SoFi

If you’re lucky enough to find yourself in possession of a bundle of cash that isn’t immediately needed to pay bills, you have some thinking to do. How to use that money? Whether it came your way via an on-the-job bonus, an inheritance, or an unexpected refund, you have the opportunity to put it to work for you in a variety of ways.

Instead of going on a shopping spree, you could deploy the funds to improve your financial situation and build wealth. Options include paying down debt, contributing to retirement goals, and beyond. Read on to learn the full story.

The Opportunity of Extra Money

At some point, you may find some extra money heading your way. Perhaps you get a bonus for wrangling a complicated project at work. Or you didn’t realize that you’d overpaid your taxes one year. Or maybe an inheritance comes your way.

When funds turn up that you weren’t expecting, it may be tempting to buy a bunch of cool items you’ve been admiring or to take friends and family out to a lavish meal or away for a weekend. But then, once that cash is gone, there’s no getting it back.

Instead, you might look at the money as a means to enrich your financial standing. (Or use most of it that way, and go shopping with a small amount of it.)

A windfall can be a once-in-a-blue-moon opportunity to pay off debt or plump up your emergency fund. It can help you boost your retirement savings or kick your savings for a future goal into high gear.

Yes, it takes discipline to put that money to work vs. splashing out with it at your favorite store. But doing so can have a long-term positive impact on your finances.

1. Build a Solid Emergency Fund

If your emergency fund is low (or nonexistent), you might use your new windfall to build it up.

Having an emergency fund gives you a financial cushion, along with the sense of security that comes with knowing you can handle a financial set-back (such as a job loss, medical expenses, or costly car or home repair) without hardship.

Having this buffer can also help you avoid having to rely on credit cards for an unexpected expense and then falling into a negative spiral of high interest debt.

How Much to Save in an Emergency Fund

A general rule of thumb is to keep three to six months’ of monthly expenses in cash as an emergency fund. Two-income households may be able to protect themselves with three months’ worth of savings. If you’re single, however, you may want to aim closer to having six months’ worth of living expenses saved up.

Consider keeping your emergency fund in a separate high-yield savings account, such as a money market account, online saving account, or a checking and savings account. These options typically offer higher interest rates than a standard savings account, yet allow you to access the money when you need it.

2. Tackle High-Interest Debt

While mortgage loans and car loans tend to offer lower interest rates since they’re secured by collateral, the same can’t be said of unsecured debts, such as credit card balances, student loans, and personal loans. Credit card debt can be especially hard to pay off, given that the current average interest rate is over 20%.

If you carry any credit card or other high-interest debt, you might want to use your windfall to jumpstart a strategic debt payoff plan, such as the debt avalanche or debt snowball method, in order to pay it off as quickly as possible.

Strategies for Paying Down Debt

The avalanche method involves ranking your debts by interest rate. You then put any extra money you have towards paying off the debt with the highest interest rate (while continuing to pay the minimum on other debts). After the balance with the highest interest rate has been completely paid off, you move on to the next highest interest-rate balance (again, putting as much money as you can toward it), and then move down the list until your debt is repaid.

With the snowball method, you focus on paying off your smallest debt first (while paying the minimum on your other debts). Once that balance is paid off, you take the funds you had previously allocated to your smallest debt and put them toward the next-smallest balance. This cycle repeats until all of your debt is repaid.

Using your extra cash to pay off debt has added benefits. You may build your credit score as your credit utilization ratio (the amount of available credit you’ve used vs. your credit limit) goes down.

In addition, once you clear your debt, you won’t have to budget for debt payments anymore, which is essentially getting extra cash all over again.

3. Invest in Retirement Accounts

Here’s another idea for what to do with extra money. You might use it to grow your retirement accounts. There are a couple of options to consider here.

401(k) and Employer Match

Does your employer offer a 401(k) with matching contributions? If so, this can be a powerful tool to help you save for retirement.

Not only does a 401(k) help lower your taxes (since this money comes out of your salary before taxes are deducted), your employer’s matching contributions are essentially free money and can provide a nice boost to your retirement savings.

If you’re not currently taking full advantage of matching funds, you may want to adjust your contributions to help ensure you’re making the most of this benefit. And if a windfall comes your way, you may want to deposit it right into your account.

Start or Fund an IRA

What do you do if you don’t have a company plan or you’ve hit your contribution limit there? You might consider using your new influx of cash to open up (or add to) an individual retirement account (IRA).

While retirement may feel a long way off, starting early can be a smart idea, thanks to the magic of compound earnings (that’s when the money you invest earns interest/dividends, those earnings then get reinvested and also grow).

There is also a possible immediate financial benefit to investing in an IRA: Just as with a 401(k), your IRA contributions can possibly reduce your taxable income, which means that any money you put in this year can lower your tax bill for this year.

You’ll want to keep in mind, however, that the federal government places limitations on how much you can contribute each year to retirement funds.

Recommended: IRA vs. 401(k): What’s the Difference?

4. Explore Additional Investment Options Money

A little windfall can offer a nice opportunity to buy investments that can possibly help you create additional wealth over time.

Stock Market Investments

For long-term financial goals (outside of retirement), you might consider opening up a brokerage account. This is an investment account that allows you to buy and sell investments like stocks, bonds, and funds like mutual funds and exchange-traded funds (ETFs).

A taxable brokerage account does not offer the same tax incentives as a 401(k) or an IRA but is much more flexible in terms of when the money can be accessed.

Though all investments come with some risk, generally the longer you keep your money invested, the better your odds of overcoming any down markets. Your investment gains can also grow exponentially over time as your earnings are compounded. Worth noting: Past performance doesn’t guarantee future return, and while your money may be insured against broker-dealer insolvency, it is not insured against loss.

While investing can seem intimidating, a financial planner can be a helpful resource to help you create an investment strategy that takes into consideration your goals and risk tolerance.

Real Estate Investments

Another option might be to look into real estate investments. One possibility: REIT investing, which stands for Real Estate Investment Trust. This is a kind of company that operates or owns income-generating properties.

You can buy shares of REITs as a way of investing in different aspects of the real estate market, and you can do so for small amounts vs. buying an actual property. In this way, REITs can make it possible for people to affordably invest in real estate projects, including those involving large-scale construction.

5. Save for Future Goals

Still wondering what to do with extra money? If you already have a solid emergency fund and your retirement account is growing nicely, you may want to think about what large purchases you are hoping to make in the next few years. That could be buying a new car, accruing a down payment for a home, doing a renovation project, or going on a family vacation.

A lump sum of cash can be a great way to jumpstart saving for your goal or, if you’re already saving, to quickly beef up this fund.

Short-Term vs. Long-Term Goals

When thinking about goals, it can be helpful to divide them into short-term goals and long-term ones. Typically, short-term goals are ones you want to achieve within a year, while long-term ones are those that have a longer runway to save.

So a short-term goal might be saving for a vacation next year, and a long-term one could be accumulating enough money for a down payment on a property.

Creating a Savings Plan

For things you want to buy or do in the next few months or years, consider setting up multiple bank accounts so you have a separate savings account that is safe, earns competitive interest, and will allow you to access the money when you’ve reached your goal.

Some good options include a high-yield savings account at a bank, an online savings account, a checking and savings account, or a certificate of deposit (CD).

Keep in mind, though, that with a CD, you typically need to leave the money untouched for a certain period of time or else pay a penalty.

The options directly above may also be a good place to put your extra money as you save up for a longer-term goal. But you might also look into whether there are suitable investments (see #4 on this list) that involve a bit more risk but offer potentially higher reward.

The Takeaway

Wondering what to do with a lump sum of extra money is a good problem to have.

Some options you might want to consider include: setting up an emergency fund, paying down high-interest debt, starting a savings account earmarked for a large purchase, or putting the money into your retirement fund or another type of long-term investment.

If you are looking for a place to bank your funds for a future goal, compare account features, such as the annual percentage yield (APY) offered and fees assessed.

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.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.

---

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 http://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.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOBK1023033

Read more

You may hit one of those life moments where you need a bundle of cash and fast. Maybe you have been hit with a major car repair bill, you want to attend a destination wedding, or you’re motivated to pay off your student loans ASAP.

Whatever the situation, there are smart strategies that will help you accrue that money as quickly as possible. Tactics like trimming your expenses, selling your unwanted stuff, and bundling your insurance can help you meet a savings goal at top speed.

In this guide, you’ll learn those techniques and more to help you finance whatever is most urgent on your financial to-do list.

How to Save Money Fast 10 Ways

One person’s goal for saving money quickly might be, “I need $500 by the end of the week.” For another, it could be, “I’m going to stash away $10,000 within the next year.” Wherever you may fall in terms of your short-term financial goals, these 10 tactics will help you save money daily and achieve your aspiration.

1. Getting Rid of Unnecessary Expenses

In an age of automated billings and subscriptions, it is easy to lose track of what exactly you’re paying for each month. It is entirely possible that you’re paying for something you’re not even using.

In order to pinpoint any potentially unwanted expenses, review a month’s worth of auto debits from your bank account. You may find that you’re paying $5 a month for a digital magazine you no longer read or that you could save on streaming services by dropping one or two you don’t watch but are paying $15 a month for.

Once you’ve canceled, you could reroute the money you would have spent directly into your savings account. While $20 or $30 a month saved on subscriptions might not seem like much, even small amounts can quickly add up over time. In combination with other savings techniques, this might help you build your savings fast.

2. Negotiating and Automating Your Bill Payments

Did you know that some companies offer discounts when you set up automatic bill payments, or autopay? This means connecting a bill directly to your bank account and allowing the company to automatically withdraw the amount of the bill on the due date.

Some companies offer a discount in these situations because automatically debiting your account gives the company assurance that the bill will be paid on time. The bonus for you is double: You might get a little discount on your bills, and you won’t have to remember to manually pay the bill each month.

Autopay might also help you avoid unexpected late fees, which in turn could help you build up savings faster. There might be some downsides to autopay, however. If you set up an autopay agreement but then don’t have enough money in your account to cover the charge, you might end up with a canceled subscription or overdraft or NSF fees from your bank.

3. Carefully Considering Big Decisions

Yes, it’s hard to save money, but learning to be mindful about your purchases can help. Instead of buying something as soon as you want it, you might want to sleep on it overnight and see if you still want it the next morning. Giving yourself more time before pulling out your credit card could help you determine if you really need the item or if you were just caught up in the excitement of shopping.

This can be especially useful when making big purchases because they might require more research anyway. For example, if you’re buying a couch and you fall in love with a sectional sofa, waiting overnight might give you a chance to read reviews, double-check the measurements of your space, and look to see if there are similar styles available online that might cost less.

Some people wait longer still. They use the 30-day rule, which involves writing a note in your calendar for 30 days after you see the item you want. If you still are determined to buy it when the calendar alert pops up, then you can probably feel confident that it isn’t an impulse buy and go for it.

By delaying purchases this way, you may be able to avoid compulsive shopping and save funds, which can go towards your savings goal.

4. Considering a Spending “Fast”

Ready to learn another way to save money quickly? Some savers find that they can save money fast with a challenge: They plan a day or two every week where they eliminate all unnecessary spending. That’s what’s called a “fast”: You avoid spending money, similar to the way a dietary fast means you eat nothing.

For example, if you decide to do a two-day spending fast, you might decide that on Tuesdays and Wednesdays you don’t spend any money other than what it costs to commute to work. That means that on those days, you might choose to forgo your daily pitstop at the coffee shop, a lunch from the salad place (you’d bring food from home), or ordering the brand new book you’ve been waiting to read.

Planning to not spend could help you reign in unintentional spending. Chances are that you barely think about that $4 you spend at the coffee shop, but if you give it up twice a week, that’s $8 that could be going into your savings.

If you save an average of $40 a week with a two-day fast, that could add more than $2,000 to your savings in a year.

5. Putting Your Accounts to Work

Choosing the right account for your money can be a great way to save funds fast. Some checking accounts charge monthly or annual account maintenance fees, with little to no interest.

Savings accounts might offer higher interest rates than a checking account, but the reality is that the average interest rates on a standard savings account can still be very low. Instead, you might shop around for a no-fee, high-interest account to make your money work harder for you. These kinds of accounts are often found at online vs. traditional banks.

If you currently have, say, $5,000 sitting in a checking account, earning no interest, if you were to put it in a savings account at 4.50% interest compounded daily, you’d have an extra $230.12 a year later, with no effort on your part.

6. Bundling Your Insurance

Insurance can be one of those “set it and forget it” expenses. You might buy a policy and then never really focus on the cost of the premium again.

Many insurers, however, will reduce your rate if you give them more of your business. Typically, this means having your auto and home insurance with the same company. You might be able to save a chunk of change and put it towards your savings goal.

It can also be wise to review your insurance annually. You might be paying for coverage you don’t really need.

7. Starting a Side Hustle

Sure, cutting back on your spending is one way to save money fast. But so is bringing in more cash. Many people find starting a side hustle is a good way to bring in more income. This could mean anything from selling your nature photography on Etsy or providing social media services to a local business or two.

While one of the key benefits of a side hustle is the money it can bring in, you also might find it personally rewarding and even an entry to a new full-time career.

8. Saving on Essentials

Looking for another idea for how to save money fast? There’s no doubt that many things you spend money on are necessities. Food, personal-care items, and gas for your car. But there are plenty of ways you can trim those costs.

•   To save on food, you could do some meal-planning so you can more efficiently manage your grocery budget. Using up what you buy vs. wasting food can help you save a bundle towards your goals.

•   You could get a gas card to save at the pump. There are also plenty of apps that point you towards the cheapest gas stations in your area.

•   Joining a warehouse or wholesale club can help you save on your typical purchases. If you find the quantities too large (say, a 12-pack of shampoo), partner up with a friend of two to share the wealth.

9. Selling Your Stuff

If you’re trying to save money fast, you might be able to “find” a pile of cash by selling your used items that you no longer need. This could mean anything from selling gently worn clothes online (say, on Poshmark or thredUP) or IRL (at Buffalo Exchange perhaps); putting functional electronics up for sale on eBay; or offering items on places like Nextdoor or Facebook Marketplace.

Just be cautious as there are scammers who try to prey on direct sellers.

10. Checking Your Tax Withholding

Here’s another idea for accumulating money quickly: Double-check your tax withholding. If you get a sizable tax refund every year, you may feel as if you are getting “free money.” Not at all! That’s actually your hard-earned money that you overpaid to the government and are now getting back. It could have been earning interest in the bank rather than being whisked out of your paycheck.

If you typically receive a refund, tweak your withholding, and then put the additional money that stays in your paycheck into your savings.

Is Saving Money Fast Realistic?

Saving money fast can be realistic, as long as you keep in mind your income and the fact that most financial experts say to save 20% of that figure. That’s one of the principals of the popular 50/30/20 budget rule. Fifty percent of your money goes towards essential spending, 30% goes to discretionary expenses, and 20% gets socked away as savings.

So, if you earn $100,000 a year and have an important goal in mind, such as the down payment for a house, you might be able to stash $20K in a single year. That might involve pausing your retirement savings for a year as you go all-in on accumulating as much cash as possible for a home purchase.

Also, if you are able to bring in more income (whether by selling your stuff, starting a side hustle, or via passive income ideas), that can accelerate your savings as well.

Keeping Your Savings Safe With SoFi

Whichever strategies (or combination of tactics) you try, it’s important to find the right banking partner where your money can grow. You’ll likely want a financial institution with Federal Deposit Insurance Corporation coverage, low or no fees, and a healthy interest rate.

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.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.

FAQ

How can I save $1,000 fast?

To save $1,000 fast, you can try a combination of such techniques as trimming subscriptions, essential, and discretionary spending; bundling insurance to cut costs; selling your unwanted items; and/or using the 30-day rule.

How to save up $10,000 in 3 months?

To save $10,000 in three months, you need to save $3,333 after-tax dollars per month. Your income and expenses will influence how doable this is. Some ways to save this amount include going on a spending fast (meaning you eliminate all possible discretionary spending) and starting a side hustle to bring in more money.

How to save $5,000 ASAP?

To save $5,000 ASAP, you can try cutting your expenses, avoiding big purchases, making sure your money is earning a good interest rate, and bringing in more cash via a side hustle.

---

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 http://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.

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.

SOBK0923005

Read more

An emergency fund can help you cover sudden and unexpected expenses. If your company downsizes, or you get in a car accident that isn’t covered by insurance, having money set aside to help pay the bills could keep costs from spiraling out of control.

But how big of an emergency fund do you need and does it need to be in liquid assets like cash, or should you invest your emergency fund?

Read on to learn more about whether investing an emergency fund is a smart idea.

Should You Invest Your Emergency Fund?

The default answer, historically, has been no when it comes to investing an emergency fund, because of the potential risk and the likelihood that you won’t be able to access it when you need it. But, increasingly, investing your emergency fund is becoming a viable option — particularly if your situation makes you less reliant on cash at hand.

So, should you invest your emergency fund? There are a number of reasons you might want to consider doing so. For instance, the returns can add up and if you wait, you could be leaving money on the table.

Here are some of the pros and cons to investing an emergency fund:

The Pros of Investing an Emergency Fund

You Could Make a Higher Return on Your Money

The number-one reason to park your emergency fund in an investment account is the potential for a higher return on your money than in a savings account.

For instance, you could put your emergency fund into a money market account or high-yield bank account that will earn you a higher rate of interest (currently more than 4% APY) than a standard bank account.

You Can Still Access Your Funds Easily

There are a number of investment options, such as a money market account, or high-yield bank account ,or even a Roth IRA, that allow you to withdraw your money if you need it.

For instance, with a Roth IRA, you can withdraw contributions at any time without paying a penalty, unlike a traditional IRA that may impose a 10% penalty on early withdrawals.

The Cons of Investing an Emergency Fund

It Might Take You Longer to Get Your Money

You might have to go through extra steps to get your money. Even if you temporarily put an emergency expense on a credit card and then pull money out of a money market account to pay off the credit card when it’s due, that’s still less accessible than simply having the money in your bank account.

You Could Risk Losing Money

If you invest your money — whether it’s in a mutual fund or pick and choose your own stocks — it always carries some risk. The market can dip at any given point, which can be a problem if your investments dip at the same time you need to tap into them.

If you’re considering investing your emergency fund, then it can be helpful to understand your options and the basics of investing.

This chart gives you a side-by-side comparison of the pros and cons of investing an emergency fund.

Pros	Cons
You could earn a higher return of your money by investing it.	You risk losing your money if the stock market drops.
The money can be easily accessible if you invest in a money market account or high-yield savings account.	It can take you longer to get your money and may involve an extra step or two.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

3 Options for Investing An Emergency Fund

Should I invest my emergency fund? This is a question you’ll need to consider carefully. Be sure to weigh the benefits and drawbacks.

Part of the decision to invest your emergency fund will be finding an appropriate account. There are a few options that could work, depending on your financial situation.

High-yield savings account

These accounts come with a higher APY — generally, more than 4% right now — than traditional bank accounts. You can easily access your money from an online high-yield savings account, just as with any other bank account.

Money Market Account

Money market accounts earn interest and are essentially a combination of a savings account and a checking account. They tend to be low risk and may allow you to access your money by writing a check or using a debit card.

Roth IRA

With a Roth IRA, you can contribute money (up to $6,500 in 2023) and withdraw your contributions (but not your earnings) without penalty. The contributions you make to an IRA are taxable.

And remember, the general rule of thumb when it comes to investing is, the higher the investment risk, the higher the potential for return — but a risky investment could be even riskier if you intend to use the money as an emergency fund.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

Investing With SoFi

If you don’t want to invest your entire emergency fund, you could consider saving a portion in a traditional savings account and investing another allotted amount. That way, you could rely on cash for immediate emergencies and have a backup of invested funds you can rely on in the event that something major, and more expensive, happens.

What’s most important is that you have a plan to deal with emergencies — because like it or not, eventually, you’ll likely have some unexpected event or cost that you need to cover.

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), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

Is it wise to invest your emergency fund?

Whether to invest your emergency fund or not is a personal decision that you should consider carefully, since investments can be risky. One thing to keep in mind: Your funds should be easily accessible so that you can tap into them quickly if an emergency happens. Think about possible investments that offer liquidity, such as high-yield bank accounts and money market funds.

How much of my emergency fund should I invest?

Experts advise having at least three to six months’ worth of expenses on hand where you can access them easily, such as in a bank account. Anything more than that you may want to consider investing. But investing is a personal choice and one you should consider carefully, and it will also depend on your specific financial situation.

What should an emergency fund not be used for?

It’s best to use an emergency fund for urgent or sudden expenses that are necessary, such as emergency car or home repairs. You should not use an emergency fund for frivolous expenses or things you simply want, like a fancy vacation or new clothes.

---

SoFi Invest®
SoFi Invest refers to the two 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 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, including state licensure of SoFi Digital Assets, LLC, 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. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Bank, N.A.

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

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

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

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

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

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

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

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

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.

SOIN0523011

Read more