Comparison of a Checking Account vs a Savings Account

Marco Green
May 17, 2018

The checking account provides a banking facility that lets you deposit money into it and take money out of it to cover regular expenses. Whether these are for paying the food bill at Walmart, picking up some medication at Rite Aid Pharmacy, or covering the monthly rent, being able to pull cash out of the ATM to pay for essential expenses makes life easier. Your salary is kept safely in your account and only withdrawn as its needed, so you’re not caught walking around with too much cash in your wallet or purse.

Banking on Your Money

Using a checking account means that you’re banking on your money. Your salary comes in and you need to have access to it when and where you need it. You’re relying on the safety of keeping the cash in the account, but it’s also accessible too.

Managing your cash well is important and “not having too much month left at the end of the money,” to quote author Dave Ramsey, means you’ve got to have your fingers on the pulse. Whether you’re a student with a student checking account, a business requiring reliable banking facilities, or a family with kids who need feeding every day, access to your cash is everything. If you need a better checking account facility, you can open a bank account online with a reliable bank like BB&T.

Goals Inspire Savers

With a savings account, the money is not intended to be accessed often, or usually not for some time. The idea is that it’s socked away as a Rainy Day Fund, to save up for a special vacation or to replace the automobile. Interest rates vary depending on the savings account type, the balance, and how long the money is locked up for (a Certificate of Deposit can be for one year or several years). There’s a special plan in place for the funds that are being saved, in most cases, which provides the extra motivation necessary to achieve the savings goal.

CD vs Savings Account

The type of savings goal tends to dictate what savings product is needed. For things that you’re saving up for over a period of a few months or a year, and plan to use the savings to purchase an item like a vacation package to Vegas or a new motorcycle, then a savings account is a good idea. Using a savings account means taking the money from the checking account and removes the temptation to spend it when you do so.

With longer-term saving goals, where either interest accumulates or there’s a desire to save up a large sum over time, then a CD is likely to be the best idea. A CD locks up the money on deposit for a specified period, which varies depending on the savings product. Interest rates are higher because you’re agreeing to not touch the funds for that period. There are usually penalties to pay when an emergency comes up and an urgent withdrawal is needed, which is why a savings account is a better place for a six-month emergency fund.

To operate your financial life well, it’s necessary to have both a checking account and a savings account. When you’ve got an excess of savings that aren’t needed for at least a year, then consider a CD to get a higher return on your money.

Other reports by Click Lancashire

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