What Are Intermediary Banks? What Do They Do?

When money moves from one bank to another, you may think it travels in one speedy step, but in truth, an intermediary bank may be involved. When funds move between a sender and a receiving account at the same bank, the money typically moves directly. But if the money is moving from one bank to another, the processing may be more involved and an intermediary bank is likely needed.

As the name implies, an intermediary bank is a bank that acts as a go-between, connecting two different banks. Smaller banks require intermediary banks or correspondent banks to facilitate transactions with other banks, while larger banks may have enough connections to serve as their own intermediaries.

Generally, retail bank customers do not have to worry about finding intermediary banks — instead, they work behind the scenes with the banks themselves.

Key Points

•   An intermediary bank acts as a go-between, connecting two different banks for transfers and transactions.

•   Intermediary banks are commonly used for international wire transfers and handling multiple types of currencies.

•   Retail bank customers usually don’t need to find intermediary banks as they work behind the scenes.

•   Intermediary bank fees are charged for their role in facilitating transactions, and the fees vary.

•   Intermediary banks are necessary when transferring money between two banks that don’t have an existing relationship.

What Is an Intermediary Bank?

An intermediary bank is a third-party bank that helps facilitate transfers and transactions between two other banks. Often, intermediary banks are dealing with international transactions such as wire transfers between different countries. If you are sending money to others abroad, your bank may end up using an intermediary bank.

You may not be aware of how the intermediary banks work behind the scenes, but be aware that you may be charged additional fees for the work that intermediary banks are doing.

How Do Intermediary Banks Work

If you are doing a bank account transfer, especially to an account in a different country than the one where your own bank is located, it is likely that an intermediary bank will be involved. During a monetary transfer between accounts at different banks, an intermediary bank works in between the sender’s bank account and the account at the receiving bank.

Here’s how the transaction might work:

•   A person with an account at Bank A wants to send money to another person, a client with an account at Bank B.

•   However, Bank A doesn’t have an account or banking relationship with Bank B.

•   Bank A and Bank B do, however, each have an account with Bank C.

•   Funds can be funneled through Bank C, the intermediary bank, to make the transaction successful.

Intermediary Bank Example

Intermediary banks are like an international travel hub through which transfers flow. They are especially important for fund transfers made via the SWIFT (Society for Worldwide Interbank Telecommunications) network.

Here’s a simple example to show how intermediary banks usually work. Let’s say that John is an importer-exporter based in the United States who banks at the Acme Bank. He needs to make a payment to Angela, a supplier of his based in Germany, who banks with Big Bank. He gives Angela’s bank’s information to his bank to make the transfer.

If Acme Bank does not have an account at or a relationship directly with Big Bank (Angela’s bank), it will use an intermediary bank; let’s call it Central Bank. This intermediary bank will have accounts at both Acme Bank, John’s bank in the United States, as well as Big Bank, Angela’s bank in Germany.

Central Bank can transfer the money between the two banks. It will likely charge a fee for their role in the transaction. The transaction will be completed by the three banks working together.

When Is an Intermediary Bank Required?

Any time that money is being transferred between two banks that do not have an existing relationship, an intermediary bank is usually involved. Whether you have a single account or a joint bank account, when you transfer money to a user at a different bank (especially internationally), an intermediary bank will generally be required.

This is likely to occur as a commercial banking transaction. In other words, the use of an intermediary bank is not something the consumer has to initiate.

The Need for Intermediary Banks

Intermediary banks are important as part of the global financial system. Since banks generally do not have accounts with every single bank around the world, there is a need for intermediary banks to help facilitate monetary transfers.

The good news is that you typically do not have to worry about finding an intermediary bank yourself. Instead, the banks themselves have intermediary banks that they use to transfer money between other banks.

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When Will an Intermediary Bank Be Involved in a Transaction?

An intermediary bank will usually be involved whenever there is a need to transfer money between accounts at two separate banks. If the sending bank does not have its own account with the receiving bank, it will usually use an intermediary bank.

Even if a business thought it could get around the need for intermediary banks (and save money; see more on fees below) by opening multiple bank accounts, its main bank would still probably use an intermediary bank at some point to transfer funds on its behalf.

Difference Between Intermediary and Correspondent Banks

When considering how bank transfers work, you may hear two different terms: intermediary banks and correspondent banks. Depending on which part of the world you’re in, there may or may not be a difference between the terms “intermediary bank” and “correspondent bank.”

•   In some countries, the terms correspondent banks and intermediary banks are used interchangeably.

•   In the U.S. as well as in a few other countries, correspondent banks are often ones that handle multiple types of currencies.

•   Intermediary banks may be smaller banks that only typically handle transactions in one currency.

What Are Some Typical Intermediary Bank Fees?

Because intermediary banks typically do not work directly with consumers, they also do not regularly post a breakdown of the fees they charge. Instead, you can look at your own bank’s fees for financial transactions such as domestic wire transfers or international wire transfers.

The fees that your bank will charge you for these transactions generally include the fees that your bank will have to pay to the intermediary bank it uses. These bank fees can range anywhere from $15 to $50 or more.

Recommended: How Do Banks Make Money?

Who Pays for Intermediary Bank Fees?

Intermediary bank fees are paid in different ways, depending on the specific transaction. Let’s say Person A is sending money to Person B. There are three ways the fees may be handled, depending on what the parties involved agree upon:

•   “OUR” is the code used when the sender will pay all fees. An average fee for an international transfer can be about $70.

•   “SHA” is the code indicating shared costs. Person A will likely pay their bank charges (perhaps $15 to $30 on a typical transaction) and then Person B pays the rest: their bank’s and the intermediary bank’s charges.

•   “BEN” indicates that Person B, the recipient of the funds, will pay all charges.

The Takeaway

If a bank customer wants to send money to someone at a different bank and the two banks involved are not connected, an intermediary bank typically plays a role. Intermediary banks work with other banks to help facilitate monetary transactions such as domestic and especially international wire transfers. You, as a consumer, usually do not have to find or hire your own intermediary bank. However, your bank will likely pass along any intermediary bank fees if you initiate a transaction that requires one.

What about your everyday, basic banking, though? If you’re looking for great interest rates while keeping flexible access to your money, why not open a bank account with SoFi? When you open our Checking and Savings with direct deposit, you can earn a competitive APY and pay no fees.

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

FAQ

What is an example of an intermediary bank?

An intermediary bank is one that moves funds between other banks. They do not typically work directly with consumers, so you likely neither need to know their names nor contact them. For instance, Bank of America might offer this service, or it might be provided by a foreign bank with which you are not familiar.

Why do you need an intermediary bank?

Intermediary banks are usually used when someone needs to send money to a person with an account at a different bank. An intermediary bank can serve as a middleman and facilitate the transaction. One common example is sending a wire transfer, especially internationally.

How do you find an intermediary bank?

In most cases, you will not need to find your own intermediary bank. The bank you use will have its own intermediary bank that it collaborates with as needed. Depending on what kinds of financial transactions you need, in some cases, you might also want to consider alternatives to traditional banks for international transfers.


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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.

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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.


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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.

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How Much Retirement Money Should I Have at 40?

At some point or another, you’ve probably wondered if you have enough money for the future and asked yourself, “how much retirement should I have at 40?”

It’s an important question. Hopefully, you’re already saving some money for retirement. However, you might not be saving enough to retire when you want.

There are different ways to save money for retirement. The sooner, the better—so that it can start adding up. Here’s how to maximize your retirement savings at age 40 and beyond.

Understanding Your Retirement Savings at 40

Now, to answer the question: How much money should I have saved by 40? A general rule of thumb recommended by many financial advisors is to have about three times your annual salary saved in retirement money by the time you’re 40.

Knowing this general benchmark is helpful for your retirement planning.

What Does the Average 40-Year-Old Have Saved?

According to a recent study from Northwestern Mutual, people in their forties say they currently have $77,400 saved for retirement. However, that’s a long way from the amount they expect to need for retirement, which is $1.28 million.

How Your Retirement Savings Compare to National Averages

Compared to the guideline of having three times your annual salary saved by the time you’re 40, if you only have the amount reported by the respondents in the Northwestern study — $77,400 — you’ve got some work to do. The good news is, you’ve probably got around 20 years or more to help get where you need to be by the time you’re ready to retire.

Factors Influencing Your Retirement Savings So Far

As you reach your 40s, it’s likely that your income is increasing, but so are the obligations that are tied to your money.

You might be saving money for your kids’ college; you probably have mortgage payments and existing debt, including your own student loans; you may even be taking care of aging parents. It’s a lot of financial multitasking and you have to prioritize.

In addition to all that, inflation over the past couple of years has made many prices higher, which could increase your cost of living. Overall, prices are 13% higher than they were two years ago, according to Consumer Price Index data. You might also be dealing with unemployment or a job layoff. All these factors can make saving for retirement more challenging.


💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

The Right Retirement Savings Path for You

To map out a savings plan that makes sense, you can start by estimating how much money you’ll need for retirement. It’s also a good idea to look at your goals. That includes figuring out when you might want to retire, what kind of lifestyle you want in retirement, and how much money you might have coming in during your golden years. That will help you determine how much you need to save.

Projecting Your Retirement Needs

Start by thinking about the kind of lifestyle you’d like to have in retirement. Will you move to a smaller home? If so, you may save money on housing costs. On the other hand, if you’d like to travel frequently, your expenses may increase.

Also, estimate what your budget as a retiree might be. Include housing, utilities, insurance, food, transportation, clothes, and so on. And don’t forget entertainment expenses like movies, concerts, and meals out.

Next, factor in healthcare expenses. Health-related costs can be significant in retirement, depending on your medical situation.

Retirement Savings Rate: How Much of Your Income to Save

While each person’s situation and needs are unique, there are some general guidelines that can help project your financial needs during retirement.

For instance, according to Fidelity, you should try to save 15% of your pre-tax income each year if you plan to retire at age 67.

Another rule, known as the 80% rule, says you should have enough money by the time you retire to cover 80% of your pre-retirement income.

Milestones for Retirement Savings By Decade

As discussed, when you plan to retire and what kind of lifestyle you’d like to have in retirement are two of the main factors that affect how much money you’ll need to save. The milestones below are general, but they will give you an idea about how much to save at various ages.

Retirement Savings By:

•  Age 30: 1x your annual income

•  Age 40: 3x your annual income

•  Age 50: 6x your annual income

•  Age 60: 8x your annual income

•  Age 67: 10x your annual income

Maximizing Your Retirement Savings in Your 40s

If you haven’t saved 3 times your annual income by your 40s, or even if you have, here are some ways to make the most of your retirement funds in this decade.

Benefits of a Roth 401(k) and When to Consider It

Some 401(k) plans give you the opportunity of choosing a Roth 401(k) to save for retirement. If your employer offers such a plan you may want to consider it.

The difference between a Roth 401(k) and a traditional 401(k) is that with a Roth 401(k), contributions are made using after-tax funds. That means they aren’t tax deductible, but the withdrawals you make in retirement are tax-free. In addition, you don’t pay taxes on your annual investment earnings in a Roth 401(k). With a traditional 401(k), the contributions you make are tax deductible, however, you will pay taxes on your retirement withdrawals. So a Roth 401(k) can be beneficial if you expect to be in a higher tax bracket by the time you retire.

The good news is, you can contribute to both a Roth 401(k) and a traditional 401(k) as long as your plan allows it. Just know that there are yearly limits on your contributions. Across both plans, individuals under age 50 can contribute $22,500 annually in 2023.

If you have a traditional 401(k), there are a number of strategies to max out your 401(k) that are worth looking into. For example, it makes sense to contribute at least enough to qualify for any employer matching that your company offers. Why lose out on the “free” money your employer is willing to contribute to your retirement savings?

Catch-Up Contributions: Leveraging Them When the Time Comes

Once you reach age 50, you can make catch-up contributions to your 401(k) plan, as long as your plan allows them, which could help you save even more for retirement. In 2023, the catch-up contribution is an additional $7,500. That means, in total, individuals 50 and older could contribute up to $30,000 to their 401(k) in 2023.

Knowing about catch-up contributions when you’re in your forties could help you plan and prepare for them when you reach 50. Catch-up contributions can help you make the most of your retirement plan.

Investment Strategies for Mid-Career Savers

There are many other ways to save for retirement, even beyond the employer-sponsored 401(k) and Roth 401(k).

Some people choose to put their retirement savings in more than one type of account. This is useful if you want to set aside more than the yearly contribution limits on 401(k) plans. In that case, it might make sense to leverage a traditional IRA or a Roth IRA to save beyond the 401(k) limits, as long as you meet the necessary criteria.


💡 Quick Tip: The advantage of opening a Roth IRA and a tax-deferred account like a 401(k) or traditional IRA is that by the time you retire, you’ll have tax-free income from your Roth, and taxable income from the tax-deferred account. This can help with tax planning.

The Role of Expenses in Retirement Planning

Figuring out how much your retirement living expenses will be is important for calculating how money you’ll need to save. These are some of the things you may want to consider and budget for.

Emergency Savings vs. Retirement Savings

Your retirement savings are extremely important. However, if you don’t have an emergency fund that can cover three to six months’ worth of living expenses, consider putting that at the top of your priority list.

Why? While retirement is still likely to be years away if you’re 40 now, an emergency could happen at any time. For instance, you may be faced with an unexpected medical procedure that you’ll need to pay for if insurance doesn’t cover it all. Or your heater might break in the middle of winter and need to be replaced. If you don’t have the emergency funds to cover these things, you risk taking on debt. And that could in turn limit your retirement savings as you work to pay off that debt.

Of course, if you can afford to contribute to both an emergency fund and your retirement savings, by all means, do so.

Planning for Healthcare Expenses in Retirement

As people grow older, their healthcare needs and costs typically increase. For many, healthcare can be one of the biggest retirement expenses.

Fidelity estimates that the average person may need $157,500 to cover healthcare costs in retirement. If you have a high-deductible health insurance plan, you might want to look into a Health Savings Account (HSA), which could potentially help you save money to cover some healthcare costs.

Incorporating Home Costs Into Retirement Savings

Housing costs are another major retirement expense. You may have mortgage payments, homeowner’s insurance, and home maintenance and repairs to pay for. If you rent, you’ll have to cover your monthly rental fee plus renters’ insurance.

Additionally, where you live — the city and state — can impact how much you pay for housing. In general, living on the coasts can be more expensive. You may want to take the cost of living into consideration when you’re thinking about where you want to live in retirement.

Family and Retirement: Balancing the Present and Future

Of course, along with saving for retirement, you have present-day expenses and events to pay for as well. This includes important family milestones, such as college and a child’s wedding. Fortunately, with proper budgeting and planning, it is possible to help cover these expenses and save for retirement at the same time.

Budgeting for College Savings While Prioritizing Retirement

To keep building a retirement nest egg while saving for college for your kids, consider some college-savings plans. One good option to consider: a 529 plan that you fund with after-tax dollars. You can contribute to the plan on a regular basis, or whenever you have extra money, and family members and friends can contribute as well. For instance, instead of birthday gifts, ask loved ones to contribute to your child’s 529 instead.

Virtually every state offers a 529 plan and you can shop around to find one that has the best tax benefits and lowest costs. Open the plan as early as you can when your child is young so that the money invested has more time to grow.

Weddings and Other Major Family Expenses

If you’d like to help pay for your child’s wedding, you could put some money in a savings or investment account so that it can grow over time. If the wedding is coming up relatively soon, you could put your money into a high-yield savings account, for instance, to get a higher interest rate than you’d get from a regular savings account. If the wedding is farther in the future, you might want to invest in mutual funds or a stock index fund, which could deliver more growth.

Expert Strategies to Increase Retirement Savings

There are a number of smart ways to maximize your savings and be on track for retirement. Here are a few strategies experts advise.

Salary Negotiations and Their Long-Term Impact on Savings

If it’s been a while since you’ve received a raise, this may be a good time to ask for one. By age 40, you’ve probably developed skills that make you valuable to your employer.

If you need some incentive for negotiating for a higher salary, consider this: Even an extra $100 a week invested for the next 20 years with a 10% annual return could give you approximately $300,000 more in retirement savings.

Building a Solid Financial Foundation with a Six-Month Emergency Fund

As we discussed earlier, having an emergency fund is critical for any unexpected expenses that arise. Ideally, it’s wise to have six months’ worth of expenses saved up. That can help tide you over in case of job loss or some other significant event that affects your income.

You can open a high-yield savings account for your emergency fund to help it grow. Consider automating your savings to make sure you’re contributing to your emergency fund regularly.

Then, once you’ve reached six month’s worth, you can allocate the money you had been contributing to the emergency fund to your retirement savings.

Why Prioritizing Roth Retirement Accounts Can Pay Off

Investing in a Roth IRA can be helpful if you want to withdraw money in retirement without paying taxes on it. After-tax accounts can be appealing to individuals who plan to achieve financial independence at a younger age and retire early. Unlike qualified plans, which place penalties on withdrawing funds before a certain age, an after-tax account is a pool of money that you can withdraw from without having to worry about penalties if you access the account before age 59 ½.

Even if you wait until age 67 to retire, if you expect to be in a higher tax bracket at retirement, a Roth IRA can make sense since you won’t have to pay taxes on retirement withdrawals.

For 2023, you can contribute up to $6,500 annually in a Roth IRA. Individuals 50 and older can contribute $7,500. That said, there are income limits on Roth IRAs. The amount you can contribute starts to phase out if you earn more than $138,000 as a single tax filer, or $218,000 for married couples who file jointly.

The Takeaway

While there are conventional rules of thumb as to how much money you should have saved by 40, the truth is everyone’s path to a comfortable retirement looks different. One piece of advice is universal, however: The sooner you start saving for retirement, the better your chances of being in a financially desirable position later in life.

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).


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



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.

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Routing Number vs Account Number: When to Use and How to Find

Routing Number vs Account Number: How to Find Both

If you’re looking for your bank routing and account numbers, they are likely easier to find than you may think: You can locate them on your checks or by logging into your financial institution’s app, for instance.

That said, you probably don’t want to broadcast these digits to too many people. Your routing and account numbers are the keys to your banking kingdom.

Your account’s routing number designates which financial institution holds your money, while your account number identifies your own unique checking or savings account. As you go about your financial business, you will require these numbers for many financial transactions, such as enrolling in direct deposit at your workplace to signing up for online bill pay.

Key Points

•   A routing number is a nine-digit code that identifies a bank or credit union.

•   An account number is a unique identifier for your specific bank account.

•   Routing numbers are used for various financial transactions like direct deposit, bill pay, and wire transfers.

•   Account numbers are private and should be kept secure to prevent fraud.

•   You can find your routing and account numbers on checks, through online banking, or by contacting your bank.

What Is a Routing Number?

A routing number is a sequence of nine digits that identifies a bank or credit union, and each banking institution has a unique number. Here are some facts about routing numbers and how they work:

•   A routing number is also sometimes referred to as an ABA number, in reference to the American Bankers Association, which assigns them. Routing numbers are only issued to a federal or state-chartered financial institution that is eligible to maintain an account at a Federal Reserve Bank.

•   Your bank’s routing number and ACH routing number may or may not be the same digits. Check with your bank to be sure.

•   The routing number required for making a wire transfer is probably not the same as the routing number that is printed on your checks, however. That number can be found online or by contacting your bank.

•   A small bank may only have one routing number, while a larger financial institution may have several (they typically vary by region or state).

Routing numbers are generally required when reordering checks, paying bills, setting up direct deposit, or making tax payments. Making sure you have the right digits will help ensure smooth transactions.

Recommended: How to Transfer Money From One Bank to Another

What Is an Account Number?

While the routing number identifies the financial institution where your account is held, the bank account number represents your specific account. While anyone can find your bank’s routing number, your account number is private; that’s a key difference in routing vs. account numbers. Here are some other points about account numbers to know:

•   Typically between 10 and 12 digits, your account number acts as a road map of sorts for your bank, letting them know where to deposit or withdraw money.

•   If you have two different accounts at the same financial institution, you will have two different account numbers. The routing number for these accounts, however, will be the same.

•   Because your account number can unlock access to the funds in your account, it’s critical that you keep it safe.

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When You’ll Need A Routing Number or Account Number

You’ll need to know your account number and, in many cases, also your routing number for a variety of everyday financial transactions. These may include:

•   Setting up direct deposit of your paycheck

•   Setting up autopay

•   Making a withdrawal

•   Depositing cash or checks into your account

•   Filling out a rental application

•   Linking external bank accounts

•   Filling out a loan application

•   Scheduling payments (such as ACH (automated clearing house) payments from vendors you do business with

•   Sending or receiving a wire transfer

•   Paying a bill online

•   Sending or receiving money to family and friends

•   Requesting a stop payment on a check

Finding Your Bank Routing and Account Numbers

Here are some ways to find your bank routing and account numbers. These three methods ought to get you the information you need:

Contacting Your Bank

If you need your bank routing and account numbers, you might call or chat online with your bank’s customer service representative to see if they can provide the information. Or you could visit a local branch if you bank with a brick-and-mortar financial institution.

It’s worth mentioning that your financial institution’s routing number is public information and should be easy to find online. But the account number, as mentioned above, is private. You will likely have to provide identifying details to prove you are who you say you are in order to gain access to this number.

Accessing Your Online Account

If you log into your bank account online, you should be able to get your banking details. Your account number may be encrypted (and you can only see the last four digits), in which case you may be able to get the full number by downloading a recent bank statement. Or there may be a prompt you can click in order to see the full number.

Looking at a Check

You can find your routing number and account number printed on the bottom of your checks.

You’ll see three groups of numbers. Typically, reading left to right, the first number (usually nine digits) is the routing number. The next group of numbers (usually 10 to 12 digits) is generally the account number. The third is usually the actual check number.

Smart move: When you have obtained and are ready to input your routing and account numbers for a financial transaction, it’s a good idea to check your numbers at least twice to make sure you get them exactly right. This will ensure a seamless transaction that avoids delays or any associated bank charges stemming from the funds ending up in an incorrect account.

check image with numbers

Protecting Your Routing and Account Numbers

Although anyone can locate your bank’s routing number, your account number is not public information. Just like you are mindful about who sees your Social Security number, the same goes for your bank account number.

To avoid potential bank fraud, it’s wise not to share your account number with any person or business unless you absolutely need to, and also to keep your checkbook in a safe place. Any old checks should be shredded before they get discarded. Also wise: not sharing pictures of checks you’ve written on social media, even if it is for the first payment on your dream car.

You’ll also want to make sure your bank account password is secure. You can do this by using a mix of numbers, letters, symbols, upper and lower case letters, and not using any personal information someone might find on social media, such as your birthdate or pet’s name. This is an important step in keeping your account and your mobile banking secure.

Recommended: What Can Someone Do With Your Bank Account and Routing Number?

The Takeaway

Your account and routing numbers work together to identify your account and ensure that your money gets transferred from the right place or that you receive funds intended for you.

The routing number indicates at which bank your account is held, while the account number is your unique ID number at that bank. Knowing the difference between these numbers and being able to locate them when needed is vital to your financial transactions, from setting up autopay to sending people money, go off without a hitch.

Another way to make money transfers and other everyday money moves go smoothly is to open an online bank account. With SoFi Checking and Savings, members can quickly transfer money straight from their phones using the mobile app, making everything from paying bills to splitting the dinner bill fast and simple.

What’s more, you’ll earn a competitive annual percentage yield (APY) and pay no account fees, which can help your money grow faster.

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

3 Great Benefits of Direct Deposit

  1. It’s Faster
  2. As opposed to a physical check that can take time to clear, you don’t have to wait days to access a direct deposit. Usually, you can use the money the day it is sent. What’s more, you don’t have to remember to go to the bank or use your app to deposit your check.

  3. It’s Like Clockwork
  4. Whether your check comes the first Wednesday of the month or every other Friday, if you sign up for direct deposit, you know when the money will hit your account. This is especially helpful for scheduling the payment of regular bills. No more guessing when you’ll have sufficient funds.

  5. It’s Secure
  6. While checks can get lost in the mail — or even stolen, there is no chance of that happening with a direct deposit. Also, if it’s your paycheck, you won’t have to worry about your or your employer’s info ending up in the wrong hands.

FAQ

Do you need both a routing and account number?

As you do your banking, it’s not likely to be an account vs. routing number situation. To complete many financial transactions, you will need to know both your bank account and routing number. This includes setting up direct deposit of your paycheck and signing up for a P2P payment service, like PayPal or Venmo.

What comes first on a check, a routing or account number?

Typically, when you look at the lower portion of a check, reading left to right, you will see the routing number, then the account number, and then the actual check number.

Do I give my account number or routing number for a direct deposit?

When setting up direct deposit, you will likely need to provide both the routing number, which identifies your bank, and your account number, which indicates your particular account with the financial institution. You may also be asked to provide a voided check.


Photo credit: iStock/SeventyFour

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.

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man on phone and laptop in kitchen mobile

How Long Does a Direct Deposit Take to Go Through?

Is there anything worse than waiting for a check to clear? If you can relate to that (awful) feeling, it’s likely that you love direct deposit. It can be a huge convenience when you’re getting paid or otherwise receiving funds. This process often transfers money into your account almost instantaneously.

No paper checks are ever issued. The money is transferred electronically, and you can typically access that money on that same day — sometimes even before your scheduled payday.

Even with all of the financial tech available at your fingertips, like online banking and mobile apps, it can still be a drag to deposit a check.

Whether it’s trying to take a clear photo of the front and back to submit to the bank, which will deposit it pending review, or physically bringing it into a branch, these hassles are easily avoided by signing up for direct deposit.

Key Points

•   Setting up direct deposit can be done in minutes, but it may take a few weeks or pay cycles for it to become active.

•   The exact timeline for direct deposit to go through depends on the entity issuing the funds and your financial institution.

•   Some direct deposits can be available on the same day they are transferred, while others may take one to three days.

•   To determine when your direct deposit will be available, you can contact your bank or observe the timing of previous direct deposits.

•   Direct deposit can offer the advantage of faster access to funds compared to waiting for a paper check to clear.

How Does Direct Deposit Work?

Direct deposit allows someone to electronically send money from their bank or financial institution directly into someone else’s.

The money is sent via the Automated Clearing House (ACH) network, which transfers money between banks and financial institutions.

ACH transfers eliminate the need to send physical checks or cash. These transfers can also happen almost instantaneously because they’re digital and you don’t need to worry about things like proving that a check is legitimate. That means direct deposit can be faster and more convenient.

Most employers now offer direct deposit as an option, and, in some states, even require it. Employers typically find direct deposit convenient because they can process payroll much faster without having to deal with issuing, signing, and mailing checks.

Direct deposit is a popular way to get your paycheck, but that isn’t the only use. It may also be the way you get a tax refund, Social Security benefits, unemployment benefits, investment-related dividends, as well as other payments.

Recommended: How Long Does It Take a Mobile Deposit to Clear?

How Do You Set Up Direct Deposit?

Setting up direct deposit is likely to be very simple — and fast. If you’re wondering how long it takes to set up direct deposit, all you have to do is fill out a direct deposit authorization form. Typically, this just takes a few minutes, provided you have the right information on hand (such as bank account and routing numbers; more on that below).

This usually happens on your first day of work, but you can often choose direct deposit or change your information later on. Some companies handle this process entirely online and some use a third party to sign you up.

When setting up a direct deposit, especially at a new job, you’ll want to remember to have the following information available to make it as simple as possible:

•   Your bank account number(s) and type of account

•   Bank routing number

•   Bank name and address

•   Whether your putting money in a checking or savings account

•   How much of your paycheck you want to deposit in the account (you may want to split the deposit; read on for details)

•   A blank, void personal check

Much of this information can all be found on a personal check, by checking your banking website or app, or by contacting your financial institution directly.

Splitting Your Direct Deposit

If you want to split your paycheck between multiple accounts, you can typically add each account to the direct deposit form and specify how much of your pay should go into each. Most forms ask what percentage of your pay goes into each, instead of just a dollar value. You may need to fill out a new form for each account.

For example, you might designate a set amount of money to move automatically into whatever kind of savings account you have, while leaving what you know you’ll need in checking for bills and smaller payments.

It’s up to you, of course, to determine how much of your paycheck to save; many financial experts recommend 10%.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


How Long Does It Take to Get Direct Deposit?

Signing up for direct deposit can be done in minutes. However, it may not take effect for a few weeks or even more because the payor has to confirm your bank account information.

With your employer, direct deposit may take one or two pay cycles to become active. During that time, you may receive a paper check as payment instead.

In some cases, an employer may hire an employee at the start of the pay cycle so that the direct deposit authorization process is done just in time for the new employee to receive his or her first payment via direct deposit.

Recommended: What to Do If Your Check Is Lost or Stolen?

Is Direct Deposit Instantaneous?

How long does it take direct deposit to actually go through? Exactly when you will have access to your direct deposit income will depend on the entity issuing the funds and perhaps your financial institution that receives the funds.

For example, if your employer uses payroll software to process your paycheck and send the transfer, they’ll set a pay date, which might be a day or two before your regular payday.

That’s the date the funds will be transferred into your bank account, and you can typically access the funds by the end of that day.

That said, other direct deposits may process on a different timeline. The funds could take one to three days to become available. To learn how long direct deposits take to post to your account, you can contact your bank directly, or watch to see what time of day the first few direct deposits come into your account.

Advantages of Direct Deposit

Receiving your paycheck or other income via direct deposit can simplify your life.

You won’t have to worry about waiting for a check or making time to take the check to the bank for deposit. And, you typically have access to your money sooner, since you don’t have to wait for a check to clear.

Direct deposit also makes it easier to stay on top of your personal finances because you know exactly when money is coming into your account.

This accuracy can help you manage your money and work towards short-term financial goals, such as paying all your bills on time or saving for an upcoming expense.

If you know when you have access to your paycheck, for example, it’s possible to schedule your other bills or an automatic transfer to your savings account soon after the direct deposit is scheduled.

Other advantages of direct deposit include:

•   Your bank might waive your account maintenance fee if you receive regular direct deposits.

•   It reduces the risk of check fraud or identity theft from a lost or stolen check.

•   You can’t lose or misplace the funds.

•   Electronic records don’t clutter draws or fill file cabinets.

•   You can easily track your paychecks and make sure none have been missed, since there is an electronic record of each payment in one place.

The Takeaway

Direct deposits are a convenient, electronic way to receive funds. This process is typically used when an employer, government agency, or other third party instructs its financial institution to digitally deposit funds into your spending or savings account on a specific date.

Direct deposit eliminates the hassle of depositing paper checks and, once the funds are transferred into your bank account, they are available to you, often almost instantaneously.

Direct deposit can make it easier to keep track of your finances, pay bills on time, and avoid negative balances and overdraft fees.

Looking for more ways to simplify your financial life? Consider opening a bank account online with SoFi. When you open our Checking and Savings with direct deposit, you can earn a hyper competitive up to 3.00% APY — and never have to worry about fees or overdraft charges. Plus eligible account holders have access to their paycheck up to two days early.

Sign up with SoFi: It’s the smarter way to bank.

3 Great Benefits of Direct Deposit

  1. It’s Faster
  2. As opposed to a physical check that can take time to clear, you don’t have to wait days to access a direct deposit. Usually, you can use the money the day it is sent. What’s more, you don’t have to remember to go to the bank or use your app to deposit your check.

  3. It’s Like Clockwork
  4. Whether your check comes the first Wednesday of the month or every other Friday, if you sign up for direct deposit, you know when the money will hit your account. This is especially helpful for scheduling the payment of regular bills. No more guessing when you’ll have sufficient funds.

  5. It’s Secure
  6. While checks can get lost in the mail — or even stolen, there is no chance of that happening with a direct deposit. Also, if it’s your paycheck, you won’t have to worry about your or your employer’s info ending up in the wrong hands.

FAQ

Is direct deposit instant?

While direct deposit is intended to be instantaneous, the exact timeline will vary with who is sending you the money and the system they use to transfer funds. It could take one to three days to clear.

Why hasn’t my direct deposit hit yet?

Direct deposit funds are often available almost instantaneously, but sometimes the transfer takes longer to go through and be processed by the receiving bank. Direct deposits can take between one and three days. Contact your bank and/or the payor if your funds have not arrived when due.

Why does direct deposit take 2 days?

While direct deposits are often available immediately, in other cases the funds can take a couple of days to hit your account and be accessed. This may be due to the software the payor is using or your bank’s way of processing and clearing the direct deposit.


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.

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Smart Short Term Financial Goals You Can Set for Yourself

Smart Short-Term Financial Goals to Set for Yourself

Setting financial goals is an important step toward becoming financially secure.

If there is something you hope to achieve in the not-too distant future — say, to buy a car or make a downpayment on a home — it may not be enough to simply hope you get there. Making a plan can significantly increase the likelihood of you meeting the goal.

Going day to day without any financial goals in place can cause you to spend too much, then come up short when you need money for unexpected bills and have to rely on high interest credit cards.

Short-term financial goals are generally things you want to achieve within roughly one to three years. They can be singular goals, and once reached you are done. Or, they might be incremental steps to much larger financial goals (such as funding your retirement, paying off a mortgage, or paying for a child’s college tuition).

Setting and reaching short-term money goals can also give you the confidence boost and foundational knowledge you need to achieve larger goals that will take more time.

While everyone’s goals are different, here are some short-term financial goals you may want to start working towards.

Key Points

•   Short-term financial goals are things you want to achieve within the next couple of years, such as paying off credit card debt or saving for a vacation or wedding.

•   Building an emergency fund is an important short-term financial goal to cover unexpected expenses and avoid relying on high-interest credit cards.

•   Tracking your spending helps prioritize your expenses and create a realistic budget to work towards short-term financial goals.

•   Paying down credit card debt is crucial as high-interest rates can hinder progress towards other financial goals.

•   Contributing to your retirement fund, even in the short term, can have long-term benefits due to the power of compounding interest or dividends.

What Are Short-Term Financial Goals?

Short-term financial goals are typically achievements you want to attain within the next couple of years. Unlike long-term financial goals (retirement, paying off a mortgage), they represent things you want to check off your money management list in the near term. Of course, everyone’s short-term aspirations will differ, but some financial goal examples include:

•   Paying off credit card debt

•   Saving for a vacation

•   Saving for a wedding

•   Stashing away money in an emergency fund.

Read on to learn more about some of the most common of these short-term financial goals.

Building an Emergency Fund

Often, a short-term financial goal might include saving for an emergency fund. This is often considered to be a smart financial goal example.

An emergency fund is cash savings that can cover three to six months’ (or more in some cases) worth of living expenses. The idea is that, just in case something unexpected comes up, such as a medical bill, job loss, or a major car or home repair, you can afford it without resorting to high-interest forms of funding.

Knowing that you have money in the bank in case of an emergency can bring peace of mind and also make it easier to work toward your other financial goals.

An emergency fund can also act as a buffer to keep you out of debt, since you’ll be less likely to have to rely on credit cards should something unexpected happen.

You can build an emergency fund by putting some money towards it every month, or you make it happen more quickly by funneling a large payment, such as tax refund or bonus, right into this fund.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Tracking Your Spending

Getting a sense of how much you are actually spending each month is a critical step in working towards both short-term and long-term financial goals.

You can do this by tracking your expenses for a month or so, then setting up a realistic budget to help you prioritize your spending, rather than spending haphazardly (which can lead to trouble when it comes time to pay bills and/or having any money leftover for savings).

You can track your spending by using a budgeting app. SoFi Relay, for example, allows you to connect all of your accounts on one dashboard and then categorizes your credit card and debit card transactions by budgeting categories.

You can also create a budget the old-fashioned way by going through your bank statements, bills, and receipts from the last few months and categorizing each expense with a spreadsheet or on paper.

Once you see where your money is actually going, you may discover some surprises (such as $200 a month on lunches out) and also find places where you can easily cut back. You might decide to bring lunch from home a few more days per week, for example. Or you might want to get rid of rarely used subscriptions or streaming services or ditch the gym membership and work out at home.

This money you free up can then be redirected towards your savings goals, like creating an emergency fund, buying a house, or funding your retirement

Paying Down Credit Card Debt

Another important financial goal example is paying down credit card debt. If you carry a balance, you may want to make paying it off one of your top short-term financial goals. The reason is that the interest on credit card debt can be so costly, it can make achieving any other financial goals much more difficult.

One strategy for paying off credit card debt is what’s known as the avalanche method, which involves paying the minimum on all but your highest-rate debt. You then put extra money toward the card with the highest interest debt. When that one is paid off, you would roll the extra payment to the card with the next-highest interest rate, and so on.

Another option is the snowball method, in which you pay the minimum on all cards, but use extra money to pay off the debt with the smallest balance. When that’s paid off, you move to the next smallest debt and so on. This can give you a sense of accomplishment that helps keep you motivated.

Or you might consider consolidating your debt by taking out a personal loan to pay off all of your cards. Personal loans usually offer lower interest rates than credit cards, and having only one payment each month can help simplify the payoff process.

Paying Off Student Loans

Student loans can be a drag on your monthly budget. Paying down student loans, and eventually getting rid of these loans, can free up cash that will make it easier to save for retirement and other goals.

One strategy that might help is refinancing into a new loan with a lower interest rate. You can check your balances and interest rates across your federal and private loans, and then plug them into a student loan refinancing calculator to see if refinancing offers an advantage.

It’s important to keep in mind, however, that not all refinancing options are created equal. There are scores of bad actors on the internet who might promise to get rid of all your debt but will only damage your credit score. If you do refinance your student loans, you’ll want to make sure you’re working with a reputable lender.

You may also want to keep in mind that refinancing federal student loans with a private lender could mean losing some of the benefits associated with federal student loans, such as income-based repayment or deferment if you fall on hard times.

If you have multiple student loans and won’t benefit from consolidating, consider using the avalanche or snowball method of repayment (described above) to pay them off faster.

Contributing to Your Retirement Fund

If you’re not yet saving for retirement, a great short-term financial goal may be to start doing so. Or, if you’re putting in very little each month, you may want to work on upping the amount.

If your employer offers a 401(k) and gives matching funds, for example, it’s normally wise to contribute at least up to your employer’s match. You can then start increasing your contributions bit by bit each year.

If you don’t have access to a 401(k), you may be able to set up an IRA online and start funding your retirement there. (Keep in mind that there are limits to how much you can contribute to a retirement per year that will depend on your age.)

While retirement is a long-term vs. short-term, financial goal, taking advantage of this savings vehicle can reduce your taxes starting this year. Here’s why: Money you put into a retirement fund is taken out of your income before taxes are calculated.

Even more importantly, starting early can pay off dramatically down the line. Thanks to the power of compounding interest (when the money you invest earns interest, and that interest then gets reinvested and earns interest as well), monthly contributions to a retirement fund can net significant gains over time.

Saving More Money

If you already have an emergency fund, you may want to start thinking about what you are hoping to buy or achieve within the next several years, and also beyond.

This could be anything, including buying a new high-tech toy, going on a great vacation, making a downpayment on a home, or doing a major renovation.

Saving up for this goal, rather than paying for it with a credit card, helps you avoid paying more for those things in the form of high-interest payments.

For financial goals you want to reach in the next few months or years, consider putting this money in a bank account online that earns more than a traditional savings account, but allows you access when you need it. Options may include a money market account or an online savings account.

For longer-term savings, you may want to look into opening a brokerage account.

This is an investment account that allows you to buy and sell investments like stocks, bonds, and mutual funds. A taxable brokerage account does not offer the same tax incentives as a 401(k) or an IRA (individual retirement account), but is much more flexible in terms of when the money can be accessed.

What are S.M.A.R.T. Financial Goals?

In addition to the short-term financial goals examples and guidance you’ve just learned, there’s another way to think about this topic: using the acronym S.M.A.R.T. This system can help you both with identifying and achieving your goals. Here’s what this stands for and how considering your financial aspirations through this lens can be helpful:

•   Specific: A goal should identify exactly what you are saving for, whether that’s paying off credit-card debt or buying a used car.

•   Measurable: How much is your goal? How much do you need to save? Perhaps your credit card balance is $5,673. That would be your measurable goal.

•   Attainable: Make sure your goal is realistic (you don’t want to attempt to pay off that credit card debt next month) and develop strategies to achieve it, such as working on alternate Saturdays to bring in more money (a benefit of a side hustle).

•   Relevant: Check that your goal really matters to you and isn’t just something you’re doing to, say, keep up with your friend group. Do you really need to save towards a potentially budget-busting vacation?

•   Time-bound: Set “by when” dates for your goals. This helps to keep you accountable. If you want to save $3,600 for an emergency fund within a year, figure out how you will come up with the $300 per month to put aside.

Using the S.M.A.R.T. method can help you crystallize and achieve your short-term financial goals.

The Takeaway

While day-to-day spending tends to grab most of our most attention, it is important to also focus on bigger goals.

Short-term financial goals are the things you want to do with your money within the next few months or years. Some key short-term goals include setting a budget, starting an emergency fund, and paying off debt.

From there, you may want to start saving for things you want to buy or do in the relatively near future, and also start thinking about investing your money to help you build wealth over time.

SoFi can help give you a boost in reaching your money goals. When you open an online bank account with us, you’ll have an array of benefits that help you bank smarter. You’ll be able to spend and save all in one place, earn a competitive APY, pay zero account fees, and access the Allpoint network of 55,000+ fee-free ATMs globally.

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

3 Great Benefits of Direct Deposit

  1. It’s Faster
  2. As opposed to a physical check that can take time to clear, you don’t have to wait days to access a direct deposit. Usually, you can use the money the day it is sent. What’s more, you don’t have to remember to go to the bank or use your app to deposit your check.

  3. It’s Like Clockwork
  4. Whether your check comes the first Wednesday of the month or every other Friday, if you sign up for direct deposit, you know when the money will hit your account. This is especially helpful for scheduling the payment of regular bills. No more guessing when you’ll have sufficient funds.

  5. It’s Secure
  6. While checks can get lost in the mail — or even stolen, there is no chance of that happening with a direct deposit. Also, if it’s your paycheck, you won’t have to worry about your or your employer’s info ending up in the wrong hands.

FAQ

What are the 7 key components of financial planning?

Financial planning for your personal goals can be thought of as involving seven key components: Creating and following a budget, making sure you have access to cash (such as an emergency fund), saving and paying for large purchases (a car or home), managing your risk (avoiding high-interest debt, perhaps), investing your money to grow it, building a retirement fund and doing estate planning, and keeping track of your financial life and communicating about it with those closest to you.

How do you write a 5 year financial plan?

If you are creating a personal 5 year financial plan, it’s wise to include these elements: Save for goals like an emergency fund, a down payment on a house and retirement while paying off high-interest debt. You’ll likely want to create a budget that allows you to understand your cash flow and put a chunk of money towards savings (many experts recommend between 10% and 20%) every month.

How do you create a short-term financial goal?

To create a short-term financial goal, identify what you want and how much money you need. Then, looking at your budget and seeing what cash you have available, see how long it will take to save up enough money. For instance, if you want to have $2,400 in a travel fund from now, you will need to put $200 a month aside. Check your cash flow and see where you can free up funds (maybe less takeout food and fancy coffees, for starters) to meet this goal.


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 https://www.sofi.com/legal/banking-rate-sheet.


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