This Online Bank Feature Made It Easier to Save Hundreds in 2023

Banks come in all shapes and sizes. One of the biggest divides in the banking world is between online and brick-and-mortar banks. One exists purely in cyberspace, while the other can be found in physical form in your city. I belong to one of each, which gives me the chance to take advantage of the features of both.

This has worked out well for my finances, and I've been especially pleased with one feature of my online bank in particular. My savings account with this bank has made it so easy (and even fun!) to save hundreds more than I expected this year.

One account -- many goals

My absolute favorite thing about my online savings account is saving for multiple goals within the same account. I have the option to add up to 30(!) sub-accounts within the main account. I can name them, set goals (and target dates to strive for), and the account generates a neat graphic showing me my savings progress.

This feature gamified saving money for me in a way that I was not expecting, especially since I originally opened the account in early 2022 for the most boring reason. I needed a place to keep the taxes I would owe Uncle Sam (when you're a freelancer, taxes are serious business and paid quarterly). Opening a separate savings account helped me sequester that money so I didn't accidentally spend it.

I was initially freelancing primarily as a means to pay off debt, so for the first several months of having the account, I didn't really take advantage of the sub-account options (other than to create one for the tax money). But when I flipped from paying off debt to actively saving money to buy a home toward the end of 2022, I discovered the joy of this feature.

In addition to saving thousands toward a home purchase, I also found myself creating mini-accounts to help me save hundreds for different vacations, an upcoming dental procedure, and even my cats' medical expenses. And every time I meet a savings goal, I get an email from my bank as a congratulations. I tell you -- it's intoxicating.

The high APY wasn't too shabby, either

My bank doesn't offer the highest annual percentage yield (APY) available right now, but it's still quite generous and well above the average. According to the Federal Reserve, the average APY on savings accounts across the board is currently just 0.46%. My account is paying me 4.35% on the money I keep in it, and right now, you can find savings accounts paying even more than that.

Earning interest on your savings account is truly passive income. I'm doing no work to get this money, other than regularly adding more to the account. The interest I earn is dumped into my account on the same day every month, and when it arrives, I end up splitting it up and moving it to a few of my sub-accounts.

How can you pick a great online bank?

All of this sounds pretty great, right? Well, I've got good news for you -- you can open accounts with an online bank, too! Here's how to find an excellent one:

• Consider technology: Because online banks don't have physical branches, they tend to put a lot of money into developing great mobile apps and web banking. Review our list of the best banking apps for some winners. Note that not all the banks on this list are online banks, however.
• Look into cash access: If you'll need to take out cash, see if the bank you're considering offers a robust ATM network with machines in your area. I got lucky with my bank; one of its fee-free ATMs can be found in a store not far from my house. Also note that online savings accounts don't generally come with an ATM card; I had to open a linked checking account to get one.
• Explore fees: You'll see fewer fees from online banks, because they don't have to pay for the overhead costs of in-person banking. But it's still a good idea to check any bank's fee schedule -- account maintenance fees in particular are one type to avoid.
• Assess APY: Not all online savings accounts are created equal, and there are some clear standouts for higher APYs. Now is the time to find a bank paying at least 4% on deposit accounts -- enjoy these high rates while they last. When the Federal Reserve cuts the federal funds rate (likely in the new year), we'll see APYs fall.

Brick-and-mortar banks have their perks -- the one I've got accounts with also offers stellar credit cards and puts a lot of money into arts and culture initiatives around the world, which is something I strongly believe in. But my online bank brings the fun and has made it easier than I ever thought it would be to save more money in 2023 – a habit I plan to continue into 2024 and beyond.