High Interest Savings Account Online | What’s The Big Deal Anyway
Sometimes Two Accounts Are Better Than One
I actually opt to have not one high interest savings account online, but two. Differences in interest rates today aren’t that high because the Fed Funds rate is at a historic low right now, but when monetary policy tightens and interest rates go up, then differences in rates between local and online banks become much greater. Sometimes special offers at one high interest savings account online might warrant shifting a few dollars into that account to pick up a special rate or sometimes even a few dollars of bonus cash (always welcome in my house!). I find it useful to have two accounts, if for no other reason than to increase the amount of money I have set aside and untouchable (in the form of minimum balances).
Interest Rates and the Economy Move in Waves
I would expect most of my readers are swift enough to understand by now the importance of earning an interest rate higher than that of the inflation rate. Present circumstances make that very difficult but I am fairly certain that in the not too distant future we’ll see the Fed rate (and high interest savings account online rates) jump up to 3% and beyond before too long. I don’t expect folks to understand why but suffice to say that the economy moves in waves, and the Fed has done as big a cannon-ball into the pool as they could. While we sit in a trough of the wave right now it won’t be long before the wave crests again, raising rates in the process. Will your savings account rate rise with the Fed rate? If you have your savings account at a brick and mortar local bank the answer is a resounding no.
Keep Inflation from Eating Holes in Your Safety Net
I wrote in a previous piece about how it is important to have your emergency funds retain their ability to be sufficient emergency funds. Having money in a high interest rate savings account online helps offset the dripping away of buying power caused by inflation. Maintaining buying power helps keep your household finances insulated from short term shocks like faulty appliances and damaged vehicles. Repairs that might cost $1000 shouldn’t force you into deciding whether to fix the car or buy food. Maintaining the discipline to build a cash reserve and set it aside from day to day funds by putting it in a high interest savings account online is just plain smart.
