reimburse ATM fees charged by other institutions when a SoFi Money™ Mastercard® Debit Card is used at any ATM displaying the Mastercard®, Plus®, or NYCE® logo. SoFi reserves the right to limit or revoke ATM reimbursements at any time without notice.
Each business day, cash deposits in SoFi Money cash management accounts are swept to one or more sweep program banks where it earns a variable interest rate and is eligible for FDIC insurance. FDIC Insurance does not immediately apply. Coverage begins when funds arrive at a program bank, usually within two business days of deposit. There are currently six banks available to accept these deposits, making customers eligible for up to $1,500,000 of FDIC insurance (six banks, $250,000 per bank). If the number of available banks changes, or you elect not to use, and/or have existing assets at, one or more of the available banks, the actual amount could be lower. For more information on FDIC insurance coverage, please visit www.FDIC.gov . Customers are responsible for monitoring their total assets at each Program Banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits in SoFi Money or at Program Banks are not covered by SIPC.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.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. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.
Any SoFi member who receives $1,000 or more in qualifying direct deposits into their SoFi Money account over the preceding 30 days will be eligible for Overdraft Coverage. Overdraft coverage only applies to SoFi Money accounts and is currently unavailable for Samsung Money by SoFi accounts. Members with a prior history of non-repayment of negative balances for SoFi Money are also ineligible for Overdraft Coverage.
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