The Benefits of a Having Both a Checking and Savings Account

The Benefits of a Having Both a Checking and Savings Account

Checking and Savings Accounts Defined

A savings account is a great addition because it allows you to save money that’s not needed in your everyday budget in a separate account, which makes it less likely you’ll dip into those funds. At the same time, it’s accruing interest which helps your money grow over time. You might also be offered a “club” account that helps you consistently save money for the holidays or other long-term goals.

What Are Key Differences Between a Checking and Savings Account?

While both types of accounts are safe places to keep your money, there are a few main differences between the two accounts:

• Interest: A checking account earns little to no interest on your balance, whereas a savings account will offer interest on the funds you deposit into the account, which in turn helps your money grow.
• Fees: Many checking accounts will incur small monthly service fees, which typically allow unlimited access to your financial institution’s app and ATM network, among other services. Often these fees can be waived through certain actions, such as setting up a monthly direct deposit or maintaining a certain average daily balance. You also might be charged certain fees if you overdraft your checking account, which means that you have spent funds or made a withdrawal that is over your current balance.
• Transactions: Most checking account products allow you to make unlimited transactions, so you can withdraw $20 here or make a $5.50 debit card payment there. With a savings account, you’re often limited to a specific number of transactions a month, which will encourage you to keep your money there rather than spending it.
• Minimum Deposit: A checking account will usually have a specific minimum amount you need to deposit to open the account – at Valley Strong Credit Union, it’s $25. The minimum amount for a savings account is generally smaller; for example, a savings account only requires a $5 deposit at Valley Strong.

Making the Most of Your Savings Account

Now that we’ve hopefully convinced you that adding a savings account can help you reach your goals, here are a few tips to create some great savings habits:

• Create an emergency fund: While you might already be saving for retirement, an emergency fund can help you cover those unexpected expenses that popup, like a car repair bill or a medical emergency. Having adequate savings set aside separately from your day-to-day checking account funds means you can cover a unexpected bill without running up your credit card.
• Save for a specific goal: Are you usually still paying off holiday bills through the first part of the year? Putting those expense on your credit card can incur expensive interest costs and can even ding your credit score. However, when you put away a set amount each month in a “Christmas club savings account,” you’ll feel as jolly as Santa Claus as you go about your already paid-for holiday shopping. A savings account can similarly be used to save for a short-term goal like a vacation or even a longer-term goal like the down payment on a house.
• Avoid the temptation to spend: There is a significant psychological advantage to having a separate savings account because it allows you to grow your money in an environment outside of your checking account. This approach to savings allows you to allocate a percentage of your paycheck to your savings account.  So, any excess funds that would have been in your checking account are now growing (with interest) out of sight and out of mind in your savings account.

Ready to open checking and savings accounts of your own? The banking specialists at Valley Strong Credit Union are available to talk about how to make the most of their financial service products, including checking and savings accounts.