Back in the old days, lots of people parked their money in traditional savings accounts because the options were more limited. But now there are all sorts of financial products that act as piggy banks for your funds.

There are old-fashioned savings accounts at brick and mortar banks, which for reasons we outline in the next section, aren’t a smart place for your money. They give such measly interest on the money, if they pay any interest at all, you’re almost as well off sticking those funds under your mattress.

Some banks offer special senior and student savings accounts that offer moderately higher interest rates and waive fees and balance minimums that can pinch your money. They are basically traditional savings accounts with better deals.

There also are IRAs, money-market funds, and CDs — all of which tend to provide higher returns but place greater restrictions on when and how you can access your funds.

Fortunately, high-yield savings accounts — also known as online savings accounts because many of them originated on the web—have developed as a better alternative for increasing your assets.

These accounts were popularized in 2002 when ING, a unit of a large Dutch financial services company, started offering an online savings account called the Orange Savings Account. ING didn’t have any bank branches, and it still doesn’t. In return for opening the account up online and doing all of the transfers via the web, customers could get rates up to 10 times greater than what local banks offered. By doing away with overhead like tellers and rent, ING could afford the more attractive rates.

With the recent volatility in the stock market, high-yield savings accounts have taken on an added shine. Other online banks have started copying ING and even more familiar names like Citibank are competing to offer more rewarding interest rates for online accounts. These accounts have become good places to accomplish all sorts of financial goals, such as maintaining an emergency fund or saving toward a major purchase.

High-yield savings accounts are pretty easy to open—you don’t have to go anywhere or talk to anyone. That doesn’t mean it’s quick. Most banks have you sign up online and electronically link your new high-yield savings account to your normal checking account, which you have with another bank. It can take several days for the online savings bank to make sure the two-way link is working.

Once that’s done, however, you can generally link as many accounts as you want to your new high-yield savings account. You can link your checking account, a brokerage account—whatever. Moving money around isn’t instantaneous, but transfers usually go through in a couple of business days.

You can usually fund your account with just a dollar; most high yield savings accounts don’t have minimum-balance requirements.

Like a normal checking account or any bank account, the money you deposit in an online savings account is insured for up to $100,000 (or $200,000 if it’s a joint account with a spouse) in case the bank goes under. The government provides this insurance through the Federal Deposit Insurance Corporation (FDIC).

One tax note: The IRS counts the interest gains from online savings accounts as “ordinary income.” That means you pay the same tax rate on it that you would for money earned from a job. You don’t get to pay the lower capital gains tax rate, like you would on money made from selling a stock that’s appreciated over a period of time, usually two years.

Want to Know More?

• Should You Open a Savings Account?
• Advice for Getting the Best Deal on a Savings Account
• Grilling Guide: Questions to Ask Banks About High-Yield Savings Accounts