Checking or Savings: Where Should You Put Your Money?
When you're managing your finances and considering where to put your money, the choice between a checking or savings account will play a vital role. Each of these accounts serves different purposes, offering unique features and benefits that you can align with your financial goals and needs.
Understanding these accounts and their purposes can help you make better decisions about where to put your funds, allowing you to manage and grow your money more optimally.
Checking Accounts vs. Savings Accounts
Choosing between a checking and savings account depends on your financial goals. However, you will often find it useful to have both. If you want to know where you should keep your money, the answer lies in their features. Before you dive in, consider these factors:
- Daily transactions: How often do you use the account? Are you using it for everyday expenses, bill payments or managing cash flow?
- Emergency savings: Are you saving toward a goal of having an emergency fund? Are you in a financial position to dedicate part of your income to a savings account?
- Accessibility and fees: How will potential transaction limits and account fees impact your goals and spending needs?
When Should You Keep Your Money in a Checking Account?
These accounts are best for day-to-day transactions like bill payments, purchases or ATM withdrawals. They allow you to deposit and withdraw money easily and come with features like check-writing abilities, a debit card and online banking access. Checking accounts support frequent transactions, providing you with liquidity and flexibility in managing your money.
Checking accounts generally do not earn interest. However, at First Commonwealth Bank, we offer checking accounts with interest benefits to help you achieve your goals.
When Should You Keep Your Money in a Savings Account?
A savings account is the happy medium between a checking account and an investment account or certificate of deposit (CD). If your goal is to store and grow your money, this is the right choice. These accounts are easily accessible with several extra key features:
- Security: These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. This provides protection for the funds you deposit.
- Goal-oriented saving: Savings accounts can help you save for specific goals, such as vacations and down payments.
- Emergency funds: A savings account is a popular choice for holding emergency funds, as you can access your money quickly when you need it while still earning some interest over time.
Link your savings and checking accounts for overdraft protection. This strategy ensures your accounts stay positive when unforeseen circumstances hit.
Savings vs. Investment
It is important to note that savings are not investments and vice-versa. When it comes to preparing for your retirement, it’s important to understand your goals and options. Here are some good questions to start with:
- Do I want to save for long-term goals, such as college or paying off a mortgage?
- Do I need higher potential returns than what I’m currently getting?
How to Transfer Money From a Savings to a Checking Account
When you want to transfer money between your accounts, be aware of any daily or monthly transfer limits and fees for certain types of transfers. Ensure you have enough funds to complete the transaction.
Note: if you're transferring between accounts at different banks, your processing time may be a few days instead of instantaneously. There are several options to transfer money between your savings and checking accounts:
- Mobile banking apps: Use your laptop or smartphone to manage your accounts or deposit checks and make payments with Zelle®.1
- Automated teller machines (ATMs): Visit an ATM and use your bank card to transfer funds between accounts.
- Bank by phone: Give your bank a call and request to transfer funds. After you answer some security questions, a banker can help you with your transaction.
- In-person transfer: Visit your nearest bank branch and request a funds transfer from your savings to a checking account through a banker.
Only use secure connections and verify details carefully before you complete any online or mobile banking transfers.
How Much Do You Need in Each Account?
Right off the bat, the balance between your checking and savings accounts will depend on your financial objectives, liquidity needs and risk tolerance. If you are setting an ideal goal, have a month or two of living expenses with a 30% buffer in your checking account. If your savings account serves as an emergency fund, aim for three to six months of living expenses.
That being said, everyone's circumstances are different and you may only be able to save smaller amounts each month. Consider these factors:
- Savings goals: Set savings goals that align with your capabilities. Work out a budget to see how much you can add to your savings to reach those goals. Many banks provide budgeting tools within their online and mobile banking.
- Checking account buffers: If you frequently need to dip into savings to meet your financial requirements, budget to keep enough money in your checking account to maintain a buffer.
Regularly review your financial situation and reassess your budget and expenses to adjust the amounts in your checking and savings accounts. It will help you reach your goals faster.
Put Your Finances First With First Commonwealth Bank
Should you keep your money in a checking or savings account? The answer depends on your goals. If you have any kind of short-term goal, save funds in a savings account. But as you encounter day-to-day expenses, you'll need a checking account to deposit your salary or benefits.
At First Commonwealth Bank, we’re committed to putting you first. With competitive lending rates, overdraft protection and Bank On certification for our Confidence Checking® account, your finances are in good hands. Apply online today or contact our team for more information or assistance with your banking needs.
1 Transactions typically occur in minutes when the recipient’s email address or U.S. mobile number is already enrolled with Zelle®. To send or receive money with Zelle®, both parties must have an eligible checking or savings account. Zelle® and the Zelle® related marks are wholly owned by Early Warning Services, LLC and are used herein under license.