This is a guest post from Kate Manning. Kate is a business major who has worked under others and as a self-employed entrepreneur. She currently owns and manages her own business in Washington State.
In today’s economy, personal savings are extremely important. It is crucial to set aside a bit of money for long-term plans: retirement, college, and major purchases among them. Additionally, it’s always a good idea to keep a portion of your assets liquid for unexpected expenses or emergencies. For many people a traditional savings account serves as a place to let their funds build, but the downside to traditional savings accounts is they don’t offer the higher interest rates that many online savings banks do. Clearly you don’t need an online finance degree to see that having an online savings account will be of greater benefit to your bottom-line than a traditional, brick-and-mortar bank. However, there are other significant advantages to moving your savings than simple interest rate comparisons.
One additional advantage of an online savings bank is convenience. When you open an online savings account you get the same benefits as you do with a regular bank: you can set up direct deposit, receive a debit card, and transfer funds. You may even be able to write checks depending on the sort of account you have. Similarly, online savings accounts usually don’t require minimum deposits or balances, giving you a great deal of control over how you manage your account.
Better yet, online savings banks allow you to accomplish everything you need to online making visits to your local branch a thing of the past. Online savings accounts also carry different business hours than regular banks, meaning you can conduct transactions at almost any time. Online accounts are also easily linked to other accounts eliminating any pain that might be caused by transfers between accounts. For example, many investment banks offer free online savings accounts allowing you to manage your savings account, 401k, and brokerage account all from the same bank. That people only have to visit one Web site to manage their finances is one of the major selling points of online banking.
Of course, one of the greatest features of an online savings account is the interest rate you get. Generally speaking, even the most basic online savings accounts offer interest rates that are significantly higher than those of regular banks. This is primarily due to the lower overhead online banks enjoy. They don’t manage branches, they employ fewer people, and they manage their funds electronically. This translates to higher interest yields for customers.
To increase your interest even more, you might consider creating an online money market account or certificate of deposit account. These are essentially savings accounts with different rules. A money market account usually requires a higher minimum balance, and in exchange you are rewarded with a higher interest rate. However before you set up a money market account, there are some things you should know. Money market accounts usually limit the number of withdrawals you can make per month. This number varies between banks, but a standard maximum is six withdrawals per month. Yet given that your goal is to save money, this should be no issue.
On the other hand, with a certificate of deposit (CD) account, you get the best interest yields possible. When you open a CD, you depositmoney for a fixed amount of time. During this time frame, which can be several months or several years, you can’t withdraw funds without paying a penalty. However, once the CD matures you will get the best rates the market can offer.
Another thing that often attracts people to online accounts is the security they provide. Like traditional banking institutions, online accounts are FDIC insured. This means that every deposit you make will be protected. This also applies to savings accounts, money market accounts, and certificate of deposit accounts. Also with an online account, your savings are not tied to the market. The market may determine your interest rate, but all of your deposits are secure. This way, you don’t have to worry about losing any money when opening an online savings account.
Opening an online savings account is both smart and easy. The whole process can be completed in a few minutes. Before opening an account, it is a good idea to look around at various Web sites and find an institution that suits your needs. After you have selected a bank and determined how much money you feel comfortable saving, you can decide what type of savings account is best for you. Clearly, moving your savings to an online account will make more money in the long run as well as provide you with many benefits. The advantages you get with an online bank will make the transition worth your time.
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