An online savings account is really no different from a regular or offline account other than the fact that you are afforded the convenience of conducting all of your financial business using your computer. This does afford you the benefit of still maintaining your day-to-day accounts while your online savings account gives you the ability to put a certain percentage of your earnings in a safe place. Additionally, current research (through 2008) indicates that nearly 80% of all internet users perform some kind of online banking.

Now at an all-time high, online savings accounts have become extremely popular over the past several years. It would appear that this type of financial endeavor has provided both banks and consumers with a win-win scenario in that the online bank has considerably lower overhead than the conventional banks while the consumer has access to their accounts on a 24/7’s basis. As a result of lower overhead, most online savings accounts will pass the savings onto the account holder with typically higher returns and lower fees.

Advantages of online savings accounts

Two of the key advantages were mentioned in the paragraph above. However, there are others. Online savings accounts usually offer a higher percentage of interest on your money as a result of lower overhead such as handling and operating costs so you can keep more money and maybe retire someday. Another significant advantage is the fact that you are able to conduct your banking in the comfort of your own home which saves you fuel costs and time.

Traditional banks also offer online account management, but some of them charge a monthly fee for this whereas there are rarely any fees associated with most online savings accounts. One of the biggest advantages is that you have access to your account and your money 24 hours a day, 7 days a week. You typically earn a better return with an online savings account as well because some of them calculate daily interest rather than on a monthly basis as a traditional bank does.

Disadvantages of online savings accounts

Naturally, with the advantages come a few disadvantages to opening and maintaining an online savings account. The biggest disadvantage as we see it involves the security issue since all of your transactions will be conducted online rather than in person. Although they still have a long way to go within this industry, many online savings banks have upgraded their security measures so that you can feel safer when you bank online. Other than this one issue though, the advantages of opening and maintaining an online savings account far outweigh this negative.

The best course of action

We recommend that if you are convinced that an online savings account is the course of action you want to pursue, do some careful shopping around on the internet for the best savings account for you and your family’s needs. Remember, scam artists can be found in nearly every internet activity and online baking and savings accounts is no exception to that rule. Be wise in your decision making and take the time to research this thoroughly.

For many of us questions like “What if I out live the money I have saved?” and “What if inflation increases too quickly?” or “Should we invest in stocks, annuities, bonds or something else?” can cause us to lose sleep at night, but fortunately proper planning can help prevent all this worry and help you enjoy your golden years without worry.

So how can you start to prepare for your retirement?

First, try to get a rough estimate of what kind of income you will need for each year of retirement. At first this sounds very complicated, but we aren’t looking for a specific number… after all things change… but it is much more difficult to plan for retirement without setting a goal.

Consider factors like a mortgage payment, property and school taxes, life and health insurance, in addition to the typical expenses like heat, electricity and food. If you would like to travel or buy a second home be sure to include that information as well… the objective here is to aim high because it would be much better to have a huge surplus than to run out of money.

If you are still having trouble coming up with a number there are a number of retirement planning calculators available like this one at CNN Money that can help you get a better idea of what you are looking for. Please note that these are just tools designed to give you an idea, not to provide exact figures.

Next, finding a financial professional to help you with your retirement investment plan is typically a good idea. Some people are more than capable of planning for retirement on their own, but for many of us who don’t work in the financial industry it is usually a good idea to seek some advice.

Financial professionals deal with situations like yours every day and are familiar with all of the ins and outs of the industry. They can help you meet your exact level of risk and return to help you get on target with your planning with the lowest amount of risk possible.

It is also important to remember that financial professionals are there to educate and assist you, but ultimately you are the one who should be deciding what type of investments you own. Be sure to take an active role in your financial planning and do not invest in anything that you don’t fully understand to help you minimize the chances of having a financial disaster down the line.