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Rainy day savings made easy

Now that the holidays are over and your September credit card bills are coming due, you may be kicking yourself for overspending. You always say you won’t overdo it on the gifts, but you do.

And that holiday money that rich Aunt Edna and Uncle Frank sent? Well, you planned to put it towards a family vacation, but where did it actually go? A new iPod for you? A Nintendo for the kids? Or just some extras here and there that you didn’t even pay attention to as you added them to your shopping cart?

You have good intentions about saving money for some special things that you don’t want to buy with credit, but somehow all your extra cash finds its way out of your pockets. If you’re an impulsive spender, then “saving money for a rainy day” can be a hard thing to do. However, new options in online banking can provide a solution!

Many banks now offer online savings accounts with high interest rates and no fees. The most popular example is probably ING Direct, but most big banks offer something similar. (I use HSBC Direct, for example.) For many people, the benefits of using these accounts far outweigh the drawbacks.

Because online banks have low operating costs, they can afford to provide you with higher interest rates and little or no fees. And good online banks (like ING and HSBC) are FDIC-insured, just like your local bank.

Additionally, you may be able to set up automatic transfers from your local bank account to your online savings. This way, if you plan to save $25 a week, the money is whisked away into your savings before you even have the chance to miss it!

The only drawback to online savings accounts is that you can’t visit a local branch when you want to deposit or withdraw money. Your local bank account is linked to your online savings account, and transfers to or from this account are done over the Internet or on the phone. These transactions can take a day or two to process.

This “drawback,” however, is actually a benefit for someone who spends impulsively. If you’re keeping your savings in an online account and you see a fabulous new gadget that is begging you to take some of that vacation savings and buy it, your impulse is halted by the fact that your cash is not readily available for spending. You have to process a transfer to make the money available, which requires going home and getting online and, by then, your impulse to spend has most likely been curbed. The cash is there should an emergency arise, but it’s not at your disposal when something unexpected catches your eye on a shopping trip.

Online savings accounts are a great way to save for a rainy day! Compare interest rates and fees before you choose a bank, and be sure that your bank is FDIC-insured. You’ll be surprised how quickly your savings builds when you protect it from your impulses!

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