Financial Planning

Online Savings Account

A few weeks ago, I started to look for an online bank account. I didn’t want to go through the hassle of giving up my regular bank account, but still wanted to find an easy way to save and manage my money.

After going through the whole process, I thought it would be a good idea to share my experience, and explain which banking account I ended up picking.

Why I Chose ING Direct

I reviewed about 20 online banks, and finally chose ING Direct. It’s been the best banking decision I’ve made for several reasons:

• Savings Rates. ING Direct offers savings account rates for 2011 that are typically much higher than “regular” banks. But even if they offered 0% interest — they would still be good to go with just for the reasons listed below.

• Automatic Saving. ING Direct offers a cool way to save money… make it happen automatically. They’ll deposit a certain ammount of money every week or month — I can choose how much. This means I’ll never have to think about saving money again. It’ll be automatic.

• Easy Investing. ING Direct makes it super easy to start investing. They also offer a stock broker account, which means when I start buying stocks, it’ll be that much easier. Haven’t bought stocks, but are “planning on it”? This is the perfect excuse to start.

• Easy to Use. So far, ING Direct has just been ridiculously easy to use. There’s a clean userface that is about as easy to do as my email. They send me emails every step of the way so I can stay on top of things. No offense to my traditional bank

• Dual Use. I don’t just have an ING Direct account — I kept my traditional bank account as well. I plan on full online banking this fall. Until then, I have both accounts hooked up to each other so I can get used to using online bank accounts.

Of course, ING Direct might not be for everyone. The other two services I’m a fan of are a special website that let’s you have banks bid for your money, and of course HSBC Direct. Both are pretty nifty if you’re still shopping around.

Online Bank Accounts: Runners Up

These high-interest online savings account rates are way above the national average:

• Discover Bank. Discover bank provides a 2% interest rates, as of the date of this article. Online money transfers are fast and free, and there’s no minimum balance. You can also track and see how much you’ll save with their calculater. Check it out.

• Money Aisle. Money Aisle often offers roughly 10x the national average. They let banks bid for your savings. That means they’ll automatically compare the online savings account rates from hundreds of banks — you’ll get the highest-interest savings account rate — period.

• ING Direct. This is what I use, and I love it. It works like a checking account, and saves like a savings account. This bank account is the best of both worlds. 35,000 ATMs available. Free debit card for purchases. Free online bill pay. This is great if you want to have your money on hand at all times for emergency reasons.

• HSBC Direct. Put your money in this online bank and make 5 times the national average. Or you can even get a CD, which is specifically made for saving — that’s at a 2.5% interest rate. This is some of the best I’ve seen.

The most important thing you can do when it comes to your money is to save it, invest it, expand it. It’s only through expansion that you can build wealth. A couple of dollars a day now means a couple of hundred thousand later.

Savings Accounts and Financial Security

Investing is risky. Just a few weeks ago a friend informed me that he lost over half of his life savings due to the financial crisis. He probably won’t get to retire for a few more decades. This reminds us of the famous investing-saying of Ben Graham:

“Rule 1: don’t lose money. Rule 2: never forget rule 1.”

The most secure way to invest is through a high-yield online savings account. If you’re already looking for a way to get an account, then click here.

Why You Should Learn Online Savings Account Interest Rates

• Guaranteed Return. The stock market is risky because it’s mostly based on speculation that could be wrong — just ask the millions who’ve lost their shirts. A free savings account doesn’t include a risk like this — you can’t lose money with an online savings account.

• Government Backed. Put your money in some FDIC insured online bank accounts and you have no worries about the company going broke, the bank being “run” or anything along those lines. You can always get back what you put in — and then some.

• Diversity. This doesn’t mean you shouldn’t invest in stocks, metals or property. It just means that you need to always diversify your portfolio. This decreases your risk, and gives you more financial security for the future.

• Efficient. If you are going to have cash for short-term purposes, it doesn’t make sense to keep it in an account that doesn’t provide you interest. Make sure you get what you pay for, and get a return. An online savings account does that.

Savings Accounts make sense (especially online savings account given their convenience and flexibility). You have a guaranteed return, your savings are government backed, and you can’t lose. Signing up for an online bank account is a true win-win.

Scroll back to the top of the page to view the best online savings account rates as of today.