Ally, your separate savings friend
I am a believer in creating online savings accounts for each annual spending or saving goals. It makes automation a breeze, removes the guesswork in knowing how much you can spend on certain things, and allows you to earn more interest than if your money sitting in your checking or savings account at your local bank. Wins all over the place!
Years ago I spent a lot of time testing out various online banks. They all had attractive interest rates but I was surprised by the limits I quickly found. Some banks only allow you to withdraw a minimum of $25, which in all honesty, is probably just fine, but I don't appreciate any sort of "handcuffs". Other banks had requirem
ents to keep money in the account for a certain amount of time after depositing and some only let you set up a handful of accounts. It wasn't until I gave Ally a try that everything clicked.
Ally always maintains a competitive interest rate. They are listed consistently listed near the highest interest rates on all the major reporting sites. Ally allows you to have many accounts. As of this post, I currently have 19 online savings accounts. They also let you open up 5 accounts at once! The only handcuff that I have seen with them is they only allow you to withdraw from an account 6 times in a statement cycle. This has not been a problem for me in the few years I have been with them.
If you are worried about tax reporting on that many accounts, fear not. Ally will provide a 1099-INT for each account, but they also provide a summary document where it is easy to see your total interest earned.
Maybe there are others out in the world who went through a similar process and ended up with many accounts at Ally because in the past couple of years Ally has rolled out some cool features like Buckets, Round-Ups, and Surprise Savings. In theory, these features would make is so you shouldn't have to open so many accounts, but I think they still have a little more development before I will use them.
If you aren't thrilled with the idea of having a ton of accounts to deal with. You can utilize their Buckets feature where you can designate a bucket for different savings goals within one account. They currently allo
w you to create 10 buckets per account. Once you have a bucket established you can set up a savings goal for that bucket, prioritize how deposits to the account are distributed or withdrawn, and transfer between buckets and other accounts. You earn the same interest rate with buckets that you would by having other accounts. The main reason why I don't use buckets is they don't show up on Mint, Right Capital, or other aggregation sites. You have to actually login to Ally and click into the account to see how much you have saved in each bucket. Deal breaker for sure!
Round-Ups is a feature similar to Acorns where your spending is analyzed and all transactions are rounded up to the nearest dollar then transferred to a designated saving account once you have at least $5 rounded up. This sounds pretty great but they require you to open a checking account with them. This is a deal-breaker for me. I think there are still great benefits to using a local bank for most transactions.
Surprise Savings is a way to optimize the interest on your saved funds. Ally will analyze your checking account to determine your typical spending patterns. Once they have determined how much you actually need in your checking account, they will systematically withdraw excess funds to a designated account so you can earn more interest. This sounds really great but yet again, you are required to use an Ally checking account. I'm just not sold on that option quite yet. Maybe they will improve this feature so you can one day use an outside account, but that's not possible for now.
Overall, I think Ally is a fantastic option for setting up separate online savings accounts for your goals and annual expenses. They are innovating with new features and although they haven't quite hit the mark to make me utilize them quite yet, I am optimistic.