if you're sitting on savings, consider putting it into a high yield online bank

Since saving up my emergency fund and opening my money challenge account, I've been considering an additional savings account outside of my bank as an "all student loans" savings, where I just throw in birthday money and maybe a few bucks a week from my paycheck to start building. Nothing too major, since I'll have a money challenge for each loan I need to pay off that will ultimately get me to the end goal faster, but small amounts to help with the $80,000 loan I'm stuck paying after the small ones in my name are complete. Seeing as how it may be a few years before all of the loans in my name are paid off, the money in this additional savings account will essentially just be sitting there and doing nothing. I don't need access to it, so why not put it into a high yield online savings account where it will collect a small amount of interest over time?

An online bank account is exactly what it sound like - a bank account for your money online. Since these banks do not have any brick an mortar buildings, which eliminates overhead (paying employees at each branch, paying heat/AC, equipment, etc.), they can offer dramatically higher interest rates and lower fees than traditional big banks. In addition to that, their customer service and reward programs are exceptionally better.

While I really love my current local bank, the interest my savings accrues is less than 0.5% - in other words, I find more money in my boyfriend's shorts when doing one load of laundry than I would make in one year in interest with my bank. Unfortunately, online banks don't offer the interest rates they used to (3-5%). You will find that most offer slightly less than, or close to, 1%, but it's still significantly better than what your big bank is currently offering you - about $10 for every $1,000 in the account. Still, that's $10 of free money every year that adds up fast as your balance grows.

If a high yield online savings account is something you're considering, check out Nerdwallet's list of their recommendations. For myself, I've decided on Ally Bank. Their interest rate is now .9% (almost 1%!), which ranks among the highest, plus they offer some neat features like depositing checks through your mobile phone and a debit card for their Money Market Savings accounts. After some research, I've decided their customer service is top notch and others who have accounts with them have had little to no issues. Plus, as a web designer, their website pleases me (clearly a top priority).

If you're thinking about moving some money to one of these accounts, keep in mind that it's money that won't be as easy to access. Typically, to withdraw the money, you'd transfer it to your checking or savings account with your regular bank, which can take a few days. If you're thinking of having your emergency fund sit in one of these accounts, consider what would happen in an actual emergency where you may need the money a lot quicker than 3-5 business days. Withdrawing from ATM's are a thing (and can be done without fees), but there's sometimes a limit and it also depends on the online bank, so research wisely.

Nonetheless, a high yield savings account is definitely something I'm going to use once I pay off my smallest student loan, Nelnet, so I'll have some extra wiggle room to work with while tackling the next debt and trying to save simultaneously. I certainly encourage online banks to anyone interested.