Online Savings Account: The Best Way To Make Out Of Savings In 2014

A recent report highlights the fact that a large segment of the U.S. population has a dwindling supply of savings. And a vast majority has already spent a large chunk of their savings in the post 2008 recession era. A survey (part of the report) indicates that 35% of the participants had already used their savings to supplement their monthly income.

Withdrawing money from retirement accounts might not always be a viable option, although at the present time, the U.S. economy offers a good chance to spruce up savings that can boost the consumer fiscal status in the long run.

With President Obama’s State of the Union address coming up, much is expected in terms of state incentives to create jobs and manage financial inequality resulting out of the post-recession policies.

A recent change seen in this regard is the usage of the U.S. Postal Service to offer basic banking services. This is expected to alleviate the costs that are associated with banking procedures. In a white paper published by the office of Inspector General, the role of online banking has been acknowledged and mentions that this new initiative would draw on similar policies.

Using online accounts

Whether the government proceeds with the needs of the hour in steps or not the general consumer has a responsibility to strengthen their financial position by making most of the opportunities that are available to them.

In this case, the status quo economic situation has to be analyzed. On a first level, the short term rates are going to rise; an inevitable phenomenon. This leads to a simple question: who would make the most out of the change?

It would definitely be consumers who have invested money in savings and relevant tools.

Another thing that goes in favor of online savings accounts is that the Federal Reserve is tapering its quantitative easing program. The quantitative easing program was initiated to allow the American economy to recover, leading to stable and low interest rates. With a very recent announcement of the tapering, changes are expected in the near future, the prime one being that the profit gained on savings accounts online would increase.

This allows room for consumers to look for short term options. An online savings account and CDs of a short term nature (two year) can yield a higher margin of savings based upon market conditions.

The biggest advantage of an online high interest savings account is the flexibility. The interest rate of 0.85% is higher than what is being offered in the market or by the Fed. Furthermore, online savings coupled with high yield CDs of a rate of 0.95%, allow consumers to compound their savings.

Income brackets of all ranges are suited to the online savings model, in which consumers are allowed to save more, even if they are earning less.

‘Investment through deposit’ is a concept which aptly describes the savings model of online banking. Instead of dipping into retirement funds, people with fewer wages can employ a savings account to accumulate larger net profit per annum.

The option of online saving is not merely restricted to people with less income. Routine investors can look at online accounts and CDs to diversify their investment in the market. The ‘savings’ portion of their investment would be a safety valve. With online accounts offering a higher profit, they become an immediate first choice of saving investment.

Another important point to note is that online accounts are free from the traditional market curve. Since these rates are pretty practical, they aren’t affected by market factors such as mergers and acquisitions.

Quantitative analysis from Money Rates shows that online banks are consistently performing well and their interest rates have been higher. The element of convenient access, safety and security are also allowing consumers to opt for them.

The analysis given above gives clear cut proof based on current market conditions that the ‘savings ‘ domain is a necessary tool to exploit in 2014. Interest rates are expected to increase, and this provides an opportunity for consumers. The key requirement is to make investments in the beginning of the year, so that the maturity period can be completed early and diversified to compound the interest earned.