Whether you’re a professional, executive or retiree, we all have one thing in common: money. While some have a small amount, others have lots. Regardless of how much we have, many of us keep our cash in a bank account where it barely grows. There is a better way to handle this money.
Traditional Savings Accounts Do Not Help Your Money Grow
Savings accounts sitting in traditional banks have paltry interest rates. These banks boast about their savings accounts and premier savings accounts, which pay between .01%-.1%, while the Federal Reserve targets 2% as its inflation goal. So people who are piling their money into these savings accounts because they are safe are literally losing money every single day to inflation.
An Alternative to Traditional Savings Accounts
Fortunately, there is another savings world out there: online savings accounts. Generally, these accounts have no minimums, no fees, are FDIC insured, and offer substantially higher interest rates (as they have virtually no overhead).
The online bank that I use for my savings account pays a whopping 1.7%. They are not alone in this market, either. There are many others competing in these same waters. In other words, that is 17-170 times better than your generic brick and mortar bank. (For related reading, see: 4 Savings Accounts for Investors.)
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- Once you find your desired online bank, you create an account, which usually takes five minutes or so.
- Typically you’ll have to do a small transfer to connect the online bank to other the traditional institutions you have accounts with.
- This will make it easier for you to transfer money back and forth between accounts when the need arises.
- Once established, you simply put in the amount you care to transfer and the date. It typically takes one to two days for your money to transfer. After that, the additional earnings begin. Quick and easy.
- Online Savings Accounts Are Practical and Easy to Use
- I personally use my bank account to pay all my day-to-day bills and expenses. Everything else gets transferred over to my emergency fund savings account. I’ve noticed my rate going up every couple of months as interest rates rise. When finding the right online bank for you, read the fine print. Some offer an introductory rate or teaser rate then lower the annual percentage yield (APY) without your knowing, so steer clear of those institutions.