Financial Fundamentals Blog

Checking accounts vs. savings accounts: Leveraging your financial options wisely

Young couple reviewing their financial options on their laptop


You’ve likely heard the terms checking account and savings account thrown around a lot. What you may not know is how they differ and how they can be used to efficiently manage your money. Today we’re taking a look at checking versus savings accounts and how you can leverage both to put your money to work for you.


Checking vs. Savings Accounts: How They Differ

Checking accounts are great for accessing your money for everyday needs. You can access the funds in your checking account via the check-writing abilities and debit card privileges that come with it. Your checking account can also be used for online bill payments, and if your financial institution has a mobile app for checking accounts, you can track your spending through the app.


Savings accounts, on the other hand, are great for long-term savings goals and for setting aside money in an emergency fund. Your savings account won’t have check-writing or debit card privileges associated with it, which means it’s purely for saving. While you can transfer money between your savings and checking accounts, your savings account is largely going to be “out of sight, out of mind,” which means you’re much less likely to use the money in the account for impulse purchases.


Why It’s Important to Have Both Types of Accounts

It’s important to have a checking account so you can pay bills and make everyday purchases, while a savings account is essential for preparing for larger long-term purchases.


It can seem tempting to just use your checking account as your savings as well, but there are several reasons why you shouldn’t do that, including:


Curbing Impulse Spending

Having extra funds sitting in your checking account instead of moving them to your savings account can make it all too easy to make an impulse purchase. While having two accounts can help curb impulse spending, there are additional strategies you can use to avoid impulse purchases, such as consulting your budget and expense tracking tools before purchasing to see how the item fits into your budget.


Earning Interest With a Savings Account

Savings accounts can help your money grow because you earn interest on them. Interest earnings can be small, but they’ll add up as you continue saving. However, not all savings accounts are alike, so look for one that offers interest earnings.


Protecting Your Finances Against Unforeseen Expenses

Having a dedicated savings account can help you have security and less financial stress in the event of a financial crisis, unexpected medical bills or job loss. Many experts recommend having 3-6 months’ worth of expenses in your savings account, but this is variable depending on your unique situation.


How Can Both Accounts Be Used to Manage Money More Effectively?

Checking and savings accounts are both essential money management tools, but how can they be combined to make the most of your money? Let’s take a look:


Transfer Money 

Having a checking and savings account isn’t just a smart financial decision; it’s also a simple thing to manage. By having both accounts through the same credit union or bank, you can transfer money with ease from your checking account to your savings online or through your mobile app.


Have Control Over Your Money

Your accounts can work well in tandem with each other. Use your checking account to pay bills and your savings account to build your emergency fund and earn interest. Remember that the more you invest in your savings, the more interest you’ll earn.


Monitor Savings Goals

Separating your checking and savings accounts enables you to have a dedicated place to store your money toward goals such as a house or car. Additionally, it enables you to better track your progress toward these goals.

Ready to Manage Your Money More Efficiently?

Feeling in control and more confident over your money is an important part of financial health. Find out how to manage your money more efficiently, what to look for in your checking account and more by checking out our resource, “Checking Accounts: A Complete Guide to Managing Your Money”.