SoFi

To put it simply, an ACH transfer moves funds electronically from one bank account to another. The three letters ACH stand for Automated Clearing House, which is a centralized system. You might think of it as Grand Central Station for the electronic distributions of funds. The ACH network could be how your paycheck appears right on schedule in your bank account thanks to direct deposit, and it may be how you send online payments to, say, your WiFi provider.

ACH transfers play an important role in finance today, so here’s a closer look at:

•   What ACH transfers are and how they were created

•   The pros and cons of ACH transfers

•   How secure ACH payments are

•   How ACH payments compare to wire transfers.

What Is an ACH Payment?

An ACH transfer is a convenient way to move money around, without using checks, credit cards, or other methods. It enables direct deposits from employers and government benefit programs, bill payments, and external fund transfers. What’s more, ACH transfers fuel person-to-person payments. Such providers as PayPal and Venmo use the ACH network.

As mentioned above, ACH stands for Automated Clearing House. But it’s not a bricks and mortar location. It is a network that financial institutions use to aggregate transactions for processing. This processing is then typically completed three times a day on every business day.

How Do ACH Payments Work?

Here, you’ll learn a little more about what is ACH, the history of ACH payments, and how they work.

History of ACH

The ACH network began in the late 1960s, when a group of U.S. bankers worried about the increasing number of checks being issued and cashed. They feared that rising numbers of checks would overwhelm the banking system, and they began to explore technological solutions.

•   In 1972, an ACH association formed in California to manage electronic banking transactions, with other regional ACH networks forming soon after that.

•   In 1974, these regional networks formed NACHA (the nonprofit National Automated Clearing House Association) to oversee and administer the ACH network. This organization creates and enforces how this network works, while the Federal Reserve and The Clearing House actually process the transactions.

•   In 1975, the Social Security Administration began testing direct deposit, which led to today’s widespread adoption. Approximately 99% of SSA’s payments are currently completed via direct deposit.

•   In 2001, online and phone payments via ACH became available, a key step forward to accelerating and automating banking transactions.

•   In the most recent year studied, ACH payments numbered more than 30 billion, and the total dollars transferred exceeded $77 trillion. These figures indicate how big a role ACH transfers play in global finance.

Categories of ACH

The ACH network processes bank transfers for both direct deposits and direct payments. Direct deposits usually include:

•   Paychecks

•   Government benefits

•   Tax refunds

•   Expenses that an employer is reimbursing an employee for

•   Annuity payments

•   Interest payments.

In terms of direct payments, the ACH network may process other transactions. What is an ach transfer can include:

•   Online bill payments from your bank account

•   Zelle

•   PayPal, Venmo, and other P2P services.

Types of ACH

As you’ve already learned, ACH works both ways: incoming and outgoing payments can be processed via the ACH network.

ACH Credit

An ACH credit occurs when one party sends funds to another entity. A very familiar instance of this would be the way (if you are among the millions who have direct deposit) arrives in your designated bank account on payday. Your employer sent instructions, their bank transmitted funds to yours, and you received your money.

ACH Debit

An ACH debit, as you might expect, moves in the opposite direction. In this case, funds are pulled from one account and processed in batches to get to their destination. In the situation of a direct deposit paycheck, while the employee receives the ACH credit, the employer’s account gets debited.

Recommended: How to Calculate Savings Account Interest

What Is an Example of an ACH Payment?

You’ve just gotten the scoop on ACH credits vs. debits, but what is a specific example of an ACH payment? When Social Security payments get deposited in millions of Americans’ bank accounts monthly, that’s the ACH system at work.

Also, if you’ve set up an automated payment of a utility or other recurring bill, that may also be an example of an ACH payment in action.

Benefits of ACH Payments

So now you know what ACH transactions are and how they became so popular. Let’s look at their benefits to your daily life and banking.

•   Speed. They are quick and save you time running around with checks and the like. Plus, the transactions themselves can be fast. The transfers are typically completed within one day. There may be ways offered to speed up your payment, often for a fee (such as when PayPal or Venmo offers an instant transfer).

•   Convenience. It can be very convenient to have mortgage payments, utility bills, and other payments automatically deducted from a bank account. Or send money to someone via a P2P service. With ACH payments, as we noted, there’s no need to travel to the financial institution to pay the bills or to write a paper check and mail it in.

•   Low cost. ACH transfers are typically free and may even actually save you money. For example, a bank may offer a lower rate on a mortgage loan or student loan if you set up an automatic ACH funds transfer for your payments. (An exception may be when a financial institution charges a nominal fee to transfer funds to another bank.)

Downsides of ACH Transfers

There are a few potential disadvantages when it comes to using ACH transfers. Specifically:

•   Transaction limits. Some banks will limit how much money you can send by ACH transfer in a specific time period, or they might not accept international ACH transfers.

•   Penalties for too many transactions. If you are completing ACH payments from your savings account and that account has a cap on how many withdrawals you can complete per month, you could be penalized.

•   Timing matters. Not all banks send ACH transfers at the same time of day — meaning they may have a cut-off time for a transfer to be processed on the next business day. This might cause problems for people needing to pay a bill by a certain due date and/or time.

Security of ACH Transfers

You may wonder whether these electronic transactions are secure. An ACH transfer can in fact be more secure than many other payment methods.

•   The reality is that paper checks can always be lost or stolen. With ACH deposits or payments, you only need to provide bank information once, when the automated transaction is set up. Contrast that with writing a check every month and mailing it.

•   Regulations exist that protect consumers in the rare case of an electronic funds transfer negatively impacting their bank accounts because of fraud or error.

•   ACH payments are very safe because they go through a clearing house that has strict rules about confidentiality of information. In addition, ACH transfers typically have an extremely low rate of error.

ACH Transfers vs. Wire Transfers

When thinking about these kinds of transactions, you may wonder, “What’s the difference between ACH transfers vs. wire transfers?” A wire transfer is another method of electronically transferring funds, which means this system comes with many of the same benefits as ACH transfers bring.

Consider a couple of scenarios that highlight the potential differences:

•   Wire transfers may occur within one business day, with funds often available for use the same day. In many cases, though, a bank employee needs to review this largely automated process, so the funds may not be immediately visible in the recipient’s account — and international wire transfers may take more than a day.

•   ACH transfers, however, are processed in clearinghouses and banks in batches. The ACH system may sometimes provide same-day transfers and is increasingly moving towards this same-day benefit being available more often.

•   In general, a wire transfer cannot be reversed.

•   An ACH transfer, though, can be reversed in some situations.

•   A last but important point: ACH transfers are often free, while wire transfer fees can cost the person sending it up to $35 or more, and the recipient might have to pay a small fee, too.

Recommended: Can You Use Your Debit Card in Another Country?

The Takeaway

ACH transfers can speed and smooth your financial life, automatically depositing and withdrawing funds so you don’t have to deal with checks, cards, or the time it takes for money to clear. That’s why they are such a popular way to transfer funds, such as receiving one’s paycheck by direct deposit.

In addition to ACH payments, another way to ensure a smoothly functioning financial life is to partner with a bank account that offers convenient access and the tools you need most.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How long does an ACH transfer take?

ACH transfers typically take a day, but they may take as long as three days.

What is needed for an ACH transfer?

To complete an ACH transfer, the following are needed: the name, routing number, and account number of the destination, whether the account is a business or personal account, and the amount of money to be sent.

How do I set up an ACH payment?

An ACH payment can be set up in a variety of ways. As a consumer vs. a business, you might use a payment app or see what forms of money transfers your bank uses. For instance, many use Zelle. Or you could see if the prospective recipient of your funds (say, a utility company) offers an automated payment system, which might use the ACH network.

Can you send an ACH to a personal account?

Yes, you can send an ACH payment to a personal account. For example, if you use a payment app to send a friend money for your share of a dinner out that they paid for, you would likely be sending an ACH payment.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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.

SOBK0124010

You may enter into marriage with shared goals and plans for the future, but what about debt? Whether your partner’s debt becomes your responsibility when wed depends on the state you reside in, the kind of debt, and other specifics.

You’ll learn more about that ahead. This guide covers the difference between common law and community law states and the different sorts of debt that may be managed in a marriage. Read on to learn the details.

How Does Debt in Marriage Work?

Here’s a quick course in marital property and marriage guidelines:

•   Marital property refers to assets acquired as a couple, such as real estate, bank accounts, and investments. Debt can also be a facet of marital property.

•   The state in which you live (meaning where your permanent address is) determines whether you are in a community or common law state and governed by its rules.

•   Most states are common law states. If property is acquired during a marriage by one partner and in only that partner’s name, it’s their sole property. So if you were married and bought a Tesla in your name, the car is yours.

•   In a community property state, however, assets and debts acquired by one spouse in a marriage are considered to be the property of both partners.

In Which States Are You Responsible for Your Spouse’s Debt?

You are probably curious about which states have community property law. Here’s the list or the nine that do:

•   Arizona

•   California

•   Idaho

•   Louisiana

•   Nevada

•   New Mexico

•   Texas

•   Washington

•   Wisconsin

What’s more, Alaska, the Commonwealth of Puerto Rico, South Dakota, and Tennessee have enacted elective community property laws. These are “opt-in” if a couple chooses to do so.

There are exceptions to these rules, such as if one partner receives an inheritance or if one owned property prior to marriage.

Am I Responsible for My Spouse’s Credit Card Debt?

Whether or not you are responsible for your spouse’s credit card debt can depend on which state you reside in.

In a common law state:

•   In a common law state, your partner’s credit card belongs only to them. The law provides that one spouse owns a particular asset unless you both put your names on it. That includes property like houses, automobiles, and even credit cards. If your spouse has a credit card with their name on it, it’s theirs alone. Therefore, the credit card debt liability also falls entirely on their shoulders.

•   You would need to become a joint account holder in order to own any part of that debt. However, you could also be on the hook for that debt if you co-signed on the account.

•   If your spouse made you an authorized user, though, that still leaves the credit card entirely in their name and not yours, meaning you hold no responsibility for paying any associated debts.

In a community property state:

•   In a community property state, if they get a credit card while you’re married, that debt now belongs to both of you. Both partners are liable, regardless of who might have opened the account or accrued the debt.

•   There is an exception: If you and your spouse are separated before they begin racking up the debt in question, you may not be held responsible. Each situation is different, however, and the state could hold you responsible for the debt in question should it be proved the debt was incurred for the benefit of the marriage.

•   It’s good to keep in mind that if you have debts from before the marriage, such as a car loan, those will belong only to you. However, if you get another car loan after getting married, that is now a communal debt that you and your partner share.

Am I Responsible for My Spouse’s Medical Debt?

As you might guess, in community property states, a spouse is likely to be held responsible for a spouse’s debts, though the specifics may vary state by state. This includes medical debt.

In a common law state, you typically would not be responsible for debts your spouse alone incurred, but again, there are exceptions to this rule. (For instance, if you cosign when a partner is admitted for medical treatment.) You’ll learn more about these scenarios below.

Recommended: What Is Financial Minimalism?

Situations Where You May Be Responsible for Your Spouse’s Debt

When it comes to debt and marriage, there are some scenarios worth considering. If you are the kind of person to wonder, “How can I protect myself from my husband’s debt?” or “wife’s debt,” then read on.

When You Are a Joint Account Holder

Even if you live in a community property state, if your spouse racks up debt on a credit card you jointly hold, you may indeed be liable.

When You Live in a Community Property State

As you read above, if you live in a community property state, your spouse’s debts acquired during marriage will become yours as well.

When You “Opt in” into Community Property

As noted above, Alaska, the Commonwealth of Puerto Rico, South Dakota, and Tennessee have laws that can allow you to opt into community property arrangements although the states may default to common law guidelines. If you do so, you will become liable for debt that your partner incurs.

When You Cosign for Medical Payments

In a situation where you live in a common law state, if your spouse were to enter medical care or a medical facility, and you agree to cosign, you will become liable for the expenses related to this treatment.

Possibly When Your Spouse Dies

Much as no one wants to think about death, there are situations in which you could be liable for a deceased partner’s debts. These include if you live in a community property state, if you cosigned on a loan or for medical care, or if you had a joint account, among other scenarios.

Will My Partner’s Debt Affect My Credit Score?

Regardless of whether you live in a community property or common law state, your credit score is yours alone. Being married doesn’t mean that you and your spouse now have the same score or that your scores get merged.

However, if you and your spouse both sign up for a joint credit card or take out a loan together, that information will show up on each of your credit reports.

What Happens to Debt If We Separate Or Divorce?

When couples decide to separate, one of the first questions may be “How much will a divorce cost me?” That is typically very quickly followed by, “What happens to our debt?” The answer to the latter will likely be: It depends.

•   Debt responsibility in a divorce isn’t as simple as dividing things in half. For example, if you have a credit card that is only in your name, that debt remains entirely with you in a common law state. However, if you have a joint credit card, most states will see that as joint debt if you separate or divorce, meaning you’ll both be responsible for that debt. It doesn’t matter who was making payments or running up bills; the law will see it as a shared burden.

•   If, however, you live in a community property state and your spouse rings up a considerable amount of credit card debt, that could be seen as a shared burden. A creditor might be able to seek repayment from both of you. There are various factors to consider, so working with a legal professional with expertise in this realm can be a smart move.

•   If you have a house, you may want to consider selling it off and splitting the money. Trying to untangle a mortgage (a form of consumer debt) if one of you will be moving out can get dicey. The partner who’s staying in the home may need to buy out the partner who’s leaving, for instance.

•   If you did any investing as a couple during your marriage, that property will need sorting out. Investments come with legal and tax obligations, on top of the financial complexity. If you invested together, you may want to split the shares or account. Or you might think about selling off those investments and dividing the proceeds during a divorce. However, a lot of investments like that come with tax burdens, so keep that in mind if you have to go this route.

Of course, the courts might answer this and other questions for you. Divorces play out in different ways, including whether they are contested or uncontested. Working with a divorce attorney can help you understand the options and possible outcomes as your marriage ends.

Recommended: 10 Personal Finance Basics

The Takeaway

Even if you decide to merge your financial lives completely, finances can become complicated in a marriage. In terms of debt and whose is whose, there is the question of whether you live in a community property or common law state. There will also be the matter if debt was held before marriage or after the wedding. And then there are such concerns as whether you and your spouse cosign or become joint holders on loans and/or accounts or keep things separated. All of these factors (and more) can impact whether or not you are liable for your spouse’s debt.

When you marry, your personal banking will be impacted as well as your lines of credit and debt. You could completely merge your banking, keep things separate, or have both a joint and separate account. SoFi can offer you options to suit your particular needs.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Will my partner’s debt affect my credit score?

Credit scores are specific to each individual. However, if you cosign a loan or open a joint credit card, the specifics of that account will turn up on each partner’s credit reports and could impact each spouse’s score.

Am I responsible for my spouse’s debt after death?

Whether or not you are liable for your deceased spouse’s debt will depend on various factors, such as whether you live in a community property or common law state, whether the debt was incurred before or during the marriage, and whether the debt is in a joint or cosigned form.

Are married couple’s responsible for each other’s debt?

Married couples can be responsible for each other’s debt in certain circumstances, such as if the debt was incurred during the marriage in a community property state or if the debt was cosigned for or accrued with a joint credit card, among others.

Can I be forced to pay my spouse’s debt?

There are a couple of situations in which you could be forced to pay your spouse’s debts, such as if you live in a community property state or if you are a joint account holder.

Photo credit: iStock/AleksandarNakic

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

This article is not intended to be legal advice. Please consult an attorney for advice.

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.

SOBK0124001

As you near 30, you probably have lots of different financial goals. Maybe you’re planning to buy a house. Or perhaps you’re considering starting a family. And while retirement may seem a long way off, it’s never too early to start saving and planning for your future.

You might know you want to save money for all these different things, but you don’t know exactly how much you should be saving. Chances are, you may have been wondering, how much money should I have saved by 30?

The good news is, money you save now can add up. And if you invest that money in a retirement account or an investment portfolio, you can get longer-term growth on your money.

First, though, it helps to know how much you should be saving by age 30 to see if you’re on track. Learn how much you should have saved — plus tips to help you reach your savings goals.

Average/Median Savings by Age 30

The average savings for individuals by age 30 is approximately $20,540, and their median savings is $5,400, according to the Federal Reserve’s most recent Survey of Consumer Finances. It’s important to note that the Fed’s survey doesn’t look specifically at people who are age 30. Instead, it divides them into groups, including 25 to 34 year olds.

These savings amounts are in what the Fed calls “Transaction Accounts.” This includes checking and savings accounts and money market accounts.


💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

How Much Should a 30-Year-Old Have in Savings?

If you’re still asking yourself, how much money should I have saved by 30?, know this: By age 30, you should have the equivalent of your annual salary in savings, according to one rule of thumb. That means if you’re earning $54,000 a year, you should have $54,000 saved.

This number — $54,000 — is based on the average annual salary for those 25 to 34 years old, which is $54,080, according to 2023 data from the Bureau of Labor Statistics.

Strategies to Help You Reach Your Savings Goals by 30

If you don’t have $54,000 saved by age 30, you can still catch up and reach your financial goals.

Here are some techniques that can help you get there.

Set Up an Emergency Fund

Having an emergency savings fund to pay for sudden expenses is vital. That way you’ll have money to pay for emergencies like unexpected medical bills or to help cover your expenses if you lose your job, rather than having to resort to using a credit card or taking out a loan. Put three to six months’ worth of expenses in your emergency fund and keep the money in a savings account where you can quickly and easily access it if you need it.

Pay Down Debt

Debt, especially high-interest debt like credit card debt, can drain your income so that you don’t have much, if anything, left to put in savings. Make a plan to pay it off.

For example, you might want to try the debt avalanche method. List your debts in order of those with the highest interest to those with the lowest interest. Then, make extra payments on your debt with the highest interest, while paying at least the minimum payments on all your other debts. Once you pay the highest interest debt off, move on to the debt with the second highest interest rate and continue the pattern.

With the debt avalanche technique, you eliminate your most expensive debts first, which can help you save money. You may also get debt-free sooner because, as you pay the debt off, less interest accumulates each month.

If the avalanche method isn’t right for you, you could try the debt snowball method, in which you pay off the smallest debts first and work your way up to the largest, or the fireball method, which is a combination of the avalanche and snowball methods.

Start Investing

Retirement probably feels like a long way off for you. But the sooner you can start saving for retirement, the better, since it will give your savings time to grow.

If you have access to a 401(k) plan at work, take advantage of it. Once you open an account, the money will be automatically deducted from your paycheck each pay period, which can make it easier to save since you don’t have to think about it.

If your employer doesn’t offer a 401(k), or even if they do and you want to save even more for retirement, consider opening an IRA account. There are two types of IRAs to choose from: a traditional IRA and a Roth IRA. At this point in your life, when you’re likely to be earning less than you will be later on, a Roth IRA might be a good choice because you pay the taxes on it now, when your income is lower. And in retirement, you withdraw your money tax-free.

However, if you expect that your income will be less in retirement than it is now, a traditional IRA is typically your best choice. You’ll get the tax break now, in the year you open the account, and pay taxes on the money you withdraw in retirement, when you expect to be in a lower tax bracket.

Contribute the full amount to your IRA if you can. In 2024, those under age 50 can contribute up to $7,000 a year.

Take Advantage of 401(k) Matching

When choosing how much to contribute to your 401(k), be sure to contribute at least enough to get your employer’s matching funds if such a benefit is offered by your company.

An employer match is, essentially, free money that can help you grow your retirement savings even more. With an employer match, an employer contributes a certain amount to their employees’ 401(k) plans. The match may be based on a percentage of an employee’s contribution up to a certain portion of their total salary, or it may be a set dollar amount, depending on the plan.

Save More as Your Salary Increases

When you get a raise, instead of using that extra money to buy more things, put it into savings instead. That will help you reach your financial goals faster and avoid the kind of lifestyle creep in which your spending outpaces your earnings.

Though it’s tempting to celebrate a pay raise by buying a fancier car or taking an expensive vacation, consider the fact that you’ll have a bigger car payment to make every month moving forward, which can result in even more spending, or that you may be paying off high interest credit card debt that you used to finance your vacation fun.

Instead, make your celebration a little smaller, like dinner with a few best friends, and put the rest of the money into a savings or investment account for your future.

The Takeaway

By age 30, you should have saved the equivalent of your annual salary, according to a popular rule of thumb. For the average 30 year old, that works out to about $54,000.

But don’t fret if you haven’t saved that much. It’s not too late to start. By taking such steps as paying down high-interest debt, creating an emergency fund, saving more from your salary, and saving for retirement with a 401(k), IRA, or other investment account, you still have time to reach your financial goals.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

Is $50k saved at 30 good?

Yes, saving $50,000 by age 30 is quite good. According to one rule of thumb, you should save the equivalent of your annual salary by age 30. The latest data from the Bureau of Labor Statistics shows that the annual average salary of a 30 year-old is approximately $54,080. So you are basically on target with your savings.

Plus, when you consider the fact that the average individual’s savings by age 30 is approximately $20,540, according to the Federal Reserve’s most recent Survey of Consumer Finances, you are ahead of many of your peers.

Is $100k savings good for a 30 year old?

Yes, $100,000 in savings for a 30 year old is good. It’s almost double the amount recommended by a popular rule of thumb, which is to save about $54,000, or the equivalent of the average annual salary of a 30 year old, based on data from the Bureau of Labor Statistics.

Where should I be financially at 35?

By age 35, you should save more than three times your annual salary, according to conventional wisdom. The average salary of those ages 35 to 44 is $65,676, according to the Bureau of Labor Statistics. That means by 35 you should have saved approximately $197,000.

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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 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.