When Should You Keep Money in Your Savings vs. Checking Account?

Let’s say you’ve got two go-to places to put your hard-earned money: your savings and checking accounts. 

Each account offers something slightly different. If you’re managing your money well, where do you put it? How much of each paycheck should go into each account? 

Choosing between your savings versus checking account is kind of like selecting the right boat for your journey: Ultimately, it comes down to what you want, what your habits are like, and where you want to go! 

What Checking Accounts Can Offer You

Checking accounts are financial Swiss army knives. They’re designed specifically to help you manage expenses with agility and ease. 

When you open a checking account, you can get access to many of the services your financial institution offers, such as: 

• A debit card
• Online and mobile banking
• Direct deposit
• Check-writing abilities
• Bill pay services

But, as you’ll see in a moment, there’s a reason why checking accounts usually aren’t the only type of account a high-quality credit union offers.

The Pros and Cons of Keeping Money in Your Checking Account

The perks of a checking account are clear. Today, you need your money to be available immediately. If you need to pay a bill online or swipe a debit card, a checking account offers a direct, simple way to make that happen. 

Here’s the thing: That in itself can be helpful and not so helpful. 

While a reliable checking account can support your lifestyle in many ways, that same convenience can make it easy to support less-than-helpful financial habits, such as overspending. And, if you’re interested in watching your money grow, checking accounts won’t provide the same benefits for you as a high-yield savings account or investment account.

What Can Savings Accounts Do for You?

A savings account is a good place to stash money you don’t need direct access to for a while. 

Why? 

Often, savings accounts come with higher interest rates than checking accounts, which means that untouched money in savings versus checking will grow faster. Plus, money in a savings account is usually a little less easy to access than money in a checking account. For example, you may not have a debit card attached directly to your savings account. 

These factors make a savings account perfect for setting aside funds for specific objectives (e.g., vacations, emergency funds, or big purchases).

Know Yourself! When to Use Savings vs. Checking Accounts

What it comes down to is this: What do you want your money to do for you? And how do you typically use your money? 

Understanding your own relationship with money can help you use these accounts to their best effect.

How Much Money Should Go in Savings vs. Checking? Illustrative Examples of Common Strategies

Determining the right balance between savings and checking accounts is a crucial part of financial planning. 

It’ll also be specific to you, your financial strategy, and your stage of life. Let’s take a look at what this could look like, depending on your current situation and goals.

Account Balance Strategies for Young Professionals

• Aim to keep 1-2 months of living expenses in checking. For example, if your monthly expenses are $2,000, keep $2,000-$4,000 easily available. 
• Put 3-6 months of living expenses for emergencies in a higher-interest savings account. For our hypothetical example, this could look like $6,000-$12,000 in savings.

Account Balance Strategies for Mid-Career Individuals

• In your checking account, maintain 1-2 months of living expenses—but, when possible, add a 30% cushion for unexpected costs. 
• Your savings account can be a great place for your emergency fund and money for mid-term personal goals, but having other accounts for retirement or children's education can help your money grow even faster. 

Best Practices for Keeping Your Account Balances Healthy

This is where knowing yourself and your financial habits really comes into play. Consider whether:

• You’re the kind of person who needs money in designated “buckets” to actually devote funds toward specific goals.
• You’re the kind of person who considers “extra” money in your account free to be spent.
• You’re the kind of person who will proactively check balances on a regular basis.

The answers to these questions don’t make you a good or bad person—it’s just information that will help you set up your money in the most helpful way possible. 

If segmenting your money into strategic “buckets” is really helpful for your brain, it may make sense to have more than one savings account—each designated for a specific goal.

If having extra money in easily accessible checking accounts leads to unplanned spending, it may make sense to keep your checking account balance to an amount necessary for regular bills and planned spending and put any extra money directly into savings. 

If you’re on top of checking your accounts regularly, you may not need alerts to keep you informed about transactions and low balances, but setting up those alerts can keep you protected from overdrafts or bounced payments. 

Remember, it comes down to what you need from your financial setup. Your financial institution or credit union team can help you assess what your goals are and how checking and savings accounts can help you work toward the best version of financial health for you.

Interested in Using Savings and Checking Accounts to Reach Your Goals?

Organizing your money into savings versus checking accounts can be a helpful way to boost your peace of mind surrounding your personal finances. If you’re looking for a way to earn a super high yield on the balances in your accounts, check out our Intelligent Checking account and our Intelligent Savings account.  Reach out to learn more about the many benefits of joining the iQ community.