Exploring Financial Cyberspace

Question of the week:After much pestering from our granddaughter, we have finally started using email and the Internet. Now we're considering online banking. Any pointers on how to get started? --Ohio Grandparents

Dear Grandparents,

Congratulations on making the leap over the digital divide! Like you, lots of people these days are interested in e-banking. The Pew Internet Project found that about one-third, or 32 percent, of Internet users were doing their banking online in 2002, up from 17 percent in 2000.

When we recently asked members of the Armchair Millionaire community about their online banking experiences, we found that folks are taking full advantage of it. Here are several comments:

Stay ahead of the curve. "I use online banking to pay ALL of my bills. Traditional banking is going the way of the Dodo bird … If you don't jump on the bandwagon you will be left behind. --mdonalds

Go automatic. "After setting up every automatic bill paying option that was available to me, I discovered that I could schedule recurring automatic payments even for those companies that don't offer the service themselves. Combine that with money management software (like Money or Quicken) and soon you'll find yourself on autopilot." --Jerry

Pay on time. "I use my credit union's bill pay service (which is free!). It's not only convenient, but is a real time saver. I always found it hard to find the time to pay bills so quite often they used to be late. Now my credit rating has also increased because the bills are paid automatically on time."--lM

Online banking, which allows you to take care of all your bills and monitor your accounts from your computer, offers terrific advantages over traditional banking. Payments are processed quickly, never lost in the mail, and can be scheduled in advance, so bills are paid while you're away on vacation. It's a money saver--no more stamps or envelopes for paying bills, and fewer paper checks. But perhaps best of all, it saves time. There's no more sitting down to the kitchen table to write out checks and, because transactions are recorded online, no more having to file away all the records.

Online banking is offered by thousands of banks and credit unions around the country, and getting started is easy--just visit your bank's Web site and sign up.

But online banking is only the tip of the iceberg. If you really decide to go hog wild on managing your money with the Internet, you'll find that there's much, much more waiting for you in cyberspace. My guide will get you started.

The Armchair Millionaire Guide to Online Money Management Tools

• Calculators ask you for a couple pieces of information, do some quick math, and then deliver the result. They will answer your questions on everything from how much you should be saving for your kid's college to whether it makes sense to refinance your mortgage. Planners provide you with specific recommendations for reaching your goals. For example, retirement planners will figure how much you'll need for retirement, and recommend savings strategies and asset allocations for getting there. Another popular type, debt reduction planners, map out the most effective route for paying off your debt.
• Investment research tools. Screeners allow you to sift through thousands of stocks and funds to locate those that meet your criteria. Looking for a domestic large-cap index fund with an expense ratio of less than .5 percent? A screener will turn up a list in seconds. And that's just the beginning. The Web can provide you all the information on particular stocks and funds that you could possibly use, including earnings reports and estimates, annual reports, price charts, company and fund news and much more.
• Portfolio trackers. These nifty tools let you enter the number of shares and ticker symbols of the stocks and funds you own, and then keep your portfolio up to date. Every time you log in, you'll get current quotes and values for all your investments.
• Account managers. Many brokers and fund companies allow you to manage your investment accounts online. You can check your account status, place buy and sell orders, or make transfers between accounts, all with the click of your mouse.

THE BOTTOM LINE: With all the tools available on the Internet, you no longer need to rely solely on your financial advisor to get your questions answered. While it will never replace that human touch, it can absolutely make you a better, more-informed manager of your own money.