Online Banking Savings Account, a Wise Investment?
Nov 22nd, 2006 by Jennifer Lynn
I’m about to head out and help my family with their dinner preparations, but I thought I would leave this pondering thought with you all.
Baby Step #3 - Receiving grants are a great way to start the holiday!
My university grants for this semester have finally arrived in the mail.
There is nothing quite as liberating as holding a nice juicy check and realizing all my hard work studying is being honored. In the past, I may have run out to the nearest mall for a deliciously naughty spending binge. But oh no, as the year draws closer to an end, I’ve become more determined than ever to force away my old habits and begin with a fresh perspective. So, much to the dismay of my friends and family, I have suppressed the temptation to spend all of my money as soon as I’ve finished shredding open the envelope. My checks, I must admit, patiently sat on my counter and have just been deposited into my checking account today.
The question is, now what?
I’ve recently started researching into the perks and drawbacks of various online banking options. One of the most attractive features of an online savings account is the highly competitive Annual Percentage Yields (APY). As an investor, APY is one of the core ways to nurture money to allow it to flourish and grow. APY is how much money my investment (in this case, my deposit) will earn me over the course of a year on interest. I’ll be writing more in depth later on the difference between simple interest and compound interest, and the incredible beauty of compound interest as it builds over time. (Update 12/18/06: Here’s the article on Compound Interest).
If anyone has experience with online banking, I’d love to hear more about it.
I’d also like to throw this engaging article out there from USAToday, about the immense debt young people are coping with today. It illustrates the struggles of our generation as we juggle personal and educational debt with trying to build a secure financial platform for our future. Does anyone else feel as if they’re running in a big ol’ hamster wheel?
Right now I’m going to finish helping my family with their Turkey day planning. Although I’ve decided to forgo the turkey this year, an endless supply of bean casserole, sweet potatoes with apples and walnuts, veggie stuffing, acorn squash, cranberry salsa, whole wheat maple rolls, and delicious pumpkin pie is sure to keep me stuffed.
I hope everyone has a lovely holiday!
~†~ Baby Steps are Key ~†~
=^..^=
I’d be in better shape today if I had made the same choices (that you’re currently making) when I was in college. After getting married, we suddenly qualified for grants and we should have been more careful. We didn’t fritter away the money, but we let it slip out more quickly than we should have.
Because we were tired of only earning .5% on our emergency fund, we bought a CD that was paying 4.25% APY which seemed like a good idea. If I were to go back, I’d probably throw it at an ING savings account like the one we opened 5-6 months ago. We’d be earning more and the entire amount would be liquid with no penalty for early withdrawal.
Another interesting idea is to throw the money into a Roth IRA. Suze Orman (I know, she’s not my favorite either) said, “you don’t have to wait until you’re 59.5 to withdraw any of your original contributions to a Roth account; you can take out your own money any time you want, for any purpose, without paying taxes or a penalty, because it’s already been taxed. It is only the earnings on that money that have to stay in the account for five years and until you are at least 59.5 years of age.”
http://www.suzeorman.com/igsbase/igstemplate.cfm?SRC=MD012&SRCN=aoedetails&GnavID=20&SnavID=21&TnavID=&AreasofExpertiseID=32
That’s something to think about too!
If you’d like to open an ING account, I or any other PF blogger with an existing account can send you a referral so that if you deposit $250 or more, you get a bonus of .. $25, I think?
ING was my first account, I liked the interface and usability. Emigrant Direct was my second online bank. I switched because it had higher interest rates but it wasn’t that much of a thrill. Both accounts are liquid, but do require about 2-3 days to transfer money to and from your regular checking accounts.
I still use both, but I use Citibank’s online checking and high-interest savings more often because it’s easily accessible and that’s important to me. (and vice versa: when it’s important to make sure it’s difficult to touch my savings, I would deposit that money with either ING or ED.)
If you’re interested in finding out more about online savings accounts and discussing which are the best — sorry for the shameless plug — I’ve got a new forum dedicated to them online at onlinesavingsforum.com.
We’re always looking for new members, so check it out!