Sunday, January 07, 2007

Online savings accounts, welcome to being old(er)

Perhaps it is a sign of fleeting youth once you start reflecting on how much things have changed during your life. I remember needles skipping on albums, eight tracks not fast-forwarding right, and cassette tapes getting chewed up and stuck in car radios. Now I can download dozens of songs to my MP3 player and never ever really touch the music.

I remember a very nice blonde lady behind the counter that always had a root beer sucker for me when I went inside the bank with my Mom. I remember there being lines to use the new ATMs. (Some of you will remember those really long lines in the bank on pay day.) Now with online banking, debit cards, and payroll direct deposits the number of trips to the bank become less and less.

All these changes got me thinking when we started building our rainy day fund. (Everyone should have an emergency fund. The “pros” suggest 3-6 months of livings expenses.) What I didn’t want was our hard earned money being mothballed in some savings account grinding out 1% a year. Now it can be debated on where is the proper place for an emergency fund to be sitting and that is for each to decide. For me I want that money guaranteed safe and near at hand. So as our rainy dollars started to pile up I went in search for something better than the near zero percent offered by my local brick and mortar bank.

An online savings account was just what I was looking for. The ones listed below are all FDIC insured and pay north of 4%. There are others, but personally I would start researching these first. (Interest rates current as of 1-07-07)

Emigrant Direct (5.05%) HSBC Direct (5.05%) Citi Bank Direct (5.00%) ING Direct (4.50%)

I will admit I was worried about it not working or more to the point me not working it correctly. When I first started using our online savings account I felt much like I did when ATMs were just getting started. If I screwed it up then there isn’t anyone near by to fix it. (Oh how I miss the nice blonde behind the counter.) Well it has been over a year since we first opened ours and I am happy to report my fears were misplaced. The transfers into and out of the account have gone smoothly and the interest rate continues to be about five times as much as a “normal” savings account.

If you haven’t embraced MP3 players and online savings accounts then this may be a good year to start. The only question I have is, “where’s my damn root beer sucker?”

That’s it for today. Enjoy the benefits of getting old(er) and keep an eye on your EveryDay Money.

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