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Savings Accounts vs. Checking Accounts – Do You Need Both?

Woman grocery shopping

If you already have a checking or savings account, you might not feel the need to have both. However, it’s important to understand the differences between the two and to understand why they are both beneficial.

Checking Accounts

A checking account is basically your daily finance operations center. This account helps you pay bills, manage your daily finances and is essentially the main start to where you divide and conquer your finances.

Checking accounts come in all sizes and flavors. While most offer basic features such as check writing, money transfers, bill pay, mobile app access and a debit card, you’ll often find differences in fees and benefits depending on your relationship with the account. This may include factors such as your daily minimum balance, whether or not you have Direct Deposit, and how many monthly transactions you make. Some financial institutions may offer checking accounts in which you can earn dividends/interest. Consider your financial situation and banking behavior to make the right choice for you.

Savings Accounts

On the other hand, savings accounts are your finance operations center for the future. A savings account allows you to set aside money for things such as vacations, holiday expenses and retirement. It also allows you to prepare for unforeseen expenses such as car problems or medical emergencies. Just last summer, I was on my way to work when all of a sudden my brakes stopped working. It was a scary situation, but without my savings it would have been even scarier. I was able to get my car towed to the local body shop and get my brake lines replaced, and my car was back on the road in a couple of days. If I didn’t have savings, I wouldn’t have been able to afford the unexpected expense and would have been in a difficult and stressful situation. So if you are wondering whether you really need a savings account in addition to your checking account, the answer is probably yes.

Just like checking accounts, savings accounts also come in different shapes and sizes. These include your basic savings accounts, with various dividend/interest rates depending on the institution, or club accounts, such as Service Credit Union’s Holiday Club Account, which offers a higher dividend rate on balances up to $3,000.

For those who are looking to save more in the long term but don’t need immediate access to their funds, a certificate of deposit (available at banks) or share certificate (offered by credit unions) can be a great option to set aside money for the future. If you require more immediate access to your funds, a Money Market account may be a better option for you.

Saving can be tricky, and it can often seem easier to simply stick with a checking account and not worry about setting money aside. However, it is extremely important to think about the future and the uncertainty that it holds. Service Credit Union is here to help you prepare for that uncertainty and get you the right savings account to meet your specific needs.