When setting up a savings account, there are many more options available today than in years past. Many brick building banks are now charging for withdrawals or requiring a minimum balance to be kept to avoid periodic service fees. Also, interest rates are minimal (.01% at my bank as of today). While it may be okay to keep a small amount of 'emergency funds' in such an account, there are other options.
Several years ago, I realized I could get a better rate with an online bank. Opening deposit was minimal - $1 at that time, and there were no fees. I wasn't sure how it all worked, but for $1 it was worth looking into.
While I have since switched from that first online bank (found a better interest rate), I have continued keeping the majority of my savings online. Right now, I have 3 accounts at one bank.
Emergency Savings (for unexpected car repairs, medical deductibles, etc.)
Remodeling Account (this is a money market account with a debit card, but earns the same rate as the savings account)
Incidentals Account (this holds the accruing monies for expected expenses such as tires, vet visits, clothing, eye glasses, etc.)
The down side of the online banking is the transfer time - usually 2 days. However, at any time, I can transfer the funds needed to my money market account and have immediate access with my debit card.
Interest rate on these accounts - 0.84% as of today! Much better than the brick building banks!
Remember, the monies going into these accounts are for short term issues - not long term investments.
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