Thursday, December 13, 2007

Earning High Interest on your Small Savings with High Yield Online Savings Accounts

We've talked before about the importance of spending less than you earn and saving the rest. We revealed this as one of the main strategies to building wealth.

People often get discouraged with saving money though because the interest in conventional savings accounts. They usually offer really low interest rates such that you don't really see any tangible or encouraging growth on your savings. This discourages most people and they decide to not save until they have a lot of money then they can save in higher yielding accounts, such as Mutual Funds or Money Market Accounts, which have higher interest rates but require higher deposits to open.

This kind of thinking is inaccurate, because the odds are that you won't have a lot of money to open these high yielding accounts if you don't start saving the little money that you have now.

There is however a workaround to the low-yielding conventional savings accounts, and that is to open a high yield ONLINE savings account. These accounts are growing more popular with those who know about them because, unlike the conventional high yield savings accounts, these high yield online accounts will let you open an account with minimal deposit, and still give you a high interest rate! Now that is what I call an attractive option!

There are several of these kinds of accounts around, and you can shop to find the one that best appeals to you. As with anything else, you want to do your homework and protect your hard-earned money:

1. Make sure the bank is legit, and not an online scam. Google it, and make sure you know everything there is to know about it.
2. Make sure the bank has a physical address with contact information. Call them if you can to verify that it's an actual bank.
3. Make sure that the bank is FDIC insured, which means that if anything happens to the bank, you will be able to get your money back.
4. Try and find out what their customer service is like, by asking on forums, and calling them to ask about their accounts to see how they respond.
5. Examine their web interface to make sure that it makes sense and that it looks user friendly. Try and go through the process of opening an account to see how easy and friendly it is.

One of the ways to shop for information about online savings accounts is to visit forums that talk about financial matters, and search to see what people have to say about the different banks you're considering. Two such places where you can find helpful information are the Craigslist money discussion forum, and the Fatwallet finance forum. Here you can search for information in previous discussions and ask your own specific questions, and people are usually willing to help.

I will be reviewing and discussing the different online savings accounts in coming posts and hope to show you the merits of putting your pennies where they can earn you a good return without a high deposit.

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