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Why is a Savings Account Better than a Checking Account for Saving Money

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If you’ve been thinking about saving money or you have already started, you might be wondering where to put your extra cash. You have a few options, a savings account, a checking account, and even an investment account. Let’s start by looking at why is a savings account better than a checking account for saving money.

Why is a Savings Account Better than a Checking Account for Saving Money

There are a few reasons it makes more sense to save your money in a savings account rather than a checking account.

Let’s look at the top ones.

1. Checking Accounts and Savings Accounts Have Different Purposes

When it comes down to it, checking accounts and savings accounts are two different types of bank accounts and have different purposes.

You use a checking account to hold the spending money that you use for everyday transactions.

This is money you spend on monthly bills as well as entertainment and other expenses.

A checking account is set up in a way that makes it easier to access your money.

You most likely have a debit card or ATM card and you can use it for ATM withdrawals across the country. 

This is great when you need to get to your cash quickly and easily.

You will also have online banking access to your account.

That’s not so great if you are trying to save money.

A savings account provides you with less easy access to your money.

The purpose of this type of account is to save money not spend it.

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2. It’s Harder to Get Your Money Out of a Savings Account

If you’re trying to save money then you don’t want easy access to that money.

It is too easy to get caught up in the moment and buy something you don’t really need. We’ve all done it. 

If the money is in your checking account, then you can give in to this impulse buying, and then boom your hard-earned money is gone in a flash.

If, on the other hand, your money is in a savings account, you might have to actually go to the bank or take some other step to access it.

This will give you time to step out of the must-have moment and decide not to spend the money.

The more difficult you make it to get to your cash, the more likely you won’t spend it and your savings will grow.

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3. You Might Receive Interest on a Savings Account

The vast majority of checking accounts don’t pay any interest. 

The few that do require you to stay above a minimum dollar amount. If you fall below that amount, then you will be charged a fee that will most likely wipe out any interest you might have earned.

Savings accounts do pay interest.

Granted, the amount of interest is terribly small, but it is something.

The average interest rates for savings accounts across the country are currently less than 1 percent, but that is better than nothing.

Money market accounts do offer some interest, but again you will have to keep a minimum balance.

If you’re lucky, you might find high-yield savings accounts in your area that will offer higher interest rates, but this type of savings will come with minimum deposit requirements as well.

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4. Savings Accounts Have Withdrawal Limits

There are federal regulations that financial institutions, including credit unions, have to follow that only allow up to six withdrawals per month from a savings account.

Checking accounts have no such limits. 

You can, of course, deposit money as many times per month as you want. Most traditional savings accounts do allow direct deposit, so you can have a percentage of your paycheck automatically deposited into savings.

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5. You Can Meet Your Savings Goals

Keeping your money in a savings account makes it easier to meet your future goals. You can determine your financial goals and watch your money grow month over month.

This is perhaps one of the key differences between an average savings account and checking.

When I was a little kid they used to have what they called a passbook savings account.

You actually got a little book that the bank teller would update when you put your money in your savings account.

I loved that.

It was something you could hold in your hands and watch your savings grow.

Of course, you can do the same now with online banking, but somehow it just doesn’t seem quite as exciting.

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6. No Monthly Service Fees

There are free checking accounts available but many accounts charge fees. These fees can really add up and would wipe out any interest you might make.

Most basic savings accounts have no monthly fees.

Why an Investment Account is Better Than a Savings Account

You do have a third option and that’s investing your long-term savings.

Yes, you want to have an emergency fund that you can access easily if necessary, but if you want to create wealth, then you need to put the bulk of your money in some type of investment.

You will never get wealthy by saving your money. 

You can only truly grow your money if you invest it.

Consider talking to a financial advisor to determine what the best type of investment is for you. They can help you set up your own personal finance plan.

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To Sum it All Up:

A checking account is an account used for spending money. A savings account is used to save money, and an investment account is used to grow wealth. 

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