A:

Setting up online banking can make a personal budget easier to manage through the use of multiple accounts or expense categories with the same financial institution (for expenses like utility bills, vacation accounts, retirement funding accounts, etc.). Some people find that by moving money out of a core checking or savings account they are less likely to spend money that is budgeted for a future expense. Also, some personal finance software programs (such as Quicken) can be linked directly to your online accounts to provide real-time analysis of all your balances and cash flows.

Once your bills and vendors are initially setup for online bill payment (and most large companies will now allow payment via this method), payments can be made electronically and instantly. You can have the payment go out on pre-determined dates (as in every month on the 15th) or simply log into your account each month and manually trigger the charges to your accounts. Either way, there is no postage to pay - and you can see the effect on your account balances immediately.

People may find that online banking makes sticking to a budget easier because you can easily sort payments to see how much was paid to specific budget categories like electricity, cell service and health care. This saves time and confusion from sorting through months of paper statements and allows you to compare spent amounts with budgeted amounts - so your budget resembles your real life as closely as possible.

For those who use budgeting with their investing, online banking can assist in transfers from banking to investment accounts. Again, a key feature here is moving money "out of sight" and directly into its budgeted purpose. Most brokerage firms will allow you to make automatic transfers to and from an investing account, so long as you have liquid assets like cash or money market funds. Many brokerage houses even offer basic banking services such as checking accounts, which you may want to consider if you are making regular cash transfers into investing accounts.

On the whole, online banking should be comparable or cheaper than standard banking. You'll want to be aware of any extra fees that exist for maintaining several accounts with the same institution, but most will offer free checking if you set up direct deposits for your paycheck.

Some people worry about the safety of online banking, but strong security measures are in place at nearly every major provider. And at most commercial banks, customers can always choose to walk into a brick-and-mortar branch to bank if they have a problem with online services or would like to talk with a bank employee in person.

To learn more about online banking, check out Keep Your Financial Data Safe Online, Choose To Beat The Bank and The Evolution Of Banking.

RELATED FAQS
  1. How soon should I start saving for retirement?

    The best answer to the question, "How soon should I start saving for retirement?", is probably, "yesterday," and the second ... Read Full Answer >>
  2. How are spousal benefits calculated for Social Security?

    The amount of your Social Security spousal benefit depends on a number of factors, including your age, the maximum amount ... Read Full Answer >>
  3. Are Social Security benefits adjusted for inflation?

    Social Security benefits are adjusted for inflation. This adjustment is known as the cost of living adjustment (COLA). For ... Read Full Answer >>
  4. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  5. What is the range of deductibles offered with various health insurance plans?

    A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>
  6. How do I know how much of my income should be discretionary?

    While there is no hard rule for how much of a person's income should be discretionary, Inc. magazine points out that it would ... Read Full Answer >>
Related Articles
  1. Retirement

    Strategies for a Worry-Free Retirement

    Worried about retirement? Here are several strategies to greatly reduce the chance your nest egg will end up depleted.
  2. Professionals

    How to Build a Financial Plan for Gen X, Y Clients

    Retirement is creeping closer for clients in their 30s and 40s. It's a great segment for financial advisors to tap to build long-term client relationships.
  3. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
  4. Technical Indicators

    Key Financial Ratios to Analyze Retail Banks

    Learn about key financial metrics that investors use to evaluate retail banks, and how the industry is fundamentally different from most other industries.
  5. Professionals

    Top Retirement Hack? Start with a Lifestyle Change

    Instead of going through the usual retirement planning steps, some people are focusing on fostering a lower cost lifestyle from the start.
  6. Retirement

    The Least Expensive States to Retire In

    Retirement time, and the livin' is easy in these locales.
  7. Retirement

    Yes, You Can Manage Your Own Retirement!

    Discover how to get started planning for and managing your retirement by making simple, deliberate steps towards financial health.
  8. Investing

    10 Best Countries for New Retirees

    Natixis Global Asset Management recently released its 2015 Global Retirement Index, and you may or may not be surprised that the U.S. barely cracked the top 20 at number 19. Of the top 10, eight ...
  9. Retirement

    Want to Retire Early? Follow This Checklist

    Understand what you need to do first to retire early with security, including covering living expenses, securing health insurance and paying off debt.
  10. Professionals

    5 Questions to Ask Yourself Before Retiring

    Before you retire, it's important to ask yourself these questions to ensure you're ready.
RELATED TERMS
  1. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  2. Dynamic Updating

    A method of determining how much to withdraw from retirement ...
  3. Possibility Of Failure (POF) Rates

    The likelihood that a retiree will run out of money prematurely ...
  4. Safe Withdrawal Rate (SWR) Method

    A method to determine how much retirees can withdraw from their ...
  5. Debit Card

    An electronic card issued by a bank which allows bank clients ...
  6. Elder Care

    Elder care, sometimes called elderly care, refers to services ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!