ING is now offering 4.0% annual interest (or more) on your checking account, up from from 3.0% when the product was first released. Sounds like free money to me! [...]

Retirement plans aside, not everybody is fortunate enough to begin investing in their twenties. Paying back credit card debt, establishing an emergency fund, and saving for home ownership all take priority over building a stock portfolio.

But if you can start investing, you certainly should. So how do you know when to start? Here is run-down of what the financial priorities in your twenties should look like.

Start with Retirement

Even if you haven’t tackled all of your other financial priorities, think about saving for retirement right away either through your employer-sponsored retirement plan (401k) or an individual retirement account (IRA).

Even if it’s just $200 a year into an IRA, it’s important to get in the habit of setting aside part of your income for the distant future and you won’t have to pay federal income taxes on your contributions.

If you haven’t already, start saving for retirement now, and if you can, contribute the maximum up to IRA contribution limits.

Pay Off Credit Card Debt

Even in its best years, you won’t earn a return in the stock market that can surpass credit card interest rates. So tally up what you owe, take a deep breath, and knock out that ugly debt.

If you need a hand, our seven steps out of debt series can help.

Get an Emergency Fund

Unlike cash in short-term savings accounts, investments aren’t always liquid, meaning you might not be able to use the assets you have invested in emergencies like if you lose your job or face medical expenses.

Once your debts are paid off, concentrate on building an emergency fund equal to at least three months of your income. In time you will want to grow this to about six months, but three months is a good start.

With high interest rates and access to your money in about 2-3 business days, an online savings account like those from ING Direct is perfect for achieving this goal.

Keep Saving, Start Investing

Once you have an emergency fund established it’s time to start investing!

At first you won’t want to be quite as aggressive with how much you invest as you have been with paying off debt and saving.

Keep saving for upcoming expenses like your home, vacations, cars, even weddings.

Your investing priority should be retirement, and you’ll want to exhaust the ways you can save for retirement before turning to the general stock market.

IRS-set contribution limits in 2007 are $15500 for 401(k)s and $4,000 for traditional IRAs (note that if you max out your 401k, however, your IRA contribution won’t be tax-deductible).

If reach your retirement contribution maximums and are rearing to keep going, congratulations! Then it’s time to start considering buying some securities with an online brokerage.

What About Student Loans?

In most cases, it’s wise to start investing even if your student loans aren’t fully paid-off. Student loans generally have long terms but at fairly reasonable interest rates thanks to federal subsidies. With some aggressive investing you make more than you’re paying on student loans.

Late in 2006, ING announced to its ING Direct Savings customers the Electronic Orange checking account. It takes free checking a step further and actually pays at least 3% interest on your balance, however small.

Could high yield checking accounts be the future of banking?

True, Electronic Orange is a paperless checking account, meaning you can’t get physical checks in the mail. But I don’t know about you, but for me that is becoming less and less of a problem. With online bill paying, the only check I write each month is for my rent, and I’m willing to bet if I really wanted to I could convince my landlord to let me pay him electronically.

And those archaic checks aside, ING offers everything else you would expect from a checking account, most importantly free ATM access and a MasterCard debit card. They also provide bill paying and electronic check writing services for free.

If you’re a big spender, the interest rates are just as good or better than most high yield savings accounts (5.30% APY on every dollar for balances of $100,000 or more and 5.05% APY on balances between $50,000 and $100,000). For everybody else, it’s 3.0%. Still, that’s a heck of a lot better than what I currently earn on my checking account…Zilch!

As of right now, you first need to be an ING Direct savings customer to sign up. But if you haven’t done so already, there’s no reason not to grab an ING Direct Account an earn an instant 10% return on your money. (You get a $25 bonus when you open an account of $250 or more). So open an ING Direct account now and then sign up for their high yield checking account to start earning returns on your checking balance!

Even if you’re already saving your money in multiple accounts, for example in a 401(k), IRA, and personal savings account, adding on additional accounts can be an easy way to reach your savings goals faster without even thinking about it.

With the great annual interest rates and deposit bonuses offered by leading online savings accounts (compare high yield savings rates here) it’s silly not to start a new account!

I keep my money with ING Direct, which allows me to divide my savings account into multiple segments so I can save towards different goals at once!

1. Vacation – Vacations are for relaxing, don’t stress out over how you’ll afford it. Put aside $48.08 a week towards your next trip of $2,500.

2. Christmas – The holidays always sneak up on your wallet. Avoid a New Year’s spending hangover by popping $19.23 into an annual holiday spending account of $1,000.

3. Auto Maintenance – If your car is like mine, it will break down when you can least afford it. Be prepared for your next $500 repair by saving an additional $9.62 a week.

4. Weekend Escape – Spontaneous weekend trips are the perfect way to escape your routine. But just because the trip is spontaneous doesn’t mean the costs have to be. Try $11.53 weekly to plan for two $300 weekends a year.

5. Spending Splurge – Shoes, golf clubs, video games, jewelry; everybody has a weakness. Plan for a quarterly $400 splurge by saving $30.77 each week.

6. Moving – Whether you’re planning a move or not, expenses can add up. Make sure you have some cash on hand to cover movers and furnishings for your new dig. Just $7.70 a week will cover a $2,000 move every five years.

7. Taxes – Though it feels good to get a big refund check from Uncle Sam once a year, it’s better to owe the tax man because it means you can collect interest on that money in the meantime. Short your withholdings a bit throw $11.54 a week into a savings account instead to cover a $600 tax debt at year’s end.

What does it all cost? It would take $138.47 a week (or $600.04 a month) to save for all of these things. If that seems like a lot, consider the fact that these are things that you are likely paying for anyway, only you may be pulling money from other sources, or even going into debt to cover them.

But by saving a little every week, you’ll not only get the things you want for less, you’ll have something to show. That $7,200.48 you’ll save in a year will earn you $324.02 in interest at 4.5%. That’s another weekend getaway, a several nice dinners out, or a nice contribution to a bigger savings goal like a house or retirement!

Ready to get going on your many savings goals? Get that 4.5%, a $25 deposit bonus, and the option to create multiple savings accounts today at ING Direct! Open an account in five minutes now.

If you liked this article, check out some other articles on saving and budgeting from Money Under 30.

Looking for a high yield savings account with no minimum balance requirement and the ability to withdraw anytime? It’s something you typically can’t find at your local bank or credit union, where rates for simple savings account rarely eclipse 2% and, if they do, they require minimum deposits of $1,000 or more. [...]