Savings may be essential for financial health, but building a savings account is easier said than done. Between regular expenses and well…life in general, it’s often hard to figure out what you can actually afford to save, let alone prioritize planning for the future.
Fortunately, the best money-saving apps on the market today promote saving techniques that work around your regular spending habits – sometimes so smoothly you save money without even noticing.
What’s Ahead:
Overview of the best money-saving apps
App
Fees
Investing included
Account minimum
Savings account APY
Checking/spending account
Acorns
$1-$5/month
Yes
$0 ($5 for round-ups)
N/A
Yes
Digit
$5/month
Yes
$0
N/A
No
Stash
$3-$9/month
Yes
$0 ($1 for certain investment accounts)
N/A
Yes
Chime
N/A
No
$0
2.00%
Yes
Twine
0.6%/year for investment accounts
Yes
$5 for investment accounts
1.05%
No
Qapital
$3/$12-month
Yes
$10 for investment accounts
0.1%
Yes
Best for first time investing – Acorns
Cost – $3 or $5/month.
Options – Saving, investing, and checking accounts, retirement accounts, children’s UTMA/UGMA accounts, cash back extension.
Acorns gets its name from the idea that small “acorns” of spare change can grow into big savings if you give them a little time. As a combo savings/investing app, Acorns makes things simple for the brand new investor and doesn’t require much money to get started.
The $3/month“Personal” plan gets you an Independent Retirement Account (IRA) and an “Acorns Spend” checking account. For $5/month, you can tack on investment accounts for children as well.
If savings are your main goal, the basic account will probably be enough to get you rolling. When you link a credit or debit card to your investment account, Acorns “rounds up” your purchases to the nearest dollar and invests the difference for you once it hits $5 or higher – a popular auto-savings technique. You can add a “multiplier” feature if you want Acorns to double or triple the amount of investment with every transaction.
Learn more about Acorns or read our full review.
Best for flexible savings – Digit
Cost – $5/month (first 30 days are free).
Options – Savings, investment, and retirement accounts.
Savings techniques – Automatic fund transfers, credit card debt reduction.
For $5/month, Digit’s algorithms analyze your spending patterns and cash flow, then make a savings plan tailored to you. When you can spare a little extra, Digit transfers some cash to a linked savings account. When you have just enough to pay the bills, Digit skips the transfer.
This method can work well for people with fluctuating incomes or anyone who has trouble deciding in advance how much to save. If Digit does overdraft your account (which they promise not to), they’ll reimburse fees for up to two overdrafts.
Like most money apps, Digit lets you pick your own savings goals, and if you’re paying down credit card debt, Digit can automatically send the amount you’ve saved to the credit card company on your behalf.
Learn more about Digit or read our full review.
Best for lots of investment options – Stash
Cost – $3 or $9/month.
Options – Savings, investment, and retirement accounts, checking accounts, individual stocks and fractional shares, life insurance.
For people who want to watch their savings grow, Stash offers over 150 ETFs, stocks, and other micro-investment vehicles. You have more control over your portfolio picks with Stash than you do with Acorns – you can design your own portfolio or pick a pre-selected one from Stash. You can even pick ETFs that align with your values.
Savings options are flexible, too: you can choose an amount to put in savings each month, invest your spare change with the “round-up” method, or let Stash’s “Smart Stash” feature figure out what you can afford to save based on your cash flow.
Stash comes with a debit card, something a lot of savings apps offer, and its own unique “stock-back” incentive. Whenever you use the Stash bank card to buy something at a publicly-traded company, Stash gives you a small fractional share of company stock to add to your portfolio.
The app’s cost depends on how many extra features you want. Most everyday savers will be fine with the $3/month Growth plan, which includes a debit card, an investment account, and stock-back perks. You can also add a tax-advantaged retirement plan (a good idea if you haven’t opened a retirement account yet). Serious investors can upgrade to the $9/month “Stash+” for 2x stock-back returns and extra market info.
Learn more about Stash or read our full review.
Disclaimer – Paid non-client endorsement. See Apple App Store and Google Play reviews. View important disclosures.
Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.
¹For securities priced over $1,000, purchase of fractional shares start at $0.05.
²Debit Account Services provided by Green Dot Bank, Member FDIC and Stash Visa Debit Card issued by Green Dot Bank, Member FDIC. pursuant to a license from VISA U.S.A. Inc. Investment products and services provided by Stash Investments LLC, not Green Dot Bank, and are Not FDIC Insured, Not Bank Guaranteed, and May Lose Value.” because the article mentions the debit card.
³You’ll also bear the standard fees and expenses reflected in the pricing of the ETFs in your account, plus fees for various ancillary services charged by Stash and the custodian.
⁴Other fees apply to the debit account. Please see Deposit Account Agreement for details.
⁵Stock-Back® is not sponsored or endorsed by Green Dot Bank, Green Dot Corporation, Visa U.S.A, or any of their respective affiliates, and none of the foregoing has any responsibility to fulfill any stock rewards earned through this program.
Best for low fees – Chime®
Cost – No monthly fees.
Options – Savings and checking accounts.
Savings techniques – Round-ups, automatic transfers to savings, paycheck transfers.
Chime is a mobile app that takes advantage of the lower-cost online-only financial app model to pass savings on to customers. They don’t charge a monthly fee, so you keep any money you save.2
Chime’s free checking and savings accounts offer plenty of the features you’ll find at a bank*, like:
A Chime Visa® Debit Card.
Check deposit options.4
Bill-paying functions.
Two-day advance on directly deposited paychecks.3
Checking and savings are linked; whenever you make a purchase with your checking account, Chime rounds up to the nearest dollar and adds the difference to savings.^ Or you can have Chime auto-deposit 10% of every paycheck into savings before the rest hits checking.1 Either way, the app does all the work.
Learn more about Chime or read our full review.
* Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank, N.A. or Stride Bank, N.A.; Members FDIC. ^ Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account. 1 Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account. 2 There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account. 3 Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date. 4 Mobile Check Deposit eligibility is determined by Chime in its sole discretion and may be granted based on various factors including, but not limited to, a member’s direct deposit enrollment status.
Best for joint savings – Twine
Cost – No fees for saving, 0.6% of invested assets/month for investing.
Twine is ideal for people who are saving for a goal together (though you can use it on your own, too!). It combines savings-app automation with robo-advisor guidance, which can be helpful if you have more than one savings goal.
The basic free Twine savings account earns you a little interest – there’s a 1.05% variable Annual Percentage Yield (APY). They encourage you to earmark accounts for certain financial goals, either “general savings” or specific goals like a vacation or a down payment on a house, and pick a monthly goal deposit amount so you can track your progress. If you’re saving with someone else, you’ll pick a joint goal but open individual accounts.
Investment portfolios are optional if you want to take your savings to the next level. Twine pre-selects diverse portfolios for you, and they only require $5 to get started.
Qapital runs on behavioral economics – their multiple savings strategies use your routines, habits, and everyday purchases to help bulk up your savings.
Here’s how it works: you get a spending account that earns you 0.1% in compounded monthly interest, and a “goals” account to grow your savings. To fund your goals, you can transfer regular, set amounts from a linked bank account to your goals account, or pick one of Qapital’s “rules” or savings tricks.
There’s the “round-up” rule, which lots of apps use. There’s the “trigger” rule which saves a specific amount every time you engage in a certain activity (something simple you do regularly, whether it involves spending money or not).
The “guilty pleasure” rule moves a little cash into savings whenever you indulge in your favorite pricey latte, takeout, etc. The “52-week” rule lets you gradually increase the amount you stash in savings over a year. Qapital has other rules, too, and you’ll probably find one that works for you.
Their pricing is higher than most money-saving apps – a $3/month basic plan has all the savings tools, while the $6/month plan unlocks pre-selected investment portfolios and gives you a Qapital debit card. The $12/month master plan lets you open joint savings with a partner, similar to Twine.
Learn more about Qapital or read our full review.
Why should you use money-saving apps?
You’re just starting to build savings
The idea of building a savings account might be intimidating, but it’s much simpler to stash away 50 cents whenever you buy a cup of coffee or a dollar whenever you refill your gas tank. That’s mostly what these apps do – take the work out of savings one small amount at a time, so your regular budget isn’t disrupted.
Read more: The Pros And Cons of ‘Spare Change’ Investment Apps
You struggle to make savings a habit
If your money management style is on the “spend now, save later” side, it may be unrealistic to overhaul your habits right away and heap everything into savings. That’s not how habits work; they take time to develop.
A free 30-day trial of Digit or Qapital, for instance, could be enough to show you how much the app can grow your savings in a typical month; and after 30 days, you’ll be more used to putting a little cash aside.
You’re curious about small-scale investing
Investing can be a great way to save, but it’s inherently risky, and you don’t want to launch yourself right into an investment account without knowing what you’re doing.
These apps make micro-investing as easy as sticking to an automated savings plan and assessing your risk comfort level. And they let you start with small balances, so you don’t have much to lose.
Read more: 7 Easy Ways To Start Investing With Little Money
Why shouldn’t you use money-saving apps?
You have a savings pattern that works for you
If you’re already saving money on a timeline that fits with your goals and income, a savings app could help you skim a little more off the top of everyday purchases, but it might not be worth the fees.
You already have substantial savings
The savings accounts built into money-saving apps are great tools to get started, but they’re not the highest-yield accounts out there. You’ll earn more money keeping your savings in a bank or investment account that offers a higher APY (Annual Percentage Yield), especially if you have decent credit.
Most important features of money-saving apps
Automated saving
Money-saving apps take the “how much can I afford” guesswork out of savings by putting them on autopilot. You won’t see a huge interruption to your regular cash flow, which is nice – saving money doesn’t have to feel like a penalty or a punishment.
And most apps make the automation flexible; if you’re having a lean month or two, you can temporarily stop withdrawals (or, as with Digit, the app stops them for you).
Most importantly, you’ll get into the savings habit after a while.
Saving for short- and long-term goals
Sometimes it’s easier to save if you have something to look forward to. Money-saving apps keep you motivated by letting you choose your goals and showing you how much your savings have progressed.
“Rounding up” purchases
This auto-savings technique is available on almost every app now. By rounding up your purchases to the nearest dollar (or two dollars, or three – some apps let you multiply) you’re saving small, manageable, regular amounts while you spend.
Checking accounts
Several apps set you up with a checking account and debit card, though you can usually link an existing checking account as well.
Everyday money management
For elaborate budgeting templates, look for a budgeting app specifically (you can find our recommendations here). But savings apps have plenty of tools to keep your finances in line, especially if you tend to be disorganized and overdraft your accounts by accident. You can observe your spending patterns, set up payment reminders for bills, and get regular balance alerts all through the app.
Investing options
While investment accounts aren’t available with every savings app, they seem to be becoming more of a standard offering. “Micro-investing” lets you start out with spare change. Once you really get the hang of it, you may choose to switch to a higher-yield investment account elsewhere.
Summary
Money-saving apps are a great starting point, but they’re only one aspect of a solid financial management plan.
Think of them as a helpful tool to analyze your spending behavior and nudge you into the next steps, whether that means breaking down a monthly budget or working towards financial freedom.
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Are you wondering how much money you should have saved by 25?
If so, this post is for you.
You need to learn how to save from a young age to be financially responsible and enjoy your life without stress.
In this post, I will outline the steps that I took to save a total of $25,000 by age 25. That ultimately led to becoming a millionaire well before most people earn that 7 figure status.
My goal is to help motivate and inspire you to save as much money as possible.
I believe that if everyone saves just 20% of their income each year, we could create massive waves of positive change across the world. So let’s get started!
How much money should you have saved by 25?
It’s never too late to start saving for your future.
By age 25, you should be working through paying off debt and starting to improve your savings rate.
Below are guidelines on how much money a 25-year old should have saved by the age of 25.
Save a Total of $20000
By 25, you should have saved $20000.
Given the average savings for this age is only $11,250 and the median savings is $3,240 (source), you will be ahead of the curve with those super savers in this age group. However, most twentysomethings fall in the middle of the bell curve and could barely afford a job loss or any major expense.
Save at Least 50% of your Annual Expenses
Another rule of thumb for a 25-year-old is to save 50% of your annual expenses.
Let’s say, you spend an average of $20000 a year on rent, food, insurance, discretionary spending, etc, then you would need to save at least $10000.
This method will make sure you have enough money saved based on your lifestyle.
How much money should you have saved by age 30 for retirement?
If you want to have a comfortable retirement, you should save as much money as you can by the age of 25 and 30.
Most people don’t save enough for retirement and twentysomething (age 20-29) only have average 401k balances of $10,500 (source).
That means at a retirement age of 65, your account balance would be $94,259 in a taxable 401k / IRA or $228,107 in a Roth 401k / Roth IRA. The assumptions include no additional contributions and an 8% rate of return.
To prepare for retirement, aim to save between $15000 and $20000 by age 25. To stay on track, use a benchmark to figure out how much you need to save each year and customize your target based on your individual circumstances.
If you’re not saving for retirement yet, start contributing to 401k plans and IRA accounts now so that you’ll have a solid foundation when it comes to savings.
Save at a Minimum of 10% of your Income
This needs to be non-negotiable at the age!
It is very easy to find ways to pay yourself first and save 10% of your income. While you may prefer to hit that happy hour or buy those designer shoes, you are better off trimming your spending and up your savings while you are young.
Then, each year increase your savings percentage by 1% until you reach the 20% threshold.
But, you don’t have to stop there! Many Gen Zs are wanting to explore why there are young and healthy and not be a slave to the workforce. That means you need to save more to make that happen.
What should your net worth be at 25?
Most people in their 20s are typically swaddled in debt, especially student loan debt.
Your goal is to have a positive net worth – even if by $100. That means your savings is greater than any debt you have.
Your goal is to double your liquid net worth quickly.
What is the average savings rate for people in their 20s?
Okay, let’s be real… okay?
Most young adults are spending more money than they are saving. That means each month their spending exceeds their income.
As such the statistics do not even include this age group.
how much should I have in savings at 25?
At 25, you should have about 3-6 months of living expenses saved up in the bank.
Additionally, it is important to start thinking about your long-term financial goals and make sure you are building a foundation that will support those goals.
What are the different savings goals that people in their 20s should have?
Saving for your future is important, and you need to make it a top priority.
There are many different savings benchmarks to choose from including:
Save an emergency fund of at least $2000.
Participate in one of our popular money saving challenges.
Start contributing to workplace retirement and save enough to get the company match.
Begin saving for those big purchases like a gently used car or downpayment for a house.
Set up a Roth IRA and start making contributions (even baby amounts count).
This will make sure you are on your way to becoming financially sound before you turn 30.
What are the list of ways to save money?
If you want to save money, there are a few things you can do.
Saving money in your 20s is the easiest age to save as you don’t have as many responsibilities and obligations as you will in the future.
Here is a list of the most common ways to save money:
1. Use Budget Percentages as a Guide
If you want to save money by 25, you’ll need to start by setting a budget and sticking to it. You can reach this goal by using different budgeting techniques, such as the 50/30/20 rule.
The 50/30/20 rule is a good place to start:
50% of your income going towards necessities (housing, food, utilities)
30% going towards discretionary expenses (groceries, entertainment, travel)
20% saved for emergencies
This will help you be consistent in your savings habits is key to saving money.
2. Track your spending
Tracking your spending is key to understanding where your money goes.
Save receipts from each purchase and go over them once a week to get a better understanding of your spending habits. This can help you see where you might be overspending and make improvements to your budgeting techniques.
Great apps to help you include Simplifi or Rocket Money.
2. Use AI Powered Savings Apps and put your savings on autopilot
With AI, you can save money by automating your savings process.
Setting up recurring transfers to automatically deposit money into your savings account means that you won’t have to worry about finances anymore.
The popular AI saving apps can also help you save for your retirement, as well as any financial goal you may have. Thus, reducing the amount of time spent on financial planning.
Top AI Savings Apps:
4. Use gamification to save
Gamification can help make saving fun and more likely to be kept up.
Gamification can help people save money by providing a tangible benefit to work towards and providing some valuable encouragement.
By using the method of gamification, you help others save money by motivating them to reach a goal while you work to complete the same goal.
For example, if you’re trying to save money for a trip, you could set up a game with friends (aka accountability partners) where you earn points every time you save money with the 100 envelope challenge. Those that save the goal amount get to go on the trip.
5. Collect your employer’s 401(k) match
If your employer matches your contributions to a 401(k) plan, it’s important to take advantage of the match.
A 401(k) match is a free money offer from your employer, so it’s worth maxing out your contributions in order to gain the most benefit.
Also as long as you meet the qualifications, you can also contribute post-tax dollars to a Roth IRA account. This is another great way to increase savings for retirement.
6. Delay buying a home
Buying a home is not easy, but it’s important to have goals and plan for what you want to achieve.
The down payment on a house is one of the most important factors when buying a home as such you may need to delay buying a home for as long as possible to save money.
Also, by delaying buying a home, you can save money by taking the time to research different neighborhoods, compare prices, and get pre-approved for a mortgage.
Not only will this save you money in the long run, but you will also have peace of mind knowing that your future home is exactly what you wanted.
7. Use Open banking to track your spending
If you’re interested in tracking your spending and saving money, you can use Open banking to do just that.
Open banking allows customers to access their bank account information and manage their finances through APIs.
This means you can see how much money you’ve spent and where your money is going, which can help you stay within your budget. Additionally, open banking tools can be used to better understand your bank’s products and services.
Many of the best budgeting apps, such as Quicken, allow you to utilize open banking data to help you organize and manage your money in one place.
8. Use credit cards sparingly
Even those Gen Z has the lowest credit card debt amount (source), it is still wise to make sure you are using credit cards appropriately.
Credit cards can be a great way to earn rewards or get cash back, but only if you use them sparingly and pay off your balance in full each month to avoid interest charges.
It’s also important to check your credit report regularly to make sure there are no outstanding debts you didn’t know about.
9. Use a budget
If you want to save money, using a budget is a great way to accomplish it.
By tracking your expenses and setting limits on how much you can spend each month, you can make sure that you are always saving money.
A budget is a great way to save money because it allows you to choose where you actually want to spend your money rather than figuring out where you spent your money afterward. It also allows you to optimize your spending so that you don’t waste money on unnecessary things.
10. Invest for the long term
Investing for the long term can be a great way to save money as you let your money grow instead of having to create new streams of income.
You can buy stocks in companies or ETFs and hold onto them for a long time, adding money to your account regularly. This strategy can help you take advantage of market volatility and make money over the long term.
You also need to make sure you’re properly investing your money in order to reach your savings goals.
What is the best advice to save money by 25?
To save money by 25, individuals should aim to save 10% of their income.
It may be difficult to save more than 10% of one’s income, but it is possible.
Saving money is essential for financial security at any age, and you can start by being determined and making sure you’re saving at least 10% of your gross salary.
Simple Tips to Save Money by 25
You should focus on spending as little as possible to save money, and set a fixed budget rather than relate your expenses to your income.
Be consistent in your savings and avoid impulsiveness to save money.
Save up on transport or any other thing you might feel is a luxury rather than a necessity.
What is the average savings rate for people in their 20s?
The average savings rate for people in their 20s is $11,250, so it’s important to start saving as soon as possible.
The median savings is $3,240, so most people in their 20s have modest savings.
Savings Tools to Build Cash Fund Savings
There are many ways to save money, so find what works best for you.
People in their 20s have a lot of opportunities to save money, so don’t wait to start!
You want a savings plan that matches your long-term financial goals!
Pay yourself first
In order to have a successful future, it is important to start saving from a young age. There are a few different ways to save money, and one of the most important is to pay yourself first.
This means putting your own money into your bank account before spending it on anything else.
This will help you build a strong foundation for your future, and you will be able to save more money
Save Consistently
Set aside money regularly so you have a stash of cash to use when you need it.
That means each you save $100 or each paycheck you save $250.
Whatever the amount, do it consistently.
Trim Spending
If you want to save more money each month or year, try cutting back on unnecessary expenses.
Don’t rely on your income to directly influence your costs – track how much you’re spending each month and try not to exceed your allotted amounts for each category.
Do not overspend just because there’s more money in your checking account – create healthy financial habits that will last long-term.
Use Cash Windfalls Strategically
These cash windfalls could be from bonuses, inheritances, or even some left hand itching lottery luck!
You want to save those cash windfalls and make a plan on how you will spend them.
Additionally, you may be able to use the money to pay down debt or buy a home. This is an important lesson to learn if you have unexpected money coming your way—you don’t have to spend it all!
Save Increases in Income
Dedicate additional income to savings so that you’re really putting your money where your mouth is.
You can increase your savings by dedicating a percentage of your income to savings. Dedicate 10% of your income to savings, for example, and then an extra 1% to save search year.
Savings will grow along with your income, and you will have more money to use for other needs.
Make Saving a Habit
Your saving habits will change as you reach your 20s and into your 30s.
However, it’s important to keep track of your progress and make saving part of your regular routine. There are many different ways to save and reach your goals, so find what works best for you.
FAQs
If you have a low income, there are still ways that you can save money.
Try to focus on paying off high-interest debt first and then saving three months of living expenses.
Another way to save money is by reducing unnecessary expenses with a 30 day spending freeze.
The answer to this question depends on your individual situation and goals. However, we can offer some general advice on saving habits for a 25 year old should include:
First, it’s important to set a budget and stick to it. This will help you track how much money you are spending each month, and allow you to make better decisions about where to cut back. Add 1% to your monthly savings each month until you reach your goal of $20000 saved.
You also need to be mindful of how you spend your money. Try not to rely too heavily on credit cards or other forms of debt, which can quickly add up over time. Instead, try investing in stocks or bonds instead – these tend to provide more reliable returns over time and offer less risk than some other investments.
Finally, don’t forget about savings! Whether it’s into a high-yield savings account or an emergency fund earmarked for unexpected expenses, putting away some extra cash will help ensure that you have enough resources when necessary.
How much should I have in my emergency fund by 25?
By 25, you should have saved at least $1000.
However, 2% of your annual salary is a better threshold.
By age 25, most people should be saving at least 5% of their income and contributing an additional 1% every year.
If you can’t save enough money to contribute at the recommended rates, don’t worry – you can still save for retirement by gradually increasing your savings rate.
Saving money can be difficult, but it’s important to focus on not spending every penny you earn.
One way to do this is to set aside a certain amount of money each month that you will not spend.
Another way to save money is to find ways to reduce your monthly expenses. For example, you can cook at home more often instead of eating out, or you can carpool with friends to save on gas.
If you’re determined and have the skills, you can quickly learn how to make money online for beginners.
Side hustles are the name of the game right now.
Stick around Money Bliss – we have plenty of ways to help you earn extra money.
If you want to pay off your debts more quickly, you should start by saving money each month.
You can use your savings to pay down your debts faster if you focus on high-interest debt first.
If you have three months’ worth of living expenses saved up in case of emergencies, that would also be a good place to start. Check out the best debt apps to help you.
First, you need to make sure you are financially stable in other areas. You are fully funding your retirement accounts and Health Savings account, you have stable housing.
Then, you can consider saving for a child’s education through a 529 plan.
Saving for a child’s education can be difficult and expensive, but it’s important to start early if you have the extra income to support it.
To save money for a vacation, start by setting a specific amount you want to save each month. Then, calculate how much money you need to save by the date of your dream vacation.
Set a date by which you want to have traveled and begin backing out the math needed for that trip! As long as you continue saving 20% of your income each month and stay within budget, travel is always possible!
How to Save for a retirement
To save for retirement, you should start by investing 5-15% of your paychecks into a tax-advantaged account.
You should also plan your retirement based on your income, age, and desired lifestyle. You can save for retirement by consistently increasing how much you put in retirement accounts.
Don’t forget to include that employer match!
What should I do if I don’t have enough saved by 25?
Don’t get down on yourself!
Start now!
Waiting will only exacerbate things.
There are many different savings techniques to try, so it’s important to find one that works for you:
Start by putting away $50 every month and then add more funds as needed.
Pick one of our money saving challenges.
Use cash or debit cards instead of credit cards.
Even if you don’t have any big expenses planned in the near future, saving is still important for long-term financial stability. You’ll be on your way to having enough money when you’re older!
What are the consequences of not saving by 25?
You have nothing to show for your hard-earned income.
That is the cold and honest truth. But, you are only 25 years old, so you have plenty of time to change your ways.
If you’re not saving by 25, you may have to make some sacrifices in order to reach your financial goals. You may need to cut back on your spending, take on a second job, or make other changes to your lifestyle.
However, if you’re willing to make these sacrifices, you can still reach your goals.
Savings Steps for your Twenty-Something Self
When it comes to your twenties, there are a lot of things you want to do and accomplish.
One of the most important things on that list should be saving money.
After all, the earlier you start saving, the more time your money has to grow.
Starting to save money from a young age can lead to a larger nest egg over time. Plus, if you start early, you can take advantage of compound interest, which will help your money grow faster.
An individual’s earnings and spending patterns are still in flux during their twenties, so there are many opportunities to save.
Also, you need to remember there is more to life than just saving money–put other goals on your list (such as starting a business) and figure out how much you need to save each month in order to reach your targets.
Now, learn how much should I have saved by 30.
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In the past decade, we’ve seen a major transformation in the banking sector. As the world continues to digitize, the financial landscape has shifted in response, giving birth to a plethora of online banking services. One such innovation that has garnered widespread adoption is online checking accounts.
As a key financial tool, a checking account serves as a lifeline for day-to-day transactions, paying bills, and generally managing one’s finances. But with online checking accounts, convenience, accessibility, and often better rates and lower fees have made them an attractive alternative to traditional banks.
10 Best Online Checking Accounts
These best online checking accounts offer a range of features, from high annual percentage yield (APY) to robust mobile apps, all designed to meet the varying financial needs of users. Here are our top 10 picks for 2023.
1. Chime Checking Account
Chime, a financial technology company that offers online banking services, is revolutionizing the banking industry with its online checking account that pairs both convenience and value into a single offering.
With Chime, you can access banking services without the constraints of physical branches and enjoy a plethora of services, from direct deposits to earning savings interest and more.
It’s essential to note that Chime isn’t a bank but rather a financial technology company providing banking services through Bancorp Bank, N.A., and Stride Bank, N.A., Members FDIC.
Key Features
No monthly maintenance fees or minimum balance: The Chime Checking Account comes with no monthly maintenance fees or minimum balance requirements, making it a cost-effective option for those looking to maximize their financial resources.
Early direct deposit: With Chime, you can receive your direct deposits up to two days early, providing you with quicker access to your funds compared to many traditional banks.
SpotMe® feature: This innovative feature allows you to overdraw your account up to $200 on debit card purchases without a fee, provided that you have $200 or more in qualifying direct deposits each month. The SpotMe® limit can be increased based on account history, direct deposit amounts and frequency, spending activity, and other factors.
Automated savings features: Chime allows you to save effortlessly with its Round Ups feature. Each time you use your Chime Visa® Debit Card, the transaction is rounded up to the nearest dollar, and the difference is transferred to your savings account. The Save When I Get Paid feature lets you set up a recurring transfer of 10% of your direct deposit paycheck of $500 or more from your checking account to your savings account each time you get paid.
Extensive ATM network: With Chime, you get access to over 60,000+ fee-free ATMs nationwide, giving you the flexibility to withdraw cash without worrying about ATM fees.
The Chime Checking Account is a stellar example of how online banks are providing value-packed offerings that rival traditional banks.
The account is particularly beneficial for those who receive direct deposits and don’t need to deposit cash often.
2. Axos Bank Rewards Checking
Axos Bank is an online-based bank that’s shaking up the banking industry with its online Rewards Checking account, a unique blend of convenience and value.
Axos allows you to utilize banking services without the constraints of physical branches and offers numerous benefits, from earning high APY to ATM fee reimbursements and more.
It’s important to note that Axos Bank is a completely online bank without in-person customer service options.
Key Features
High APY: The Axos Bank Rewards Checking account can earn an APY of up to 3.30% on balances up to $50,000, given certain conditions are met. You can earn this high APY by fulfilling certain requirements. These include maintaining a monthly direct deposit totaling at least $1,500 or making qualifying debit card purchases. Additionally, maintaining certain balances in Axos investment accounts, or making a monthly Axos consumer loan payment using Rewards Checking.
No Overdraft Fees: Rewards Checking doesn’t charge overdraft or nonsufficient funds fees. Transactions are simply declined unless you enroll in one of the bank’s overdraft programs, which include the option to set up free automatic transfers from a savings account to your checking account if your balance goes negative.
ATM Fee Reimbursement: Axos Bank offers unlimited ATM fee reimbursements, which gives you the flexibility to withdraw cash from any ATM without worrying about the fees.
Cash Deposits: Axos Bank uses a third-party service, Green Dot, to let customers add cash to their accounts or reload debit cards at retailers such as 7-Eleven and CVS Pharmacy. However, it costs up to $4.95 per deposit. You can also make deposits at some of Axos Bank’s 91,000 in-network ATMs.
Remote Customer Service Options: Axos Bank offers a variety of remote customer service options, including a 24/7 phone line, automated online chat, secure online messaging, and Twitter support.
The Axos Bank Rewards Checking account is a prime example of how online banks are delivering offerings that compete with traditional banks.
The account is particularly beneficial for those who can meet the requirements to earn the high APY and are comfortable with online-only customer service.
3. Current Account
Current, a pioneering financial technology company, delivers cutting-edge banking solutions with its Current Account.
While not a traditional bank, Current collaborates with Choice Financial Group to provide banking services, assuring member FDIC protections up to $250,000.
Key Features
Up to 2-day early direct deposit: With Current, customers can receive their paycheck up to two days earlier with direct deposit, offering superior control over their finances.
Fee-free overdraft protection: Current Account users can take advantage of fee-free overdraft protection, a feature that can safeguard against unexpected charges.
Points earned on debit card swipes for cash back: The Current Account provides added incentives for daily spending, as customers can earn points on debit card swipes that can be redeemed for cash back.
Access to over 40,000 fee-free ATMs: Ensuring easy access to cash nationwide, Current provides its users with over 40,000 fee-free ATMs.
Mobile check deposit: The innovative mobile check deposit feature from Current allows for effortless banking directly from a smartphone.
Current doesn’t just stop at basic features, it goes beyond by offering a range of options that simplify and amplify the banking experience.
Free from minimum balance fees, overdraft fees, bank transfer fees, and in-network ATM withdrawal fees, Current is committed to delivering an uncomplicated and seamless banking experience.
The “Current Pay” feature further enhances the user experience by facilitating instant money transfers among friends and family, simplifying payments or reimbursements.
4. SoFi Checking and Savings Account
SoFi, a modern financial platform offering a suite of financial services, is setting new standards in the world of banking with its online bank account that combines remarkable earning potential and considerable convenience.
Remember that SoFi isn’t a traditional bank but a financial technology company that provides banking services in association with a network of participating banks, all of which are FDIC insured.
Key Features
No account or overdraft fees and no minimum balance: The SoFi Online Bank Account is cost-friendly, with no account fees, overdraft fees, or minimum balance requirements. This makes it an excellent choice for those who want to keep their banking expenses to a minimum.
Potential 2-day early direct deposit: If you set up a direct deposit, SoFi provides the possibility of getting your paycheck up to two days earlier, offering faster access to your money compared to traditional banking establishments.
High-interest earnings: As a SoFi member, you have the opportunity to earn up to 4.20% APY on your savings and Vaults balances, and 1.20% APY on your checking balances. This earning rate is significantly higher than the national average, making your money work harder for you.
No-fee overdraft coverage: SoFi introduces a user-friendly feature covering accidental overspending up to $50 with no fees, given that you have qualifying direct deposits.
Cash back at local establishments: SoFi users can enjoy up to 15% cash back at local establishments when they pay with their SoFi debit card, combining savings with everyday spending.
Increased FDIC insurance: SoFi deposits are insured up to $2M, a feature that provides extra peace of mind when it comes to the security of your funds.
The SoFi Checking and Savings Account is an excellent example of how FinTech firms are providing robust banking solutions that rival and even surpass traditional banks.
The account is particularly attractive to those who frequently use direct deposits and prefer banking digitally, offering superior returns on their balances and protection from various fees.
5. Ally Bank Interest Checking Account
Ally Bank, renowned for its customer-centric digital banking services, provides a comprehensive offering through its Ally Bank Interest Checking Account.
While being an entirely online institution, Ally Bank ensures FDIC insurances up to the maximum allowed by law, bolstering financial security for its customers.
Key Features
Fee-free banking: Ally Bank champions transparency and affordability with no monthly maintenance or overdraft fees, supporting customers in maximizing their financial resources.
Access to 43,000+ no-fee Allpoint® ATMs: With a network of over 43,000 no-fee Allpoint® ATMs, customers enjoy widespread cash access. Plus, Ally reimburses up to $10 per statement cycle for fees charged at other ATMs nationwide.
Spending buckets: This innovative feature helps customers manage their money effectively by setting funds aside for ongoing expenses such as rent and groceries, much like digital envelopes. This encourages better spending habits and gives a clearer picture of personal finances.
Up to 2-day early direct deposit: Offering greater financial flexibility, Ally Bank allows customers to receive their paycheck up to two days sooner with early direct deposit.
Overdraft protection: With the Overdraft Transfer Service and CoverDraft℠ service, Ally provides a dual protection mechanism against accidental overspending, adding to its customer-friendly features.
Manage your debit card: Within Ally’s mobile app, customers can lock their card, set notifications, and limit spending, offering enhanced control over their banking.
Remote check deposit: With Ally eCheck DepositSM, depositing checks is as simple as snapping a photo with your smartphone.
Send and receive money: Through Zelle®, customers can send and receive money quickly, securely, and without the need for an extra app.
The Ally Bank Interest Checking Account provides a robust banking experience, packed with unique features that suit the needs of today’s digitally savvy customers.
It combines the convenience of online banking with the benefits of a comprehensive checking account, delivering unparalleled value.
Furthermore, Ally Bank’s commitment to keeping fees minimal, coupled with its transparent approach, ensures customers can bank confidently and efficiently.
6. Consumers Credit Union Serious Interest Checking
Consumers Credit Union, committed to enhancing its members’ financial prosperity, offers an appealing solution with its Serious Interest Checking®, a high yield checking account.
Despite being a credit union, it combines the benefits of a checking account with an attractive interest rate, making banking rewarding for its members.
Key Features
High-yield earnings: This checking account stands out by offering a whopping 4.00% APY on balances up to $15,000. To qualify for this interest rate, account holders must have 12 posted debit card transactions per month, maintain a $1,000 average daily balance, and establish a minimum recurring monthly direct deposit of $1,000, along with eStatements.
Instant-issue debit card: With the Serious Interest Checking® account, members receive an instant-issue debit card, providing immediate access to their funds.
No debit card usage fees or check deposit fees: In alignment with its member-friendly approach, Consumers Credit Union does not charge fees for debit card usage or for each check deposited.
24-hour online banking and mobile banking app: Offering a seamless digital banking experience, account holders have 24-hour access to online banking and a convenient mobile banking app.
Free online check copies and unlimited check writing: As part of its comprehensive offering, Consumers Credit Union provides free online check copies and allows unlimited check writing, adding to its array of cost-effective features.
Access to 30,000+ fee-free ATMs nationwide: Customers can withdraw cash from over 30,000 fee-free ATMs nationwide, ensuring easy access to their funds.
Competitive interest rates and custom alerts: Apart from competitive interest rates, the account also offers custom alerts for balance and activity, promoting active financial management.
Free eStatements and mobile check deposit: This high yield checking account also features free eStatements and mobile check deposit, further simplifying the banking experience for customers.
The Consumers Credit Union Serious Interest Checking® account blends the convenience of a checking account with the high-yield earnings usually associated with a savings account.
Its feature-rich, value-packed offering makes it a compelling choice for those seeking to elevate their banking experience and maximize their earnings.
7. Quontic High Interest Checking
Quontic Bank, committed to maximizing customer earnings and supporting financial inclusivity, offers a high interest checking account that combines convenience, high-yield potential, and an innovative digital banking experience.
Highly rated by multiple platforms, this account is perfect for those seeking to earn more from their deposits.
Key Features
Earn up to 1.10% APY: The Quontic High Interest Checking account allows you to earn up to 1.10% APY on all balance tiers. To qualify, make at least 10 qualifying debit card point of sale transactions of $10 or more per statement cycle. Failure to meet these requirements results in a 0.01% interest and APY. A minimum opening deposit of $100 is required.
Quontic Pay Ring: In a bid to revolutionize banking, Quontic offers a payment wearable called the Quontic Pay Ring. This innovative feature allows you to make payments effortlessly without needing to carry your debit card.
Access to 90,000+ ATMs nationwide: Enjoy surcharge-free withdrawals at any participating AllPoint® Network ATMs, MoneyPass® Network ATMs, SUM® program ATMs, or Citibank® ATMs located in various retailers across the nation.
Fully mobile & online banking: Quontic offers a dynamic online banking platform and mobile app equipped with features like remote check deposit, bill pay, account transfers, and receipt tracking, providing a seamless banking experience on your terms.
Wide range of pay options: With compatibility for Apple Pay, Google Pay, Samsung Pay, and Zelle, Quontic ensures you have plenty of options to facilitate your payments.
No monthly or overdraft fees: Quontic is committed to transparency and affordability, promising no hidden monthly or overdraft fees.
Member FDIC and advanced security monitoring: As a FDIC-insured institution, Quontic offers robust security features including the ability to lock and unlock your debit card online and protection against unauthorized transactions.
Banking with a purpose: Quontic stands apart by being a Community Development Financial Institution (CDFI), striving to bring the dream of homeownership to low-income families, immigrants, people of color, small business owners, and others who are unable to obtain mortgage financing through traditional lenders.
The Quontic High Interest Checking account combines innovative features, high yield potential, and an inclusive mission, making it a compelling choice for socially conscious individuals seeking to earn more on their deposits.
8. Alliant Credit Union High-Rate Checking
Simplicity and high yields are the cornerstone of Alliant Credit Union’s High-Rate Checking account, a solution tailored to meet the needs of modern-day banking customers, whether they’re on-the-go or prefer traditional banking methods.
Recognized by multiple platforms for its service excellence, this account is designed for customers who desire a seamless and rewarding banking experience.
Key Features
No monthly fee or minimum balance requirement: Alliant Credit Union ensures hassle-free banking with no monthly service fee or monthly minimum balance requirement.
No overdraft fees: Mistakes happen, and Alliant understands this by not charging its customers overdraft fees. However, some standard fees such as stop payment do apply.
Access to 80,000+ fee-free ATMs: Get access to more than 80,000 fee-free ATMs, eliminating the need for ATM hunting. Plus, enjoy up to $20/month in ATM fee rebates for out-of-network ATMs.
Contactless payments and digital wallet compatibility: Pay quickly and securely with your free Visa® contactless debit card or through digital wallets such as Apple Pay™, Samsung Pay™, and Google Pay™, and other payment apps like PayPal, Venmo, and Cash App.
Mobile banking and remote deposit: Manage your finances anywhere, anytime with the Alliant Mobile Banking app, which also allows you to deposit checks remotely.
Free overdraft protection and courtesy pay: Avoid accidental overdrafts with free overdraft protection, and opt-in for Courtesy Pay to cover checks, electronic payments, and transfers beyond your overdraft protection.
Account alerts and card management: Receive alerts for large transactions or unusual account activity, and manage your debit card on-the-go with options to activate or replace a lost/stolen card via Alliant online or mobile banking.
Federally insured and $0 liability on fraudulent charges: Rest assured knowing your deposits are federally insured up to $250,000 by the NCUA, and enjoy Visa’s $0 fraud liability feature, offering protection against unauthorized charges.
To earn interest on your checking account, simply opt for free eStatements and ensure at least one monthly electronic deposit to your Alliant High-Rate Checking account.
The Alliant Credit Union High-Rate Checking account offers simplicity, flexibility, and competitive interest rates, making it a smart choice for your everyday banking needs.
9. Schwab Bank Investor Checking
Charles Schwab brings its robust reputation in the investment sector to banking with its Schwab Bank Investor Checking account, designed for those seeking seamless integration of banking and investing.
This account ensures that your financial management is hassle-free and efficient, encouraging more financial freedom and effective investment.
Key Features
No fees or minimums: Experience the freedom of no maintenance fees or account minimums. This account enables you to focus more on your finances without the worry of hidden charges or minimum balance requirements.
Competitive APY: Enjoy a competitive 0.45% APY on your checking account balance, providing an added benefit of earning interest on your deposited funds.
Unlimited ATM fee rebates worldwide: Travel or live abroad without worrying about ATM fees. Charles Schwab offers unlimited ATM fee rebates worldwide, making accessing your money easier and more affordable.
No foreign transaction fees: Schwab’s account is designed with the international traveler in mind, eliminating foreign transaction fees and making it more convenient and cost-effective for you to use your debit card abroad.
Security and peace of mind: Feel secure with features like card lock/unlock, bank and transaction alerts, and travel notices. These features, combined with the Schwab Security Guarantee, ensure maximum security and control over your financial transactions.
Robust mobile app: Manage all your Schwab banking needs from one place with a feature-rich mobile app. Make deposits, transfer money, and more, with just a few taps on your smartphone.
Mobile payments: Enjoy a secure, convenient, and easy way to pay with your mobile wallet or contactless debit card. This allows for quick and hassle-free transactions, whether you’re shopping online or in-store.
The Schwab Bank Investor Checking account integrates banking and investing, offering convenience, ease, and attractive benefits for the modern user.
Whether you’re an avid traveler or looking for a no-fee, high-yield checking account that also offers excellent digital banking capabilities, this account could be a great fit.
10. Navy Federal Credit Union Free EveryDay Checking
Navy Federal Credit Union’s Free EveryDay Checking is an easy-to-use, accessible banking solution for everyone.
It is ideally suited for those seeking a basic, straightforward account for everyday banking needs, particularly individuals with lower account balances.
Key Features
No monthly service fee or minimums: This account demands no monthly service fees, no opening deposit requirement, and no minimum balance requirement, offering a flexible, low-maintenance banking experience for all users.
Interest-earning: With a 0.01% APY and Dividend Rate, your balance isn’t just sitting—it’s working for you, accumulating dividends over time.
Free debit card with zero liability protection: Your account includes a Navy Federal Debit Card, which is accepted at millions of locations worldwide and comes with zero liability protection for added security.
Digital banking: Navy Federal’s account offers a wide range of digital banking capabilities. This includes Mobile Deposits and Bill Pay, enabling you to manage your finances on the go, securely, and conveniently.
Checking protection options: Protect your checking account from overdrafts and denied transactions with Navy Federal’s Checking Protection Options, ensuring peace of mind and financial stability.
Additional benefits: The Free EveryDay Checking Account also offers free traditional name-only checks, an easy-to-use online ordering system, and automatic notifications to track account activity.
Highly rated: With a 4.7 out of 5 rating based on 142 reviews, Navy Federal’s checking account is highly rated by its customers for its user-friendly features and excellent service.
In addition to these standard features, Navy Federal Credit Union offers comprehensive digital banking tools like mobile banking apps, bill pay services, and convenient transfer and deposit options.
Plus, all members enjoy access to 24/7 customer service and more than 350 branches worldwide. The Free EveryDay Checking Account is a simple, straightforward, and user-friendly option that makes everyday banking a breeze.
What is an online checking account?
An online checking account operates much like the checking accounts you’re accustomed to at traditional brick and mortar banks, with the primary difference being that it’s mostly or entirely digital. They are provided by online banks, credit unions, and even financial technology companies that are not banks themselves.
Online checking accounts have surged in popularity for a variety of reasons. Their major draw is the convenience and flexibility they offer. With these accounts, you can deposit cash, pay bills, transfer money, make debit card purchases, and even deposit checks digitally using the bank’s mobile app. This means that all your transactions can be completed without visiting a physical branch location.
Additionally, online only banks typically offer higher annual percentage yields (APY) than traditional banks, meaning your money grows faster. The absence of physical branches translates into reduced overhead costs for these financial institutions, enabling them to pass on the savings to customers in the form of higher interest rates and lower fees. These accounts also often have lower minimum balance requirements and monthly maintenance fees compared to their brick-and-mortar counterparts.
Lastly, many online banks are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), providing the same level of safety for your deposits as traditional banks.
Criteria for Evaluation
Selecting the best online checking accounts was not a task taken lightly. We’ve considered a variety of factors in our analysis to ensure that our picks provide a mix of the most advantageous features for diverse financial needs. Here are the key criteria we used in our evaluation:
Annual percentage yield (APY): We considered the APY offered on the checking accounts. Higher APY means your money grows faster, making it a key feature to look for in an account.
Monthly fees and other costs: Monthly maintenance fees can eat into your savings. We favored accounts with low or no monthly fees. We also looked at other potential costs like overdraft fees, out of network ATM fees, and foreign transaction fees.
ATM access: Easy and wide-ranging access to ATMs is crucial. We considered online banks with large ATM networks and those that offer ATM fee reimbursements.
Customer service: Exceptional customer service is important, especially for an online only bank where in-person assistance is not an option. We assessed the quality of customer service provided by each bank.
Mobile app experience: A great mobile app can make managing your money a breeze. We evaluated the usability, functionality, and reliability of each bank’s mobile app.
Additional features: Other features like early direct deposit, mobile check deposits, cash back rewards, and savings tools can add value to online checking accounts. We considered these additional features in our review.
How to Choose the Right Online Checking Account for You
Choosing the right online checking account is crucial. It can simplify your financial management, enhance your monetary gains, and align with your lifestyle needs. Below are key factors to consider in making an informed decision:
Financial Habits: Evaluate your typical financial behaviors. Do you frequently use ATMs, and will you need access to an extensive, fee-free ATM network? If you regularly maintain a high balance in your checking account, an interest-earning account could be beneficial. Conversely, if you tend to keep a low balance, consider an account with no minimum balance requirement to avoid potential fees.
Goals: What are your financial goals? If you’re aiming to save, consider an account that earns interest. If you’re focused on investing, select an institution that offers seamless integration between checking and investment accounts.
Lifestyle: Assess your lifestyle and daily needs. Do you travel often and need an account that doesn’t charge foreign transaction fees? If you prefer digital banking, look for accounts with robust online platforms and mobile apps that allow for easy money management on the go.
Fees: Examine the fee structure carefully. Consider potential monthly maintenance fees, overdraft fees, and ATM fees. Look for accounts offering fee waivers or reimbursements.
Customer Service: Exceptional customer service is crucial, particularly for an online bank. Look for 24/7 customer support, availability of live chat, and timely response to queries.
Security: Ensure that the bank employs stringent security measures to protect your account from fraud or unauthorized transactions. Features like two-factor authentication, alerts for suspicious activity, and FDIC insurance are vital.
Bottom Line
In today’s fast-paced, digital age, online checking accounts provide a convenient, accessible, and often more financially rewarding alternative to traditional banking. However, the key to making the most of these benefits is to choose the right account based on your individual needs, lifestyle, and financial goals.
By carefully considering factors like your financial habits, goals, lifestyle, potential fees, customer service, and security measures, you can find an online checking account that not only meets but exceeds your expectations. Remember, your checking account is at the heart of your financial life – choose wisely.
Frequently Asked Questions
Are online checking accounts safe?
Yes, online checking accounts are safe as long as they’re offered by a reputable bank or credit union that has FDIC or NCUA insurance. This insurance protects your money up to $250,000 per depositor.
Can I deposit cash into an online checking account?
Depositing cash into an online checking account can be more challenging than with a traditional bank. Some online banks have agreements with certain ATM networks or retail outlets where you can deposit cash. You can also deposit cash into a traditional bank account and then transfer it to your online account.
What should I do if I need to write a check?
Many online banks offer free or low-cost checkbooks. However, if you seldom write checks, you may not need a physical checkbook. Instead, you can use the bank’s online bill pay service, which sends a check or electronic payment to the recipient on your behalf.
Do online banks offer customer service?
Yes, most online banks offer robust customer service options, including phone support, live chat, email, and often extensive FAQ sections on their websites. Some even offer 24/7 support.
It’s tough out there for first-time homebuyers. They’re facing multiple challenges, including rising mortgage rates, high home prices and limited inventory. However, that doesn’t seem to scare off young Americans — in fact, 71.5% of Gen Zers plan to buy their first home in the next one to six years, according to a Rocket Mortgage survey from earlier this year.
At the same time, not every Gen Zer knows what mortgage lenders are looking at when evaluating a home loan application. On average, 33.9% of Gen-Z were wrong about the factors lenders consider when deciding whether to approve a mortgage, according to the survey.
What most mortgage lenders look at when considering your application
CNBC Select explains what factors influence mortgage approval and what young people can do to increase their chances of qualifying for a home loan.
Credit score
Most Gen Zers know that their credit score can impact their ability to secure a mortgage (73.2%). And while they’ve had less time to establish a credit history, Gen Zers have an average FICO score of 679 according to the latest data from Experian. That’s lower than that of older generations but still considered good.
The minimum credit score to qualify for a conventional mortgage is 620. Government-backed mortgages have more relaxed credit requirements. The minimum credit score for an FHA loan is 580 with a down payment of 3.5% or as low as 500 if you can put at least 10% down. USDA and VA loans don’t have set credit requirements, but lenders that offer them might.
Besides approval chances, a homebuyer’s credit affects the interest rate on the loan. A small difference in interest rates can add hundreds of dollars to a monthly mortgage payment.
It’s best to work on building credit before applying for a mortgage. Free credit monitoring services such as CreditWise® from Capital One and Experian free credit monitoring can be helpful in tracking progress and finding opportunities to improve.
CreditWise® from Capital One
Information about CreditWise has been collected independently by Select and has not been reviewed or provided by Capital One prior to publication.
Cost
Credit bureaus monitored
TransUnion and Experian
Credit scoring model used
VantageScore
Dark web scan
Identity insurance
Terms apply.
Experian Dark Web Scan + Credit Monitoring
On Experian’s secure site
Cost
Credit bureaus monitored
Credit scoring model used
Dark web scan
Yes, one-time only
Identity insurance
Terms apply.
Note that the scores credit monitoring services offer differ slightly from the scores mortgage lenders use when making their decisions. That said, they should be pretty close and provide a good idea of your overall credit health.
Debt-to-income ratio (DTI)
Almost one-third of Gen-Z didn’t name the debt-to-income ratio (DTI) as one of the factors affecting mortgage approval (32.8%). In reality, lenders evaluate this closely when determining whether to approve a mortgage and what the terms of the loan will be.
DTI is the amount of debt relative to income. To qualify for a conventional mortgage, you don’t want a DTI any higher than 43%. For USDA and VA loans, the DTI limit is typically 41%, while the FHA might allow you to go up to 50%. Remember, these are guidelines — it’s up to individual lenders to determine the cutoff for what’s an acceptable number.
Calculating your DTI
To calculate your DTI, divide your total monthly bills, such as rent and any debt payments, by your gross monthly income (how much you make before taxes).
For example, let’s say your monthly bills total $2,500 and your gross monthly earnings are $5,000.
$2,500 / $5,000 = 0.5
Multiply the result by 100 to get the percentage. In this case, your DTI would be 50%.
Down payment
When a homebuyer makes a sizeable down payment, the lender may consider them a less risky borrower. Having more money to put down increases the chance of mortgage approval and can lower the monthly mortgage payment.
According to the survey, 10.1% of Gen-Z plan to put down 20% of their home price. If they do, they’ll start off with a good amount of equity in their home and won’t have to worry about private mortgage insurance (PMI). PMI is a monthly fee rolled into the mortgage payment, designed to protect the lender if the borrower can’t pay their home loan.
That said, it’s possible to secure a mortgage without a 20% down payment. In fact, FHA loans require as little as 3.5% down with a credit score of at least 580. Qualified first-time homebuyers can also put 3% down with conventional mortgages, such as HomeReady and Home Possible. USDA and VA loans have no down payment requirement at all.
Saving up for a down payment can take some time — often, several years. Putting the funds in a high-yield savings account can help them grow a little faster. Some of CNBC Select’s favorite accounts include LendingClub High-Yield Savings and the Western Alliance Bank Savings Account for their high APYs and ease of use.
LendingClub High-Yield Savings
LendingClub Bank, N.A., Member FDIC
Annual Percentage Yield (APY)
Minimum balance
No minimum balance requirement after $100.00 to open the account
Monthly fee
Maximum transactions
Excessive transactions fee
Overdraft fees
Offer checking account?
Offer ATM card?
Western Alliance Bank Savings Account
Western Alliance Bank is a Member FDIC.
Annual Percentage Yield (APY)
Minimum balance
$1 minimum deposit
Monthly fee
Maximum transactions
Up to 6 transactions each month
Excessive transactions fee
The bank may charge fees for non-sufficient funds
Overdraft fee
The bank may charge fees for overdrafts
Offer checking account?
Offer ATM card?
Terms apply.
Employment
Current employment, as well as work history, are also factors in mortgage lending decisions. It’s not uncommon for a lender to require two years of consistent employment history. Note that it doesn’t necessarily mean working for the same company. More likely, the lender will be looking to see whether the borrower has been employed in the same line of work or career field and if there are any lengthy gaps without a job.
Showing this kind of consistency can be tricky for Gen Zers who have only just started building their careers. However, as long as the homebuyer can prove they have a stable income and are a responsible borrower, the lack of two years of work history might be something a lender can live with.
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How Gen-Z can prepare for a mortgage application
While mortgage lenders generally examine the same things when evaluating an application, they might not always agree on what’s an acceptable risk. Individual lenders also may offer different types of home loans, work with different down payment assistance programs or even have their own unique offers for first-time homebuyers.
For that reason, it’s wise to speak to several lenders before choosing one. Plus, this will also allow for interest rate shopping, which is essential to securing the best possible mortgage terms.
CNBC Select picked PNC Bank as one of the best lenders for first-time homebuyers, thanks to the variety of home loan options they can offer. Rocket Mortgage can be a good choice for borrowers with lower credit scores, and Ally Bank Mortgage can help new homebuyers save on lender fees.
PNC Bank
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, HELOCs, Community Loan and Medical Professional Loan
Terms
10 – 30 years
Credit needed
Minimum down payment
0% if moving forward with a USDA loan
Terms apply.
Ally Bank Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, HomeReady loan and Jumbo loans
Terms
15 – 30 years
Credit needed
Minimum down payment
3% if moving forward with a HomeReady loan
Terms apply.
Bottom line
Gen-Z are entering a challenging housing market, but many feel up for the task and plan to buy a home in the next few years. Homeownership can be an excellent way to build wealth, but before springing into action, it’s a good idea to educate yourself on what impacts mortgage lending decisions and get your financial ducks in order based on what you’ve learned.
Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
There are literally thousands of legitimate checking accounts to choose from, and more spring into being all the time as online banks emerge and grow. There’s no way you can evaluate them all.
If you’re under age 25 and don’t care about loading up on potentially generous features, you can safely narrow your search by limiting your choices to basic checking accounts built for young, unfussy people. One account that should still be among those choices is the BMO Harris Smart Money™ Account.
The BMO Harris Smart Money Account has no monthly maintenance fee for users under 25 and relatively few other account fees. It comes with a Mastercard debit card accepted by millions of merchants worldwide. And it could be right for you — but be sure you understand its capabilities and limitations before opening an account.
What Is the BMO Harris Smart Money Account?
The BMO Harris Smart Money Account is a basic checking account designed for younger people and those seeking the peace of mind that comes with fee-free overdraft protection.
Smart Money has no monthly maintenance fee for anyone under 25 and no overdraft fees for anyone. Otherwise, it has the same basic features as BMO Harris’s two other consumer checking accounts — Advantage and Premier — including a vast fee-free ATM network, a robust mobile app, and no ongoing minimum balance requirement.
What Sets the BMO Harris Smart Money Account Apart?
The BMO Harris Smart Money Account stands out from competing checking accounts in a few key ways:
No overdraft fees. Smart Money has no overdraft fees. This is less generous than it sounds because BMO declines most Smart Money transactions that would result in an overdraft. Still, BMO may allow some transactions to go through even if they result in a negative balance. If and when it does, there’s no charge.
No maintenance fee for younger users. Smart Money has no monthly maintenance fee for users under 25. It qualifies as a free checking account for younger folks.
No way for older users to waive the maintenance fee. Smart Money does have a maintenance fee ($5 per month) for users 25 and older. This is low as checking account maintenance fees go. But it’s also unusual (in a bad way) because there’s no way to waive it. Most checking accounts waive maintenance fees if you maintain a minimum balance or incoming direct deposit.
Key Features of the BMO Harris Smart Money Account
The BMO Harris Smart Money Account is a straightforward checking account for people who don’t need many bells and whistles.
Age Restrictions
Smart Money has no official age restrictions. Kids under age 18 can open an account with a parent as a joint owner, and anyone 18 or older can open an account as the sole owner.
However, Smart Money does make an important distinction between account holders under age 25 and those 25 and older. While there’s no monthly maintenance fee for users under age 25, users 25 and over must pay a $5 monthly maintenance fee. There’s no way to waive this fee, either.
Minimum Deposit & Balance
The minimum deposit to open this account is $25. Once opened, there’s no ongoing minimum balance.
ATM Network
BMO Harris belongs to the Allpoint ATM network, which has more than 40,000 fee-free ATMs across the United States. These ATMs are relatively evenly distributed across the country, including in many locations where BMO Harris has no physical branches.
Smart Money doesn’t reimburse out-of-network ATM fees, however. Be sure to use Allpoint ATMs to the extent possible.
Possible Account Fees
Smart Money has no maintenance fee for users under 25 and an unwaivable $5 maintenance fee for users 25 and older. It has no overdraft fee for any users, though BMO Harris declines most transactions that would result in a negative balance.
Other possible fees include:
A $2 paper statement fee per month
A $3 fee for each out-of-network ATM transaction
A $3 fee for each check image if you’re not opted into paperless statements
Mobile Features
Smart Money users get access to BMO Harris’s user-friendly mobile app. Notable capabilities include:
No BMO user fees for person-to-person Zelle transfers (though other fees may apply)
Free mobile check deposit
Free budgeting and expense-tracking tools
A single view of all your BMO accounts, including bank accounts and credit cards
Advantages
Like the account itself, Smart Money’s advantages are straightforward: no maintenance fees for younger users, no ATM fees if you stay in-network, and excellent mobile features, to name a few.
No monthly maintenance fee for younger users. BMO waives the $5 monthly fee for account holders under age 25. That makes Smart Money an appealing choice for college students and recent college graduates.
No overdraft fees. Though it declines most transactions that would result in negative balances, BMO waives overdraft fees and insufficient funds fees for such transactions anyway. If it allows negative-balance transactions to go through at its discretion, it still doesn’t charge an overdraft fee.
Big fee-free ATM network. As part of the Allpoint ATM network, BMO Harris has more than 40,000 fee-free ATMs in the United States. You can find these machines in every corner of the country, including places far from any physical BMO Harris branches.
Excellent mobile features. BMO Harris has a comprehensive, user-friendly mobile app with useful, time-saving features like mobile check deposit and Zelle transfers.
Disadvantages
Smart Money’s biggest downsides include an unavoidable monthly fee after age 25, unavoidable ATM fees outside the Allpoint network, and no sign-up bonus for new account holders.
No sign-up bonus. Unlike the BMO Harris Premier Account and the BMO Harris Smart Advantage Checking Account, the BMO Harris Smart Money Account has no sign-up bonus for new account holders. If you’re looking to pad your balance early on, consider one of those instead.
Can’t waive the monthly fee after age 25. Most checking accounts offer a way around their monthly maintenance fees, and sometimes several. Often, maintaining a minimum balance of a few thousand dollars or receiving a recurring direct deposit does the trick. Smart Money is different — in a bad way. There’s no way to waive the $5 monthly fee after you turn $25.
No out-of-network ATM fee reimbursement. Smart Money doesn’t reimburse out-of-network ATM transaction fees. These can really add up, so if you expect to use non-Allpoint ATMs often, consider an account with a more generous reimbursement allowance.
How the BMO Harris Smart Money Account Stacks Up
The BMO Harris Smart Money Account is one of three BMO checking accounts. Before you open yours, see how it compares to the highest-end account in the BMO family: BMO Harris Premier.
BMO Harris Smart Money
BMO Harris Premier
Monthly Maintenance Fee
$5, limited waiver only
$25, but can be waived
Waiver Requirements
Only waived if you’re under 25
Yes, required $10,000+ balance
Overdraft Fee
$0
$0
ATM Fee Reimbursement
None
Up to $25 per month
Credit Card Benefits
None
Up to $75 in quarterly spending bonuses
Mortgage Benefits
None
Closing cost and interest rate discounts
Interest on Balances
None
0.01% APY
Final Word
If you’re a college student or recent college graduate looking for a basic checking account that lets you spend as you please, wherever you please, the BMO Harris Smart Money™ Account makes sense for you.
Just don’t expect Smart Money to be anything more than it claims. With no sign-up bonus or perks beyond fee-free in-network ATM withdrawals, it’s not a lifelong checking account. Better to use it as you work to build your net worth, then trade up to a more generous product — whether with BMO or another bank of your choice.
The Verdict
Our rating
BMO Harris Smart Money™ Account
The BMO Harris Smart Money Account is a no-frills bank account with few fees and an above-average mobile experience. It’s ideal for people under age 25, who pay no monthly maintenance fee no matter what.
Editorial Note:
The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
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Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.
Is saving for retirement important? Some people think so. But, if you love spending all of your money on things you want right now, like lavish vacations and designer clothing, then maybe learning how to save money for retirement isn’t for you.
Just kidding, that’s horrible advice.
Your future is very important and you can significantly damage it if you are only thinking about the present.
Let me tell you again, saving for retirement is extremely important. If you keep putting it off, it’s only going to get harder, and it’ll most likely add a lot of stress to your life.
Even though prioritizing your future is important, the average person is behind when it comes to saving for retirement.
Saving for retirement now is important for many reasons, such as:
It can help make sure you aren’t working for the rest of your life.
You can retire sooner rather than later.
You can lead a good life well after you finish working.
Compound interest means the earlier you save the more you earn.
You won’t have to rely on your children or others in order to survive.
As you can see, saving for retirement is very important.
However, according to a survey done by GoBankingRates, 56% of Americans have less than an average of $10,000 in retirement savings and 33% have no retirement savings at all.
This is a very scary statistic, and the image below illustrates is further.
Related:
Other interesting statistics found in this survey include:
42% of millennials have not begun saving for retirement.
52% of Gen Xers have less than $10,000 in retirement savings.
About 30% of respondents age 55 and over have no retirement savings.
26% report retirement savings with balances under $50,000, an insufficient amount for people nearing retirement age.
Nearly 75% of Americans over 40 are behind on saving for retirement.
These statistics terrify me.
And, it isn’t just young people without retirement savings, because as you can see around 30% of respondents age 55 and over have no retirement savings.
That is a lot of people who are close to or at retirement age with very little retirement savings!
So, why is this?
Why aren’t people saving for retirement?
They’re trusting ridiculous articles about not saving for retirement.
Sadly, there are many articles that say it’s okay to not save when you’re young.
However, you should never listen to a person telling you not to save money for retirement. Or perhaps, people are just agreeing with these ridiculous articles because it makes them feel better about how they aren’t saving for retirement?
Whatever the reason may be, everyone needs to face their fears and build their retirement savings.
I have read countless articles, such as If You Have Savings In Your 20s, You’re Doing Something Wrong, that tell people not to save money. I’ve even had people tell me that I’m not living the way I should because I’m saving for retirement.
I really hope no one is listening to this kind of advice, because there are so many reasons to start saving for retirement as early as you can. I don’t think I’ve ever heard someone say “I regret all that money I saved when I was younger.”
In fact, it’s usually the exact opposite.
You should start saving as much money as you can, as soon as you can, because it’ll help you be better prepared for the future.
Many people believe that 5% is enough to save.
There are a lot of people that think saving between 1% and 5% of their income is enough in order to be on track for retirement.
Sadly, that most likely won’t be enough to retire.
Instead, you should watch your spending now and/or find ways to make more money, so that you can start saving for retirement.
By spending less money, you’ll decrease the amount of money you need for the future, including money for emergency funds, retirement, and more.
Just think about it: If you are currently living a frugal lifestyle, then you will be used to living on less in the future. This means that your retirement savings doesn’t need to be as large, which means it may be easier to reach that savings goal.
According to the U.S. Bureau of Economic Analysis, the personal savings rate has averaged around 5% in the past year, and averaged 8.33% from 1959 until 2016.
While 5% is better than nothing, even just one small emergency each year could easily and completely wipe out that savings.
Further, saving just 5% means it will take you a very long time to retire. Mr. Money Mustache has a great graphic in his blog post The Shockingly Simple Math Behind Early Retirement that shows you how your savings rate can dramatically impact when you’ll retire. For example:
With just a 5% savings rate, it would take you 66 working years until you reached retirement.
A 25% savings rate means that it would take you 32 working years to retire.
A 50% savings rate means that it would take you 17 working years to retire.
A 75% savings rate means that it would take you 7 working years to retire.
So, by saving more of your money, you are likely to retire sooner. Sounds amazing, right?
Related: Do You Know Your Net Worth?
A lot of people don’t understand compound interest.
Saving for retirement as soon as you can is a great thing, especially because of the power of compound interest.
With compound interest, time is on your side- meaning you should start saving money as early as you can.
Compound interest is when your interest is earning interest. This can turn the amount of money you have saved into a much larger amount years later.
This is important to note because $100 today will not be worth $100 in the future if you just let it sit under a mattress or in a checking account. However, if you invest through your retirement account, then you can actually turn your $100 into something more. When you invest, your money is working for you and growing your savings.
For example: If you put $1,000 into a retirement account with an annual 8% return, 40 years later you will have $21,724. If you started with that same $1,000 and put an extra $1,000 in it for the next 40 years at an annual 8% return, that would then turn into $301,505. If you started with $10,000 and put an extra $10,000 in it for the next 40 years at an annual 8% return, that would grow into $3,015,055.
Side note: I recommend you check out Personal Capital if you are interested in gaining control of your financial situation. Personal Capital is similar to Mint.com, but much better. Personal Capital is free and it allows you to aggregate your financial accounts so that you can easily see your whole financial situation, including investments.
Some think it’s normal to not have retirement savings.
Many people normalize their debt or low savings rate (or even lack thereof) because they assume others aren’t doing so well either.
Well, why would you want to be normal, especially when it comes to saving money?
You should always strive to do your best as sometimes “average” is not good enough for you to live a financially successful life. Keep in mind that the average person is not the greatest with money, and many are wrecked with stress and hardship due to their unfortunate financial situation.
Just because the average person has a low average savings amount doesn’t mean that you have to be in that same financial situation. Instead, you should be in control of your own life!
If you want to be even better than the average, I highly recommend reading The Average Net Worth For The Above Average Person on the Financial Samurai website. It is an excellent article that can motivate you to improve your finances.
According to Financial Samurai, the average net worth of the above average person is:
Remember, striving to be above average means you can take control of your financial situation, retire on time or even early, and live a happier life.
People think that saving for retirement means you won’t have fun.
As you all know, I really dislike the myth that people who save money are boring. That’s not true at all.
I believe that you can find a balance while living a good life and saving a comfortable amount of money.
There are plenty of ways to live an awesome life while saving money and budgeting realistically. Yes, you can still see your friends, have fun with your loved ones, go on vacations, and more.
Here’s a list of some early retirees who are leading great lives. I definitely recommend reading about them:
If you want to learn how to save for retirement, then learning how to be happy with yourself and figuring out affordable ways to enjoy life are key.
Related article: How To Have Frugal Fun
Women are 27% more likely than men to have no retirement savings.
In fact, 63% of women say they have less than $10,000 saved for retirement to NO savings for retirement at all, which compares to 52% of men in the same situation.
To change this money statistic, please read The Smart Woman’s Guide To Investing Success. Here’s a quick snippet from that blog post:
“Women face different obstacles than men do when it comes to investing in the stock market. Right off the bat, they tend to have less in savings because women often take time off to raise children. With years of not earning a salary, there is no money being saved and compounded upon.
In addition to this, women typically outlive men by close to 10 years on average. Therefore, it is important as a woman to invest in the stock market.”
Some people think they don’t need to save yet.
Instead of thinking that you’re invincible and that you have all the time in the world to improve your finances, you should stop procrastinating and learn how to build your wealth now.
Many people push things off and/or spend their money carelessly because they think they can start tomorrow, next month, and so on. However, for everyday that you push off saving for retirement, the further away and harder you’ll have to work towards your goal.
Stop wasting time and take control of your financial situation now.
Read Why Saving Money In Your 20s Is A Good Idea to learn more.
Many think their income will never end.
Yes, there are many different types of jobs and your income potential is pretty much unlimited. However, you never know how long you’ll be making money, whether you’ll come across medical issues, or how long your job will last.
You might be thinking “But I enjoy my job!”
While it’s great to love your job, you should still be saving for retirement. I have heard far too many people say they don’t need to build their retirement savings account because they love their job enough to just work forever and still be happy.
However, what happens when you can no longer work? You don’t know what the future will bring. You may encounter a medical problem, a serious life event, you may hate your job 20 years from now, and so on.
Remember, nothing is guaranteed.
So, instead of spending every last penny, you should find ways to start saving for retirement.
What you need to do to jump start saving for retirement.
The sooner you start saving, the sooner it will become a habit. By saving for retirement now, you will learn good retirement savings practices that will help you well into the future.
I always say that the first step to investing is to just jump in. However, what if you don’t even know how to start investing and saving for retirement?
If you are like many who don’t know how to begin, here are the easy steps to start saving for retirement:
Start saving your money. In order to invest your money, you need to start setting aside money specifically for it. The amount of money you save for investing is entirely up to you, but in general, the more the better.
Do your research. Before you start dumping your money into the stock market and other investments, it’s a good idea to know what you’re putting your money towards. Researching various investment-related tips will help you become more informed about your investing decisions, which only means you will make better decisions well into the future.
Find an online brokerage or someone to manage your investments. There are two main ways to invest your money- yourself through a brokerage or you can find someone to manage your investment portfolio for you. You will need to chose one of these options to actually start investing your money. Personally, I like to do everything myself through Vanguard.
Decide how you will invest. How you invest depends on your risk tolerance, the time period for which you are investing (when will you retire?), and more. Generally, the sooner you need your funds the less risk you will take on, whereas the longer your time period is, then the more risk you may be willing to take.
Track your investment portfolio. This is important because you may eventually have to change what you are invested in, put more money towards your investments, and so on.
Continue the steps above over and over again. To invest for years and years to come, you will want to continue the steps above over and over again. Now that you know the steps it takes to invest your money, it only gets easier.
As you can see, saving for retirement isn’t impossible. By starting now, you’ll set yourself up for a much better future.
Have you started saving for retirement? Why or why not?
This guest post from Corinne is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks with all levels of financial maturity and income.
At my previous job, I was paid on a monthly basis. I loved it. I got all my money for the month upfront, so it didn’t matter when I scheduled automatic savings or investment transfers.
When I moved to a job that was on a bi-weekly payroll schedule, I had to make sure the transfers were split across the month so I didn’t inadvertently empty my checking account! I was grumpy about it at first, but I’ve come to discover a wonderful secret about getting paid bi-weekly: If you’re on a biweekly payroll schedule, you’re getting a couple of “bonus” pay checks every year! Yes, that’s right. Bonus checks. Let me explain.
The Bonus of Bi-Weekly Pay
If you’re like me, your budget is constructed around a month’s worth of expenses. Most bills are monthly, rent or mortgage payments are monthly, and I’m betting you plan your grocery spending by how much to spend in a month. Maybe someone budgets by quarter or even by year, but not many people do.
So in any given month, you can expect to bring home two paychecks. Let’s say you take home $1000 with each check. Your budget allocates how to spend $2000 every month.
But wait a minute. Are you paid bi-weekly? If you look at a calendar, you’ll find that in some months, you actually receive three paychecks. Don’t believe me? Have a look at March. Say you get paid every two weeks on Friday. If your first check came on the 2nd, your next came on the 16th, and the third was on the 30th. All your expenses have been entirely covered by the first two checks; this is the amount of money you planned on receiving. The third is pure gravy!
Assuming you’re not living paycheck to paycheck and have enough of a buffer in your primary savings account, this is a huge opportunity to hit your some of your financial goals hard.
Putting the Bonus to Work
What might you do with this “bonus” money? The possibilities are endless, of course. Here are just a few suggestions:
Fund a holiday account. I don’t have any consumer debt and I invest regularly anyway, so this is my personal favorite. With my first “bonus” check, I grab $500 and stick it in a ING savings account called “Christmas Fund.” When the most wonderful time of the year comes around, I can enjoy it and not worry about all the money I’m spending; it was allocated for that purpose long ago.
Pay off high interest debt. If you’re carrying credit card debt, you can use your bonus check to make a serious dent in it (or perhaps pay it off entirely!). This is a brilliant way to spend your bonus money; you get an automatic return of whatever interest rate you’re paying.
Make an extra mortgage payment. I’m a renter in Brooklyn, so I know very little about mortgages! However, I have read that making one extra mortgage payment a year is supposed have a great impact on the overall amount you spend to pay off your mortgage. Maybe you’ve thought about doing this before, but wondered how to find the extra money to do it. Using your “bonus” check makes it completely painless.
Max out your IRA. If you’ve got extra room in your Roth IRA or traditional IRA, why not max it out with your “bonus” money? Remember, you’ve got until 4/17/2012 to contribute to your 2011 IRA. The limits are $5,000 if you’re younger than 50 and $6,000 if you’re older than 50. If you don’t have an IRA yet, then start one with your “bonus” money!
Start (or contribute to) an emergency fund. If you don’t yet have an emergency fund, start one with this “bonus” check. You’ll immediately have half a month’s expenses covered. In fact, you could build your emergency fund entirely through “bonus” checks. If you get two “bonus” checks a year, in three years time you’ll have a three month emergency fund. Not bad for pretty much no effort!
Treat yourself! After regularly reading about personal finance for three years, I’ve become pretty good with money. In fact, I might be frugal to a fault. If you’re like me, you might want to use your “bonus” check as an opportunity to enjoy life. Take a spur of the moment trip, go out to that expensive restaurant you’ve been drooling over for years, or buy thoughtful gifts for your loved ones. I’m thinking about using some “bonus” money to go on a hot air balloon ride for my birthday!
Naturally, you’ll want to spend your “bonus” money in the best way possible for you and that depends on your own unique circumstances. So, what are you doing with your “bonus” money?
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When you are trying to tighten down the hatches on your spending, you are doing everything possible to stick to your budget.
You are determined to stick to your budget this time around. But, you always hear that budgeting can be hard.
Well, here are some quick budgeting tips that will make sure to stick to your budget.
As most new budgeters learn, they struggle to stick to a budget for their monthly expenses. It is a natural process everyone goes through.
Budget, if you are looking for an easy button, then learn which payment type is best if you are trying to stick to a budget.
Especially if you spend a lot of time on social media, studies have shown you are more likely to overspend. So, you must learn which payment type will have you stick to a budget.
Then, you may be wondering and wanting help deciding which payment type is best for you.
The Optimal Solution Payment Type Solution
The most efficient payment type is something that is instantaneous and there are no fees associated with the transaction.
Cash is the most efficient payment type: Cash payments are usually the most efficient and convenient way to pay for goods or services.
Credit cards can be a less favorable option: Credit cards tend to have high-interest rates and can lead to financial disaster if used irresponsibly.
Debit cards are a great way to keep your spending within your budget: Debit cards should be considered a top priority for budgeting because they keep you within your spending limits.
Developing a budget will help you avoid financial disaster: A budget helps you stay organized and make informed decisions about which payment method works best for you.
Today, there are so many options on which payment type to use in today’s online world.
1. Cash
Cash is a payment type that can be used to reduce debt spending. It is versatile and can be used for a variety of expenses, such as groceries, medical bills, and gym memberships.
Cash is an excellent choice for people just starting to budget and save.
It is more restrained than credit or debit cards. The envelope method of cash budgeting can be used to train your brain to reduce spending. Cash is the most traditional payment method and has the fewest drawbacks. However, you need a safe place to store your cash, and some stores may not accept it.
Benefits of Cash:
Cash is an excellent payment type when your financial goals are to reduce debt spending.
Cash is a finite payment method that prevents you from overspending.
You have a set amount of money to spend each month, so there’s no chance of overspending.
Easy to track with the envelope method: Utilizing the envelope method ensures that you are tracking your spending (i.e groceries, gas, medical bills) and making sure that you aren’t overspending.
Cash is a quick and easy way to pay for goods and services.
No Fees. No maintenance fees or interest rates as credit cards. Cash is just plain cash – printed paper of currency.
You can avoid high fees associated with card transactions: There are no associated fees when paying with cash, making it the cheapest option overall.
Cash discounts may be available. Since you are paying with cash many small businesses offer a cash discount of 2-5%.
You can use cash at any store: No need to carry around extra cards or checks.
It’s easy to get cash: You can easily get cash and make extra cash.
There’s no need for bank account details: No need for bank account details means you’re free from identity theft risks and other inconveniences that come with having a bank account.
Cash allows you to skirt some financial regulations: Because cash payments don’t fall under the purview of many financial regulations, businesses can take advantage of loopholes in the law that allow them to charge higher interest rates on loans or engage in shady business practices. (highly recommended to stay above book)
Cons of Cash:
Possibility of losing or stolen cash: Keep your cash in a safe place!
You need a safe place to store your money: Another disadvantage of using cash is that you may need a safe place in which to keep it – some stores don’t accept it as a payment method.
Why Choose Cash?
Total control over your money, so there’s little chance of unexpectedly running out of funds.
Cash is a great way to stay on budget, as you can easily track your spending and see where you need to cut back.
Unpleasant to spend money with cash, which can help train your brain to reduce spending.
Cash is a quick and easy way to pay: Using cash eliminates the need for banks, credit cards, or other forms of payment.
Verdict: Paying with cash is the best method for budgeting and saving.
Overall, cash is a great payment type when it comes to budgeting. You can immediately see how much money you’ve spent and what needs to be cut back.
You can’t make impulsive buying decisions with debit cards or credit cards.
With a finite amount you can spend, cash is an excellent choice to prevent overspending. According to research, paying with cash can feel unpleasant, which can train your brain to reduce spending as much as possible.
2. Credit cards
Credit cards offer a number of benefits, including convenience, cash back, and the ability to make large purchases or pay bills in case of emergency. However, credit cards also come with credit card debt and can lead to overspending and financial problems if not used carefully.
For many, credit cards are the easiest way to blow your budget because you don’t have control over how much money you spend.
It is possible to overspend with credit cards if you are not mindful of what you charge.
On the flip side, this is a preferred method as many credit cards also offer rewards programs that give you cash back or points for purchases. If you make the conscious decision to use credit cards, you must make payments on time to avoid penalties.
Benefits of Credit Cards
Credit cards are convenient: Convenient to use and don’t have to worry about losing cash.
Use a credit card if you are disciplined and have strict spending habits: If you are disciplined and have strict spending habits, then using a credit card can work well for budgeting purposes.
Flexibility on larger purchases: Some benefits that come with having a credit card include more cash flow as well as being able to make larger purchases.
Credit cards provide support in times of crisis: Many credit cards offer extended services that can help like 24-hour fraud protection, lost wallet services, traveler’s insurance, and many other benefits – check each issuer for details.
$0 Liability on Unauthorized charges: Your credit card company will not be held responsible for any charges that were not authorized by you. This means that if you did not authorize a charge in person, online, or otherwise, you will not be responsible for it.
Fraud protection: Check your credit card issuer, but many offer fraud protection.
New card introductory APR is helpful to pay down debt: The introductory APR for the new card may not last long.
Payments on balance transfer should be manageable: Make sure that the payments on your balance transfer are manageable.
Points: You can accrue points along with your spending which can be a great perk.
Credit card interest rates are significantly lower than payday loans: Interest rates on credit cards are usually much lower than payday loans.
Due Date is After your statement closes. Since your bill cycle is at least another 21 days between the closing date for your statement and the due date, it gives you flexibility. Personally, I still account for the credit card bill in the same month that it was accrued.
Cons of Credit Cards
Potential for credit card debt: When using a credit card, be aware of your credit limit and the interest rate that you will have to pay on your debt. Also one of the categories of debt.
Credit limit often leads people to spend money: The credit limit often leads people to spend money by giving them a false sense of security, when they should stick to a budget and pay attention to their credit card statement and the billing cycle.
Credit card overspending can lead to debt: Consider the purchase if it is essential or delay it if possible.
Ability to easily purchase something you cannot afford. Buying something that you don’t have the money saved up for will cost you interest fees associated and maybe even with a credit card balance transfer.
There are a number of fees associated with a balance transfer: Transfer fee, interest on new purchases charged to the card.
Your introductory APR may not be valid if you make too many payments late: If you fall more than 60 days behind on payments your introductory APR might be canceled and you may face higher interest rates.
Credit score can suffer from debt: When you carry a credit card balance or don’t pay your monthly bills on time, you will lower your credit score.
Avoid carrying a balance: Pay your statement in full each month to avoid paying interest and maximize your grace period.
Key Takeaways on Credit Cards
Make sure to pay attention to the dates: Don’t spend more than you can afford, and make sure you’re making your minimum monthly payments on time so that your debt doesn’t increase over time.
A credit card can be used for budgeting only if you’re very disciplined: If you know that overspending is NOT an issue and you pay the credit card’s monthly balance in full, then using a credit card is fine.
Credit card transactions usually take several days to register in the feedback system: Something to look out for!
You can step back into debit cards or cash if needed: If credit cards are not for you, there are other options available such as debit cards or cash
3. Debit cards
Debit cards are a good option if you want to stick to a budget because the predetermined amount of funds can help you stay within your means. Additionally, debit cards are more convenient than cash and just as accepted as credit cards in most places.
A debit card works more similarly to cash than to credit cards.
They provide an easier way to track your spending and avoid having to carry a lot of cash.
Pros of Debit Cards:
No Need to Carry Cash: A debit card is better than cash because you don’t have to carry a lot of paper money and change around, and they’re also safer.
Debit cards are faster and easier to use: Debit cards work just like credit cards – withdrawing cash, making purchases, and paying bills – but they are linked directly to your bank account, so there is no need to carry around a separate cash envelope wallet or purse for them.
A debit card is a good option if you want to stick to a budget: Debit cards come with a predetermined amount of funds that you can spend from your bank account just like cash.
Tracking payments is easy with debit cards: Your debit payments will appear on your issuer’s dashboard, which you can monitor anytime from any location.
Convenience: Debit cards are more convenient to use and faster than needing to write a check or carry around cash. Plus they don’t add to your debt.
Shopping online is easy. You can use your debit card to make online purchases with your bank account, and digital banking tools make tracking your spending easy.
Points: Some debit cardholders can earn points for spending on their cards, which can be redeemable for rewards such as cash back or gift cards. This is new to compete with credit cards.
Fraud protection is typically offered for free with most debit cards—meaning if your card is stolen or used without your permission, you can get your money back.
No impact on your credit report. When you use a debit card, the funds are actually withdrawn from checking or savings accounts so there is no credit reporting occurring.
Cons of Debit Cards:
An overdraft on a debit card can happen when a purchase exceeds the amount of money in the checking account, leading to overdraft fees.
Funds on hold with fraudulent charges. If your account gets hacked, your losses will be limited since most banks protect their users against fraudulent charges and online purchases with their accounts. However, those funds will be held while they investigate and you may be liable for $50.
No chance to improve your credit score. Since you are not borrowing money, you are unable to improve your credit score.
Debit cards are a great way to keep your spending within your budget and avoid overspending which can lead to many detrimental issues.
Regardless of the overdraft fee, debit cards are still better than cash because they’re safer and easier to carry around.
4. Checks
Checks… do people still write checks? Why yes they do!
Checks offer a few benefits as a payment method, even though they are slowly being replaced by more modern options.
This can help you keep track of your spending and make sure you do not overspend. Additionally, if you ever need to dispute a charge, having a check can be helpful in proving what you paid for.
What is a check?
A check is a written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer from the check writer’s account. The date is usually written in month/day/year format. The signature of the check writer is usually on the line below “Pay to the order of.”
There are three main types of checks:
A cashier’s check is a check guaranteed by a bank, drawn on the bank’s own funds, and signed by a cashier.
A certified check is a personal check for which the bank has verified that there are sufficient funds to cover the payment.
A personal check is one that you write yourself and that is not guaranteed by the bank.
Pros of Checks
Checks are still a payment option: Checks are one of the traditional payment methods, but it is slowly dying out because of modernization.
Physical written record. It can be helpful to have physical copies of checks in addition to digital records through the bank.
You need to make both digital and physical copies of the check: Save check stubs but also transfer the information to a budgeting system.
Cons of Checks
Saving check stubs is helpful, but you still need to transfer the information to a budgeting system: Useful for tracking spending, but you’ll likely want more detailed records than just check stubs.
Not as convenient as credit or debit cards.
5. Apple Pay or Apple Cash
Apple Pay is easy to use and convenient since you only need to connect your smartphone to your cards and bank accounts via the app.
It is easy to use since you just hold your phone up to the reader and wait for the payment screen to appear.
You can even get cash back with apple pay.
Pros of Apple Pay:
Apple Pay is easy to use and convenient: You only need to connect your iPhone to your cards and bank accounts via the app.
You don’t need to carry any extra cards or cash: No need for additional cards or cash when you’re out and about
You can use Apple Pay on different devices: You can use Apple Pay on your iPhone, iPad, and Mac.
Transactions are secure: Your transactions are secured with Touch ID or a passcode.
Set up Spending Limits for each user. This way you can make sure you (or others with authorized access) are not spending more than you intended. Learn how.
Protection of Data during transactions. Your actual credit card number is changed to a different digital number, which allows limits your card number’s exposure.
Cons of Apple Pay:
Not widely accepted (yet). This method of payment is 100 percent guaranteed. While many stores offer apple pay, not all do quite yet.
The same rules apply if you load apple pay with a debit or credit card drawbacks include late fees, interest rates, and overspending: Keep that in mind when choosing Apple Pay as your payment method.
6. Mobile wallets like Google Pay, Samsung Pay, Venmo, or Zelle
Mobile wallets are digital payment systems that allow you to pay for items with your smartphone. Many people find mobile wallets are very convenient and becoming a traditional method of payment (such as credit cards).
With mobile wallets, you are making digital payments without having to carry around cash or cards using just your smartphone.
Mobile wallets are easy to use and provide instant payment convenience, making them perfect for shopping online.
Pros of Mobile Wallets:
Mobile wallets use credit cards and debit cards: Connect your smartphone to your bank accounts and use it for digital payments.
Mobile wallets are easy to use and convenient: Instant payment convenience makes them perfect for shopping online as well.
No need for cash or cards: No need for cash or cards.
Strong secuirity features provide privacy and security features that ensure your personal information is safe from data breaches and unwanted charges.
You can make purchases without having to show your identification: You can make purchases without having to show your identification.
Additional Layer of Security. Additionally, mobile wallet data is protected with verification, such as fingerprints.
Cons of Mobile Wallets:
With Zelle and Venmo, it is easy to send money to the wrong person or add an extra zero and send more money from planned. More often than not, it is difficult to recover your money.
You need to be disciplined when using a mobile wallet: Pay attention to late fees and interest rates, as well as the amount you spend in a month.
7. Prepaid Cards or Gift Cards
A prepaid card or a gift card could be right for you. The advantage of these is the mere fact that you reached the limit is enough to deter overspending.
It can make you think twice about whether you need to purchase an item or not.
Pros of Prepaid Cards and Gift Cards
Easy to use: Prepaid and gift cards are easy to use and manage your finances with.
The mere fact that you reached the limit is enough to deter overspending: It can make you think twice about whether you need to purchase an item or not.
No strings attached: No need to worry about any fees associated with the prepaid card once activated.
Privacy: The prepaid card does not track your spending or use any personally identifiable information.
Credit Score Doesn’t Matter: Your credit score does not matter when obtaining a prepaid card.
Cons of Prepaid Cards or Gift Cards
Losing a prepaid card is not a fun experience. Contact the prepaid card issuer right away to protect the funds on the prepaid card.
Fraud protection: Consider whether your prepaid card issuer offers any theft or fraud protection, as not all providers offer this feature.
Prepaid cards have limits on how much money you can load onto them, which can be frustrating if you need to make a large purchase.
8. PayPal
PayPal is a very convenient way to pay for items online or in person. It is widely accepted and used by many people.
PayPal is a digital payment service that offers convenience and ease of use. You can use them to send money to people or pay for online purchases.
However, because these services can only be used online, they should not be relied on as your sole method of budgeting and tracking expenses. Instead, consider Paypal in combination with another budgeting tool, like a spreadsheet or app, to get a fuller picture of your spending.
Pros of PayPal:
PayPal is one of the most popular online payment methods: Widely accepted and used by many people.
You can use them to send money to people or pay for online purchases: Help you review your spending prior to purchase.
Cons of Paypal:
EasyTarget for phishing scams. A phishing scam is when someone tries to trick you into giving them your personal information, like your password or credit card number. They might do this by sending you an email that looks like it’s from PayPal, but it’s not. Or they might create a fake website that looks like PayPal. If you enter your information on these sites, the scammers can then use your account to make purchases or send money to themselves.
Reputation for poor customer service. This is evident in their customer service ratings, which are some of the lowest in the industry. The majority of complaints against PayPal revolve around poor service received when asking for assistance with fund freezes and account holds.
9. Cryptocurrency (ie: Bitcoin)
Cryptocurrencies offer a new and innovative way of handling payments. They’re not yet widely accepted, so there’s potential for businesses to get in on the ground floor with this new technology.
However, because cryptocurrencies are so new, it’s uncertain if they will be regulated or not. This could pose a challenge for businesses down the road.
Pros of Crypto
Not subject to the same regulations as traditional currency, which makes them appealing to those who want to avoid government intervention.
The valuation of Crypto changes rapidly. If you are smart with crtyple this is a great way to spend your crypto coins.
Cons of Crypto
Cryptocurrencies are not accepted everywhere: Cryptocurrencies are not accepted by most organizations yet, which it makes it difficult to use them in day-to-day life.
It’s unclear if cryptocurrencies will be regulated: It’s uncertain if cryptocurrencies will be strictly regulated or not. This poses a challenge for those who want to use them as a payment method.
Bitcoin and other cryptocurrencies are still in their infancy: Bitcoin and other cryptocurrencies have only been around for a few years, so they may still face challenges in the future.
Here are the most popular budget apps today:
Other Payment Methods:
ACH payments
ACH Payments is an excellent way to pay bills and other financial obligations: You can easily set up a billing cycle for recurring payments, making it safe and convenient.
Fewer people are aware of your transactions when using ACH payments, reducing the chances of fraud or theft.
Key Facts:
Fewer people know about your transactions when using ACH payments, reducing the chances of fraud or theft.
Your checking account information is not shared or accessed by the system in any way.
You can quickly pay bills and other expenses with ACH payment: Financial institutions offer this as part of their deals.
When setting up recurring bills with ACH payment, you are aying your bills on time is important for maintaining a good credit score.
Pay attention to your check account balances: Make sure you have enough funds in your check account to avoid paying overdraft fees.
Money orders
A money order is a document that orders the payment of a specified amount of money. Money orders are convenient because they can be bought at many locations, including post offices, banks, and convenience stores.
To get a money order, you will need to fill out a form with the payee’s name, the amount of the payment, and your contact information. You will then need to purchase the money order with cash or a debit card.
To cash a money order, you will need to take it to a bank or post office. You will need to show identification and sign the back of the money order. The teller will then give you the cash for the payment.
More secure than cash: Money orders are more secure than cash because they don’t require a bank to make the transaction.
Less convenient: money orders are less convenient because you must purchase them in person.
Able to trace. They are also more secure than cash because they can be traced if lost or stolen.
Wire Transfers
Wire transfers are a more secure way to transfer money than traditional methods like checks and cash. These are sent through the banking system and are usually processed within two business days.
Typically, wire transfers are used when sending and receiving large sums of money (over $10000).
More secure than cash: Wire transfers are more secure than cash as the bank verifies there is enough money to make the wire transfer.
Fees involved with using a wire transfer. Most institutions charge for handling a wire transfer.
What method of payment is best?
Cash is the most widely accepted form of payment, but debit and credit cards are very popular.
The payment method that is best for you depends on which one helps you to stick to your budget and spend less money. The goal is to be financially stable.
What method is best for sticking to a budget?
There are several different types of budgeting methods that people use in order to manage their finances. Many people focus on using the 50/30/20 method, in which each percent corresponds to a different category of expenses.
There are plenty of budgeting tools available today to make sure you stick to your budget.
You need to find what works best for you. At the end of the month, you want to spend less than you make. That is the winning combo!
1. Budgeting App
There are many budgeting tools available online, which can be helpful as it can be easier to track your progress and budget over time.
You can use various popular budgeting apps like Quicken, Qube Money, or Simplifi.
These apps can help you track your spending, set goals, and stay on track with your budget.
2. Paper and Pen or Simple Spreadsheet
Some people find that they prefer using a simple spreadsheet or paper budget. This may be due to personal preference or because they find it easier to understand and use.
Additionally, using a paper budget may help you stay more organized as you can physically see where your money is going.
Options to get you started include our own budgeting spreadsheets or using an automated system like Tiller.
3. Envelope budgeting method
The cash envelope system is a good way to stick to a budget because it is rigid and based on envelopes and cash. You can’t get more money until your cash payday. So, this system helps you track your spending and budget better.
However, using only cash can have drawbacks as having large amounts of cash on hand can be risky.
The envelope method gives you a sense of control over your spending and makes it more tedious to write down your transactions. If you find writing down your transactions tedious, the envelope method may be too much for you.
4. Know Your Budget Categories and Track expenses
Tracking expenses is essential to move ahead financially: Knowing what you have spent in each category will help you make better financial decisions.
Be specific with your budgeting categories. Don’t make it too complicated. Always remember to include household items, clothing, and groceries when tracking expenses.
5. Prioritize your Budget Plan
A budget can provide a realistic picture of your finances, help reduce stress related to money matters, and guide you toward achieving your goals.
Creating a budget can help ensure that you are able to meet your financial obligations and still have money left over for savings and other goals. A budget can also help you track your spending so that you can make adjustments if necessary.
Make a budget plan: This will help you stay on track and make sure that you are spending your money wisely.
You decide where to spend money: A budget helps you set future goals and achieve your financial goals.
Creating a budget can help reduce stress: If you tend to get stressed about money matters, creating a budget can give you peace of mind.
A budget has other benefits beyond financial ones: If you want to achieve something in life, creating a budget can help guide you in the right direction.
See where to cut back spending. You can also look at your past spending habits to see where you can cut back. Sometimes it may be necessary to save more in order to achieve long-term goals, like buying a house or having a wedding. Always be mindful of your budget when making payments and spending money.
It’s a three-step process that involves basic math: Making a budget is simple and requires only basic math skills.
Stay on track: Making a budget plan will help you stay organized and keep track of your expenses.
A budget plan will help you stay on track and make sure that you are using the best payment type for your budget.
Making a budget is an easy way to save money. By following a few simple steps, you can keep track of your expenses and make sure that you are spending your money wisely.
Which type of payment is best for sticking to a budget?
One of the main pros of using cash as a method of payment is that it is the most efficient way to keep track of your finances. This is because it is very easy to budget when you are only dealing with cash.
However, many people prefer debit or credit cards are the best type of payment. They are more convenient than cash and can help you keep track of your spending. However, if you have a bad credit history or a low credit score, credit cards may not be the best option for you.
Cash payments are the most efficient: Most convenient and easiest to keep track with cash envelopes.
Credit cards allow you to accrue points along with your spending: These are a great benefit and one that can be a perk if handled well as part of your budgeting process. As long as pay them off in full each month to avoid credit card debt, high-interest rates, and other negative consequences.
Debit cards are also a good option for sticking to a budget. They can be used like credit cards but with less risk of debt.
Cash-based payments are a newer option and are more reliable: May not have as many negative consequences as other payment methods such as credit cards or loans.
What Not to Use when you are Trying to Stick to a Budget
You need to steer clear of these types of payments if you want to be financially stable person.
Personal loans
Personal loans are a risky way to budget. However, if you need the money for an emergency or unexpected expense, a personal loan can be a lifesaver.
There are many risks to consider and other ways to lower your spending before resorting to a personal loan.
Loans can cause budgeting problems: Loans can mess up your budget and make it difficult to stick to spending plans.
Taking out a personal loan just for the sake of having money can disrupt your budgeting: Consumers often borrow money in order to pretend they’re doing better financially than they really are.
Borrowing money is usually not a good idea: When you borrow money, you may find that you cannot handle seeing low checking account balance, which can lead to deeper debt problems.
Payday Loans
Payday loans are a bad option for someone looking for a long-term solution. They are expensive, and there is a high chance that the person will not be able to pay back the loan.
The interest that is charged is also high, and it can add up quickly.
Write bullet points about what happens with a payday loan
Payday loans can trap people in a cycle of debt, as they are often unable to pay back the loan in full on the due date.
When someone takes out a payday loan, they are borrowing money from a lender in a short amount of time, usually two or three days.
Payday loans are often expensive, with interest rates that can be above 300%.
Debt Consolidation Loans
Debt consolidation can be a good way to manage your debt because it can result in a lower monthly payment and extended payments may impact your financial plan. You can use a debt consolidation calculator to estimate how much debt you can afford before taking out a consolidation loan.
Debt consolidation loans also provide convenience because they have lower interest rates than payday loans. However, be careful when consolidating your debt because it is possible to overspend and lose your introductory APR.
You may be able to pay off your debt with one monthly payment: A consolidation loan often results in a much lower monthly payment than all of your previous monthly payments combined.
Extended payments may impact your financial plan: Take a look at how these extended payments will impact your financial planning.
You can estimate how much debt you can comfortably afford: use this tool – Tally .
It is possible to overspend with debt consolidation: If you spend more money than you planned on your day-to-day expenses, this could increase your debt. Consider if the purchase is necessary or if it can be delayed.
You may lose your introductory APR: If you fall more than 60 days behind on payments, you will likely lose your introductory APR and may even trigger a penalty interest rate.
You need to be careful when transferring a balance: Transferring a balance can also forfeit your grace period and you’ll need to pay interest on new purchases charged to the new card.
What type of payment method is best for sticking to a budget?
There are a variety of payment methods available, and each has its own benefits and drawbacks. It’s important to choose the payment method that’s best suited for your business and budget.
A payment method that allows you to stick to a budget is the best option.
FAQs
There are three main types of payment methods: cash, debit cards, credit cards, and cash-based payments.
The envelope budgeting method is a simple way to create a budget. You will need envelopes and divide your money up into the different categories that you spend money on. You will then put the corresponding amount of money into each envelope. This method can be helpful if you have a hard time sticking to a budget.
The zero-based budgeting method is a more methodical way to create a budget. With this method, you track every penny that you earn and spend. This can help you to see where your money is going and make adjustments accordingly.
A debit card is a plastic card that is linked to a checking account. Customers can spend money by drawing on funds they have already deposited. An overdraft on a debit card can lead to overdraft fees, which have high-interest rates.
A credit card is a plastic card that allows customers to borrow money up to a certain limit in order to purchase items or withdraw cash. Using a credit card can help build credit or improve your credit score.
There are a few different ways to use a credit card. You can use it to check your balance and review your spending history, which can be helpful in staying accountable.
Credit cards also offer online tools which make the analysis of your spending easier which can be helpful in tracking your budget.
Finally, you can use a credit card to rebuild your credit score by using it responsibly and paying off the balance in full each month.
Which payment type can help you stick to a budget?
When it comes to choosing a payment type that will help you stick to a budget, there is no one-size-fits-all solution.
The best payment method for you will depend on your specific needs and preferences.
When you are creating a budget, it is important to consider which payment type will help you stay on budget. Different payment types work better for different people, so it is important to experiment and find the one that works best for you.
As I stated for me, I have learned how to use credit cards to maximize cash back. But, I learned how to budget with cash when first starting.
Please pay attention to your budget and how it changes over time, as different payment types may work better at different stages of your life.
Consequently, I hope that this guide has given you a better understanding of the different payment types available and helped you narrow down your options. There are a variety of payment types that can help you stick to a budget, so it’s important to research each one carefully.
I highly recommend using an app to track your expenses and know where you spend your money. By developing a budget and choosing the right payment type, you can stick to your financial goals.
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In the past, you had to drive to your bank and work with a teller to manage your deposit accounts. These days, however, you have the option to complete virtually any banking need with any device that has internet access. You can pull out your smartphone and deposit a check. Or you may use your laptop to check your account balance.
That’s where banks called neobanks come in. It’s no surprise that neobanks are more popular than ever before. Let’s take a closer look at what they are and how they work so you can decide whether a neobank makes sense for your particular situation.
20 Best Neobanks
While traditional banks take up more market share than neobanks, you can still find a good amount of them if you do your research and shop around. The right neobank for you will depend on your unique lifestyle, needs, and preferences. To help you hone in on the ideal option, here’s our list of the top neobanks of 2023.
1. Chime
Founded in 2012, Chime is a financial technology company that offers banking services from The Bancorp Bank, N.A. and Stride Bank N.A. The Chime Checking Account is free of monthly maintenance fees and no minimum balance requirements.
Its perks include early direct deposit, automated savings features, access to over 60,000 or more fee-free ATMs, and free debit card replacement. In addition, you can take advantage of SpotMe and get up to $200 in fee-free overdrafts.
There’s also a Chime’s Savings Account, which offers a competitive interest rate with no cap on the amount of interest you can earn. Other services include Secured Chime Credit Builder Visa® Credit Card that doesn’t require a credit check, making it a suitable option if you have limited credit. Chime should be on your radar if you prefer a one-stop-shop for all of your banking needs.
You can read our full Chime review to learn more.
2. GO2bank
For more than a decade, Green Dot Corporation has specialized in alternative banking products. In 2013, GoBank made its debut as the first digital bank offering digital financial services. Then, in 2021, the company launched GO2bank, its second online bank.
GO2bank stands out from other neobanks which require you to sign up online because you can pick up their debit cards in person at Walmart and other popular retailers. GO2bank’s bank account tends to be a popular product in addition to its secured credit card that can help you build credit.
For a comprehensive overview, read our full GO2bank review.
3. Current
Since its inception in 2015, Current, which is not a bank, but a fintech company based in New York City, has partnered with Choice Financial Group and Metropolitan Commercial Bank to offer banking services. Its flagship products are a personal checking and debit card you can access via a mobile app on any iOS or Android device.
Even though Current’s product line is limited, the neobank prides itself on no shortage of perks and benefits. You can get your deposit up to two days early and earn cash back for debit card spending from more than 14,000 merchants. Additionally, Current doesn’t charge minimum balance fees or bank transfer fees and offers fee-free ATM withdrawals from ATMs in the Allpoint network.
If you would like to learn more, take a look at our Current review.
4. Revolut
Founded in 2015, Revolut is one of the largest European neobanks, serving more than 16 million customers. It has expanded its footprint to the U.S. market and has plans to become one of the most reputable neobanks in the world.
Revolut is unique in that it offers a wide array of financial services, such as bank accounts, debit cards, peer-to-peer payments, cryptocurrency, and currency exchange. It supports both individual consumers and businesses with more than 30 currencies. For a neobank with a diverse lineup of offerings, Revolut has you covered.
To learn more, read our full Revolut review.
5. Quontic Bank
Quontic Bank is a full-service, FDIC-insured online bank that was founded in 2002. It offers a range of banking products and services, including checking and savings accounts, credit cards, mortgages, and business banking solutions.
They offer some of the best annual percentage yields (APYs) in the industry. Quontic accounts come equipped with no overdraft fees, no incoming wire transfer fees, no monthly service fees, and access to over 90,000 surcharge-free ATMs.
Quontic also has a savings accounts feature called “Roundup”, which makes saving money simple and easy. In addition, they have a responsive U.S. based customer service team available to assist with any questions or concerns.
Read our full Quontic review for more information.
6. Dave
When Dave began in 2017, its sole focus was paycheck advances. Over time, it evolved to offer a checking account with no minimum balance requirements. If you become a Dave customer, you can receive early access to your paycheck, without a credit check or interest charges.
Dave also offers handy built-in budgeting features and doesn’t charge overdraft fees or ATM fees, as long as you use an ATM from the MoneyPass network. Dave may make sense if you’d like the option for small cash advances to get you through a financial hiccup from time to time.
See also: Free Online Checking Accounts: No Opening Deposit Required
7. Albert
Albert began as a money management app in 2016, but is now a personalized banking service that has attracted over 6 million customers. This digital banking account offers cash back and a range of benefits.
These including no-interest cash advances of up to $250, integrated budgeting and savings tools, and annual savings bonuses of up to 0.10%. There are no minimum balance requirements or overdraft fees. However, there is a minimum monthly fee of $4. Keep in mind that you’ll need to have an external bank account to open an account with Albert.
8. Varo
Varo Bank began in 2015 as a fintech company that partnered with The Bancorp Bank. In 2020, it acquired its own national banking charter, making it different from other neobanks you might come across. Even though Varo operates as an actual bank, it focuses on online banking via its website and mobile app.
Its checking account is free of monthly fees and there’s no minimum balance requirement. Plus it comes with a debit card. In addition, Varo partners with more than 55,000 ATMs through the Allpoint ATM network.
We can’t forget its other perks, such as contactless payments, credit cards with reporting to the major credit bureaus, early direct deposits, and no foreign transaction fee or transfer fees. Varo might be worthwhile if you’re looking for a checking account with all the bells and whistles.
Read our Varo Bank review to learn more.
9. Aspiration
Aspiration was founded in 2013 under the motto “Do Well. Do Good.” It partners with financial institutions like Coastal Community Bank and Beneficial State Bank to offer cash accounts, savings accounts, and a few investment accounts.
Aspiration’s most popular product is the Aspiration Spend & Save Account, which is a hybrid of a checking account and savings account. There’s also the Zero credit card, which offers cash back and plants a tree every time you make a transaction. Aspiration can be a good fit if you’d like to get rewarded for your spending and like the idea of one account for your checking and savings goals.
Read our full review of Aspiration to learn more.
10. Bluevine
Bluevine made its debut in 2013 as a fintech company with a mission to improve banking for small and mid-sized business owners. Its flagship product is the Bluevine Business Checking. It’s completely free and comes with a competitive annual percentage yield and unlimited transactions. This is rarely seen in the world of business checking.
In addition to the business checking account, Bluevine offers financing products, such as lines of credit of up to $250,000. Bluevine should be on your radar if you’re a business owner in search of fast, convenient startup banking and financing.
11. SoFi
Social Finance or SoFi entered the market as a student loan refinance company. Recently, however, the fintech company received its own bank charter to offer digital banking services. You can use the SoFi Checking and Savings combo account to manage your spending and saving needs in one place.
Fortunately, SoFi doesn’t charge monthly maintenance fees, overdraft fees, and ATM fees. Additional perks and extras include no-fee overdraft coverage, sub accounts for various savings goals, and additional products like credit cards, cryptocurrency trading, and retirement accounts, like an individual retirement account.
Read our full review of SoFi to learn more.
12. Acorns
Acorns has a reputation as an easy-to-use micro investing app. Since 2012, many people have downloaded it on their iOS or Android devices to invest their spare change. Over time, Acorns has expanded to offer a checking account.
You can open Acorns Checking for free and enjoy perks such as no monthly or overdraft fees, early direct deposit, mobile check deposit, and access to a network of 55,000 ATMs.
The checking account seamlessly integrates into the Acorns micro investing feature. Plus when you use your Acorns debit card, you can earn cash back at participating retailers and use it to invest, along with your spare change. If you’d like to get started with investing, Acorns is worth considering.
13. One
One is a neobank owned by Walmart. It offers a budget-friendly overdraft program with customized budgeting and savings options for its customers. One’s banking account allows users to organize their money into subaccounts called Pockets.
Pockets offer saving rates of 1% on up to $5,000 for any customer and 1% on up to $25,000 for customers with direct deposit. Additionally, One provides fee-free overdraft coverage of up to $200 for customers with direct deposits of at least $500 per month.
14. Cheese
Cheese is a digital banking platform that was launched in March 2021 and caters specifically to the immigrant and Asian American communities. It offers up to 10% cash back at 10,000 businesses, including Asian-owned businesses and restaurants.
Cheese’s customer support is available in English and Chinese, with more languages to be added in the future. One of the benefits of opening an account with Cheese is that accounts earn interest and do not have monthly fees or ATM fees when using the national MoneyPass ATM network.
15. Unifimoney
Unifimoney is a money management and investment app that helps you manage your banking, investing, and borrowing needs all in one place. It caters to account holders who earn at least $100,000 per year but have significant amounts of student debt. You can download Unifimoney to pay bills, deposit checks, and write checks.
It’s unique in that it also allows you to refinance student loan debt and can create a diverse investment portfolio with particular stocks, cryptocurrencies, precious metals, stocks, and exchange-traded funds (ETFs).
In addition, you can turn to Unifimoney for insurance products, like car insurance and health savings accounts (HSAs). If you’d like to get started with Unifimoney, open the Unifimoney high-yield checking account with as little as $100.
16. NorthOne
Headquartered in New York and founded in 2016, NorthOne offers digital business banking services. If you’re a startup, entrepreneur, or small business owner, NorthOne can be a good fit. It differs from other banks that serve businesses in that there are no transaction limits that require premium upgrades.
You can open a business bank account for a flat $10 monthly fee and won’t have to worry about additional fees for deposits, transfers, ACH payments, or app integrations. In addition, you’ll get to create as many “Envelopes” or sub accounts as you want so you can save for payroll, taxes, and other business needs.
17. Oxygen
San-Francisco based Oxygen focuses on two accounts: the free thinker account for individuals and the pioneer account for business users. Even though it doesn’t charge fees, like monthly fees, ACH fees, and overdraft fees, you will have to pay an annual fee that can go up to a few hundred dollars.
While most neobanks don’t allow for cash deposits, Oxygen does. As long as you have an Oxygen bank account, you can make deposits at GreenDot locations, which are usually located inside popular retailers, like Walmart, Walgreens, and CVS. If you don’t mind paying an annual fee and like the convenience of being able to deposit cash, Oxygen is worth exploring.
18. Bella
Bella is a fairly new player in the neobanking space. Its partner bank is nbkc bank, which allows it to provide banking services. With Bella’s checking account rewards program, you can receive a random percentage of cash back on randomly selected purchases.
The cash back amount may be anywhere from 5% to 200%. Like most neobanks, Bella doesn’t charge monthly fees, ATM fees, and overdraft fees. You can also opt for a no-fee savings account. Bella accounts are FDIC insured for up to $5,000,000.
19. Lili
Lilli services small business owners and believes that managing two accounts is a hassle. That’s why this neobank offers a single account you can use for both your business and personal transactions.
Come tax time, Lili will eliminate financial stress and let you automatically save a certain percentage of your income into a “tax bucket.” Plus, it produces quarterly and yearly reports instantly, reducing your tax prep costs. While the Lili Standard account is free, Lili Pro will run you a couple dollars per month.
If you upgrade to Lili Pro, you’ll get cashback rewards on all your debit purchases and 1% interest on your savings accounts. Lili could be a solid pick if you’re a freelancer or solopreneur hoping to simplify your finances.
20. Monzo
Monzo is a UK-based neobank that just opened up to the U.S. market in late 2022. All accounts are insured by the FDIC for up to $250,000. Plus fee-free withdrawals are available at more than 38,000 ATMs.
Furthermore, Monzo is similar to Aspiration as it strives to protect the planet. Additionally, this neobank offers budgeting tools that can help you meet various savings goals.
What is a neobank?
Often called challenger banks, neobanks have recently entered the financial services industry and challenged banking norms. Most neobanks are financial technology or fintech companies that offer the same banking services you may find at traditional banks, like Bank of America or PNC.
But they promote innovation and act like digital only banks or online banks as they don’t have any physical branches and operate via apps. Most of these apps are user-friendly and loaded with a variety of handy features, such as early deposit and savings tools to simplify the banking experience. They are specifically designed to give you greater control of how you manage and spend your money.
Also since neobanks don’t have any physical branches, their overhead costs and customer acquisition costs are low and enable them to offer more affordable banking products and services. Many neobanks let you choose from a number of free and paid premium subscription services.
Are neobanks safe?
Since neobanks are fairly new and different from many traditional banks, you might wonder whether they’re safe. Fortunately, most of them are very safe because they operate within a regulated market.
These financial institutions typically work with U.S. banks to offer FDIC-insured accounts, which protect your money from potential bank failures and the losses that come with them. To help determine if a neobank is safe, check out their ratings and reviews on reputable websites like the Better Business Bureau (BBB).
Neobanks vs. Traditional Banks
To further explain neobanks and their modern spin on traditional banking, let’s take a closer look at how they differ from traditional banks.
Neobanks
Neobanks operate without physical branches. To take advantage of their offerings, you’ll likely need to download an app and provide some personal information.
While you can expect fewer banking and credit products than you’d find at traditional banks, you’ll reap the benefits of lower fees and extras that improve the overall banking experience.
Some neobanks have decided to expand their lineup of products and services to create more of a one-stop-shop you’d get from a traditional bank. Since most neobanks don’t earn money from lending, like incumbent banks, their business model depends on interchange fees or transaction fees, which usually come from debit cards. They might also charge for premium accounts and extra features.
Traditional Banks
Traditional banks often have brick-and-mortar locations across the country or in a specific geographic region or area. But many of them also have digital banking divisions in which you can perform banking services online.
Most banks focus on strong customer relationships and earning interest through loans as well as account fees from banking, lending, and investing. They typically target customers who appreciate customer engagement and a traditional in-person banking experience.
See also: Best Alternatives to Traditional Banks
Pros & Cons of Neobanks
Just like all types of financial institutions, neobanks have benefits and drawbacks you should consider, including:
Pros
Lower fees: Compared to traditional banks, neobanks offer lower fees. That’s because they don’t have the high overhead costs associated with the upkeep of physical branches.
Higher rates: Neobanks often pride themselves on higher interest rates on their checking and savings accounts. This can make it easier and faster for you to save money.
Convenience: Perhaps the greatest benefit of neobanks is the convenience they bring. You can perform a variety of banking tasks, like depositing checks or making payments from your smartphone device, round-the-clock.
Easy access: You can manage your banking 24/7 without ever having to leave your home and visit a local branch. All you have to do is download an app from the app store.
Simple setup: It’s usually fast and easy to open an account with neobanks. Many of them will approve you, regardless of your credit score or credit history.
Focused services: While most neobanks don’t offer all the services you might find at traditional banks, the few services they do provide focus on service quality and are typically loaded with perks and benefits. For example, you can get a no fee checking account with cash back rewards.
Cons
No bank charters: Neobanks don’t have bank charters. Instead, they often partner with traditional banks to insure their products. Before you move forward with a neobank, ensure they partner with a Federal Deposit Insurance Corp or FDIC-insured bank and offer their own FDIC insurance.
Customer service restrictions: Since neobanks operate on app instead of through physical branches, customer service can be a downside. You may have to turn to chatbots or social media for basic banking questions and support. If you notice fraud in your account, it may be more difficult to resolve the issue.
Fewer services: Traditional banks usually pride themselves on a long list of services, including loans, wealth management, and brokerage services. Neobanks, however, tend to limit their offerings to checking accounts and savings accounts.
Unproven track record: Neobanks are still in the startup phase as many made their debut within the last few years. This means that they may fail and force you to look elsewhere for your banking needs.
Require knowledge of technology: While most neobank apps are intuitive and designed for the average person to use with ease, they may still be inconvenient for some people. If you don’t consider yourself tech literate, a neobank might not make sense.
Bottom Line
There’s no denying that neobanks have revolutionized the banking industry and financial industry. If your primary goal is convenience and you prefer mobile or online banking, a neobank can be a great alternative to a traditional bank or legacy bank. Just make sure you explore all your options and read the fine print before you choose one.
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Rates on savings accounts and certificates of deposit are seeing highs not seen for at least a decade. But what exactly impacts the rate of your bank account?
Let’s break down a few factors.
Fed rate increases push up savings rates
From March 2022 to May 2023, the Federal Reserve has steadily increased its federal funds rate, or Fed rate, from nearly zero to around 5%. These ongoing rate increases are the Fed’s attempt at curbing high inflation. The rate itself is the one U.S. banks use to borrow or lend money overnight between each other, and a higher rate means higher borrowing costs.
Banks and credit unions, in turn, take their cue from Fed rate increases to raise their rates on certain loans as well as savings accounts and certificates of deposit. Banks often fund new loans and investments using the money in customers’ bank accounts, and higher savings rates help attract more customers.
But banks don’t typically follow the Fed rate immediately, and their rates typically remain far lower. From April 2022 to May 2023, national average rates only rose from 0.06% to 0.40% for savings accounts and 0.13% to 1.59% for one-year CDs, based on a NerdWallet analysis. The biggest banks, in particular, can often lag behind most in raising savings rates.
“Historically, bank deposit rates move with other interest rates, but not very much. A lot of bank deposits are ‘sticky,’” meaning most depositors stay with a bank even if rates don’t keep up with the market, said Philip Dybvig, economist and professor of banking and finance at Washington University in St. Louis, in an email. “As a result, banks have little incentive to increase rates with the market.”
Online banks compete with higher rates
National average rates don’t tell the full story, though. If you’re an avid saver, you’re probably familiar with high-yield savings accounts and high-yield CDs. These accounts often have rates several times the national average and are mostly available at online banks and online credit unions. These branchless institutions don’t have the overhead costs of brick-and-mortar banks, so they can provide — and compete for — customers with higher rates.
In June 2022, high-yield savings rates at some online banks were around 1% to 1.25% annual percentage yield, and competitive one-year CD rates were hovering around 1.50% to 2% APY, based on NerdWallet data. In May 2023, top savings rates are closer to 4.75% APY while some one-year CD rates have surpassed 5% APY.
To take advantage of rates, compare high-yield savings accounts as a potential place for emergency savings or other short-term money goals. Rates are variable so they can change, but adding regular contributions will boost your savings and help you see the effects of compound interest over time. If you have a portion of savings that can stay untouched for months to years, high-yield CDs can offer competitive, fixed rates that also compound interest.
Other factors that affect rates
The type of bank account matters
Banks typically raise rates quickly on CDs followed by savings accounts and money market deposit accounts, Federal Reserve Bank of New York researchers said in an email.
CDs lock up funds for a fixed term, while savings and money market accounts allow for ongoing access, though they can have a monthly limit on certain withdrawals. The type of account with the most access to funds — a checking account — typically earns minimal, if any, interest. The national average for interest checking has barely budged in the past decade, based on NerdWallet analysis.
Consumers may seek higher returns outside banks
Banks have an incentive to keep interest rates on various savings accounts low to save on costs, says Daniel Talley, professor of economics and statistics at Dakota State University. But banks also have to be competitive with other opportunities that savers have.
Talley says money market mutual funds are a good example currently of getting high returns that are relatively safe and accessible as far as investments go, though they’re not federally insured like bank accounts are. Money market funds consist of short-term, high-quality investments such as U.S. Treasurys.
New York Fed researchers also called out money market funds as an example of an attractive nonbank option for depositors. Consumers may opt to take more money out of banks, which puts pressure on banks to raise their rates to keep those consumers.
Economic forecasts can play a role
The only type of bank account with fixed rates is a CD, and typically the longer a CD term, the higher the rate. You ideally get a bigger reward for keeping funds inaccessible for longer. However, CD rates in the first half of 2023 — both national average and high-yield rates — experienced an inverted yield curve, a phenomenon that originated with bonds such as Treasurys, in which long-term interest rates are lower than short-term interest rates. This type of yield curve can reflect banks’ beliefs that interest rates are headed downward, so they’re adjusting CD rates accordingly. Talley says banks might be betting that the Fed will cut rates soon to fight a possible recession.
A rising rate environment tends to be good news for saving money in bank accounts, but remember that other factors can determine the rate you get.