Yahoo Finance I’m a Bank Teller: 8 Reasons You Should Open Both a Checking and Savings Account
When you go to sign up for a new bank account online or in person, you’re usually presented with at least a couple of options. Often, banks will encourage you into opening both a checking account and a savings account, if they have those products available.
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This may feel a bit like you’re being crassly lured in by said financial institution, but opening both a checking account and a savings account is a smart move for a number of reasons.
To find out why it’s so important to open both a checking account and a savings account, GOBankingRates chatted with a bank teller and a former bank teller.
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Establishes Strong Relationships with Financial Institutions
Kimberlie McGee, head teller at one of Addition Financial Credit Union branches, avers that opening both types of accounts at the same financial institution can help you establish a relationship with that bank or credit union.
“[This makes] it easier to access a variety of financial products and services and potentially qualifying you for better terms on loans or credit in the future,” McGee said.
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It Keeps Your Finances Organized
Organization is key to successful budgeting, which in turn is key to your overall financial well-being. Opening both a checking account and a savings account goes a long way in helping you keep your finances organized.
“Having both a checking and savings account allows you to separate your everyday expenses from your long-term savings and financial goals,” McGee said. “This ensures that you can track your spending and savings more effectively.”
It Helps You Build an Emergency Fund
When you keep your savings in an account that is separate from your spending money (which is usually kept in a checking account), you’re better able to set aside a nest egg and keep it all organized.
“A savings account is a great place to store your emergency fund, providing you with a financial safety net in case of unexpected expenses or loss of income,” McGee said. “Keeping this separate from your checking account reduces the temptation to dip into it for daily expenses.”
Higher Savings Returns
A checking account is best suited for cash you need to be able to quickly access from an ATM, for example. A savings account is of equal importance, enabling you to earn higher interest rates on your nest egg.
“Savings accounts typically offer higher interest rates than checking accounts,” McGee said. “By having both types of accounts, you can maximize the interest earned on your savings while maintaining easy access to funds for daily expenses in your checking account.”
And we’ve seen tremendous growth in interest rates, particularly in high-yield savings accounts (HYSAs).
“High-yield savings accounts have become very popular, and some are paying you in excess of a whopping 5% interest,” said Christopher M. Naghibi, EVP and COO at First Foundation Bank and a former bank teller. “Holding money … in your savings account is actually making more money than the current rate of inflation for the time being.”
Budgeting and Goal Setting
As noted previously, budgeting is essential in managing your money.
McGee said, “By splitting your finances between a checking account for daily expenses and a savings account for specific goals, such as a vacation or a down payment on a home, you can more effectively manage your money and work toward your financial objectives.”
You Can Often Link Accounts to Get Overdraft Protection
Overdraft fees can be steep. Use your savings account as a backup for your checking in case you make the mistake of withdrawing more than you cover.
“Many banks offer overdraft protection by linking your checking account to your savings account,” Naghibi said. “If your checking account balance falls short for a transaction because you spend too much or have an unexpected expense, funds can be automatically transferred from your savings account to cover the difference, preventing the dreaded expensive overdraft fees.
“These fees were the bane of my existence when I was younger and living on a tight budget, and they can add up quickly,” Naghibi added. “Even a $3 overdraft used to be able to incur a $35 overdraft fee.”
It Can Help You Save More Efficiently
“From a psychological perspective the physical separation of funds into two distinct accounts can encourage better savings habits,” Naghibi said. “Knowing that certain money is in a savings account for a specific purpose can deter impulse spending. No matter your financial position in life, finding smart ways to proactively stop impulse spending is important.”
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This article originally appeared on GOBankingRates.com: I’m a Bank Teller: 8 Reasons You Should Open Both a Checking and Savings Account
