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How to Earn 10% on Your Savings With the DoD Savings Deposit Program

Sep 09, 2020 5 min read Ben Gran

Key Takeaways

  • Eligible service members can earn 10% interest on savings up to $10,000.
  • The Savings Deposit Program is only available for income earned on deployment in combat zones.
  • It's an effective way to supercharge your cash savings while on deployment.


The Department of Defense (DoD) Savings Deposit Program (SDP) offers a special opportunity for active duty service members deployed to eligible combat zones to earn extra money on their savings. At a time when they're focused on their mission, service members can be assured that their money is working overtime at home.



What is the DoD Savings Deposit Program?

In addition to the various other benefits and savings programs that military service members are eligible for while on active duty, the DoD offers a special Savings Deposit Program that works like a high-interest savings account. But instead of offering the low interest rates and fees that a regular bank might impose, the DoD Savings Deposit Program gives you a 10% annual interest rate, compounded quarterly, on up to $10,000 of savings during each deployment.

Why the SDP is an easy yes

Simply put: You can earn a vastly better rate of interest with this savings deposit program than any bank savings account or Certificate of Deposit. For example, as of August 2020, according to the FDIC Opens in new window, the average interest rate on a bank savings account was only 0.06%, and the average interest rate on a 12-month Certificate of Deposit (CD) was only 0.20%. Even 3-month U.S. Treasury bonds Opens in new window – generally considered a safe investment – are only paying around 1.54% interest.

This means that participating in the SDP can give you a return on your savings that is 4.4 times higher than U.S. Treasury bonds, nearly 21 times higher than a 12-month CD, and 125 times higher than an average bank savings account.

How to qualify for the SDP

To open an SDP account, you must be deployed in an SDP-eligible combat zone. You must be receiving Hostile Fire Pay, and you must already have been deployed for 30 consecutive days, or one day in each of three consecutive months.

How to use your SDP account

Open your SDP account by going to a local military finance office in theater where you are deployed. You can make deposits via cash, check, or by allotment, and you can increase or decrease your allotment contributions at any time if your financial situation changes. Your allotments to the SDP account will automatically stop once your deployment to the combat zone is over.

Once your SDP account reaches a balance of $10,000, you can withdraw funds in excess of the $10,000 limit on a quarterly basis.

How the SDP can improve your financial wellness

The Department of Defense started this program as a way to help military service members increase their financial stability. There are a few reasons why service members can benefit from more cash savings:

  • Expand your emergency fund — Many military families, just like Americans of all income levels and occupations, could benefit from having a stronger emergency savings fund . Earning a 10% interest rate can be an ideal way to add to your cash savings and to provide financial protection for you and your family in case of a financial emergency.
  • Save for as long as you're deployed — One feature of the DoD Savings Deposit Program is that the account cannot be closed until you have left the combat zone – so it kind of “forces" you to keep saving and keep earning interest on the money in the account for as long as you're deployed. This is a good thing — it helps service members stay motivated to keep saving for the future, while letting them put savings on “autopilot" for the duration of deployment.
  • Earn interest for 90 days after deployment — After you leave the combat zone, you can leave your money in your SDP account for up to 90 days where it will continue to earn the 10% interest rate. This can be a nice extra “nest egg" to look forward to after your deployment.


Is the interest earned from the DoD Savings Deposit Program tax-free?

Although military service members generally do not owe income tax on combat pay, the money that you earn in the DoD Savings Deposit Program is considered taxable interest income.

What's the catch? Are there any possible downsides?

Keep in mind that the DoD Savings Deposit Program is only applicable to saving money that you earn while deployed in a combat zone – you're not allowed to open an SDP account by depositing cash that you already had saved.

If you need to make an emergency withdrawal from your SDP account while on deployment, you must get approval from your commanding officer. The DoD wants to encourage service members to leave their SDP money in their accounts, unless absolutely necessary. Your commanding officer will only give approval to withdraw the money early if it is determined that the money is needed to help ensure the health and welfare of you or your family.

Also, after your deployment is over, you are responsible for closing your SDP account and making arrangements to receive the funds via direct deposit or check by contacting Defense Finance and Accounting Services (DFAS) Opens in new window. If you do not manage the closure of your SDP account and give instructions for how you want to receive the funds promptly after deployment, your account might become dormant, with your money just sitting there not earning interest (after 90 days).

Difference between SDP and TSP

Military service members might wonder what is the difference between the SDP and TSP (Thrift Savings Plan). The SDP is a short-term savings program to help you supercharge your cash savings with a special high-interest savings account. The TSP is a long-term retirement savings program to help you build wealth to take care of you and your loved ones when you are retired.

Both of these are great programs to help you build financial wellness, and you should definitely maximize your retirement savings – but the SDP is an excellent option if you want to boost your short-term emergency savings with a special offer that is only available to active duty service members in combat zones.


What you can do next

To sign up for your DoD Savings Deposit Program account, talk to your local military finance office in theater where you are deployed. If you have questions, contact the Defense Finance and Accounting Service (DFAS) for more information.


Ben Gran is a freelance writer based in Des Moines, Iowa. He writes about personal finance, public policy, financial services, technology, and business.


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