Get a high-yield online savings account and put some money in it.
Real short and sweet, huh? Well, that’s the point, because it’s fairly simple. You already know you should be trying to save, so we’ll skip the lecture on that, and just go straight into the where.
You see, the problem with savings accounts at regular, “brick-and-mortar” banks is that their interest rates tend to suck. As I write this, Bankrate puts the national average at an abysmal 0.46%. That means for every $100 you put in a regular savings account, you get 46 cents per year.
Rates at any bank aren’t particularly high right now, thank to recent economic happenings, but you can certainly do better than 0.46% by going online – 2.75% or higher. You can check out current rates by visiting the sites that offer high-yield savings accounts:
There are others – leave a comment if you want to add your favorite! All of these accounts have something in common, though: no minimum and no fees. That’s something you might have trouble getting from a brick-and-mortar bank, as well.
My personal favorite? Capital One 360. I have four online savings accounts (the other three being at E*TRADE, Citibank, and Emigrant), and Capital One 360 has given me the best experience. They don’t always have the highest rate, but their interface and customer service are top-notch. And you can’t beat their referral program!
Truly Frequently Asked Questions About Online Savings Accounts:
Are they safe?
Yeah. These are real banks and real accounts, and the accounts are FDIC insured, just like your accounts at brick-and-mortar banks.
Why is the rate so much higher than regular savings accounts?
Brick-and-mortar type banks have to employ tellers, security people, rent the property, build the building… there’s a lot more overheard to running actual locations. Online banks can set up just one or two office buildings for the whole country. Their lower costs add up to bigger rewards for you.
How do I get money in and out of them?
These accounts electronically link up to your current checking account. The process is easy, and you’ll be walked through it when you open the account. Once they’re linked up, you can do transfers between the savings account and your checking account. Warning: Federal law prevents you from making more than 6 transfers per month out of any savings account. This includes non-online accounts! You can make as many transfers in as you like, however.
You won’t believe this but when I went to college and got my first student loan I put the whole loan into a Certificate of Deposit. It was $2,500, the maximum allowed at the time, and my interest rate was 16.75% Jimmy Carter was in office at the time. When I took it out a few years later it made $1,000. It was nice but I was still had to pay a lot on my student loans for 10 years after I graduated. I miss RIT though.
I just started an account with SouthBank of Chicago. I got a 3% interest rate on an online savings account (killing the bs I got at Wachovia) and the bank was formed for the purposes of facilitating community development and environmental work. Two for two.
I agree, putting it into a bricks and mortar account is silly. The online banks seem to be both better for your wallet and better for your sanity too since I have found them to be very responsive to my needs, unlike the old banks.
I actually have two bank accounts. One at a local Toronto Dominion Bank and another with an online bank. The local bank is convenient for obvious reasons. However, the best part about the other bank account is that it’s a bit of a process to take out money at times, so that’s a roadblock for those that need one. The thing I love about online banking is that it allows to me monitor my spending and keep track of my money.
Dear Stephanie,
This has really been a long time coming, but I really like your blog. I think it is all a blog should be: casually written, humorous, and chock full of valuable information. I like your blog so much, in fact, that it is first on my list of Blogs To Read on MY own blog. I am also pleased to announce that I have been pre-emtively following your advice (i.e. already doing a lot of the things you’ve been blogging about) and it pleases me to have my financial choices affirmed by someone with an expertise. Keep up the good work!
Lidiya
Our daughter actually chose the ING account, and all of our home and car Insurance is ING as well.
Another great idea to save money is to use one of the cheap textbook search engines (I use the one at http://www.mynextcollege.com/cheap-textbooks) that allow you to search online for much cheaper textbooks.
Alot of students are still fearful of buying their textbooks online because they may have a different ISBN, be lacking a study guide, or some other inconsequential reason. But the fact is, you can save hundreds of dollars each semester buying your textbooks online.
I have an account at TDAmeritrade. I need to get better about putting money into it but i also need to find a good balance between paying off my debt while still saving money
I’ve found that a local credit union is nearly always the best bet for savings accounts and loans. Due to tax laws and such, they can consistently get better rates.
ING for my car insurance…