Do you have an online high-yield savings account? If you don’t you need one!
Here’s why:
■Brick and Mortar Interest Sucks - I just checked the interest rate on my savings with the bank I do my checking with. Ready? 0.20% APY! It used to be that banks would offer a decent interest rate on savings to get you store your money with them; not quite the case anymore!
■Many Online High Yield Savings Accounts Offer Better Interest – I use ING Direct for my online savings. Currently they are offering 2.4% APY on their savings accounts. No, you won’t be Bill Gates rich with that rate but it is MUCH better than what the average brick and mortar bank offers. For me that’s 2.2% better than the bank where I do checking!! If you do a little research you’ll find banks with higher interest on their online savings than ING Direct. Let me tell you, that interest adds up! I love seeing how much I’ve earned every month and at the end of the year.
■Automatic Savings – Most online banks will let you set up automatic savings. What this does is pull a set amount at whatever time you set up to be pulled into your online savings account. This could be from your checking account or even from your paycheck if it’s direct deposit. Why automatic savings? So you don’t have the opportunity to spend the money first then try to save! Even if it’s a small amount it will add up over time (and that money earns interest and so on…).
■Bill Pay – Some online banks offer the ability to pay your bills from the site. Another option is using your routing and account numbers to set your account up to pay from on the site you have a bill with. For instance, we set up our car payment to pull from our online savings account. This way we don’t have to worry about having enough in our checking to cover the bill every month (we have more than enough in our savings to cover this). Yes, you can do this from a checking account as well but the money you need to keep there won’t be earning interest in the meantime.
■Out of Sight, Out of Mind – In a lot of brick and mortar accounts your checking and savings are accessible from an ATM. Falling short of funds in checking? Pull it outta savings. I don’t have access to my online savings at an ATM. As a result I don’t have that money staring at me every time I need an ATM. My savings stays saved!
■Relatively Easy to Access – So I can’t pull my savings from an ATM. That’s ok. If I should ever need it then I can have my money transferred to my checking in a few days or so. The money is still pretty easy to get should I need it but not so easy that I could take the savings for an impulse buy!
■Use of Sub-Accounts/Multiple Accounts – With ING Direct you can set up multiple accounts under one customer number. Wanna save for a new car? Create another account just for that purpose. Wanna show your child about the power of saving and compound interest? Set up an account for her to put gift money in. In fact you can set up automatic savings for any account as well. When my wife and I were engaged we set up an account to help save up for the wedding. The options are limitless!
■Great spot for Emergency Savings – Some might say online savings isn’t liquid enough for emergency savings. I say it depends. For us it’s a great place to stash emergency funds which will also earn interest!
■Great Customer Service – This one depends on who you use for your accounts. Again, we have been using ING Direct for their high-yield savings for years. Every time I’ve called I’ve gotten friendly, helpful people who were able to answer my questions and handle my needs without any problems. That’s a huge reason why we haven’t switched our account somewhere else with slightly higher rates. Knowing that my bank can handle any issue I have without being on hold for half an hour is important to me.
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