Most people know they should have money saved for a rainy day, but many don’t know how much to save. Some people recommend keeping enough in savings to cover three to six months of living expenses, in case of an emergency. But others say that you should have enough saved to cover a year’s worth of living expenses. A checking account should cover your day-to-day expenses, with a little extra for unexpected costs. Read on for tips to save more money and how much is recommended to keep in your checking account.
Difference Between a Savings and Checking Account
A checking account is a type of bank account where people deposit what they earn and use it to easily pay for what they need. Checks can be written from a checking account to pay for goods and services. A savings account, on the other hand, is a type of bank account where people save money. Money in a savings account usually earns interest based on an annual percentage rate (APR). The main difference between a checking account and a savings account is that checks can be written from a checking account, while a savings account may have more restrictions on taking money out.
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What to Use a Checking Account For?
A checking account is the best place to store money that you will need to access on a regular basis. This account should be used for:
Monthly expenses
This includes your mortgage or rent, car payment, insurance, utilities, groceries, and other regular bills. You should always have enough money in your checking account to cover your monthly expenses.
An emergency fund
An emergency fund is money that you set aside for unexpected expenses, such as a job loss, medical bills, or car repairs. You should aim to have three to six months of living expenses in your checking account.
What to Use a Savings Account For?
A savings account is the best place to store money that you do not need immediate access to. This account should be used for:
Savings Goals
As simple as it sounds, your savings account should be used for saving money. This account is not meant to be accessed frequently, but it is there to help you reach your financial goals.
Tips for Saving Money
Now that you know what a savings account is and what it should be used for, here are a few tips to help you save money:
Start small
You don’t need to have a lot of money to start saving. Even if you can only save $5 per week, that’s $260 per year!
Set a goal
Having a specific goal in mind will help you stay motivated to save. Whether you’re saving for a down payment on a house or for retirement, make sure your goal is realistic and achievable.
Create a budget
A budget will help you track your spending and figure out where you can cut back so that you can save more money.
Keep the end goal in mind
It can be helpful to have a physical representation of your goal, such as a picture of the item you are saving for.
How to Avoid Fees on Accounts
There are a few fees that you may be charged on your savings or checking account. However, there are ways to avoid these fees:
Keep a minimum balance
Many banks will waive fees if you keep a minimum balance in your account. This amount can vary from bank to bank, so make sure to check with your institution.
Use direct deposit
Direct deposit is when your employer deposits your paycheck directly into your bank account. This can help you avoid fees, such as a monthly maintenance fee.
Be mindful of ATM withdrawals
ATM withdrawals can sometimes be free, but there may be a fee if you use an ATM that is not affiliated with your bank.
How Can CreditAssociates Help?
CreditAssociates can help you save more money by helping you reduce your debt. With our Debt Settlement Program, we can help you get out of debt in as little as 24–36 months. We are America’s #1 rated debt relief company with 4.9 out of 5 stars based on over 10,000 reviews on Trustpilot. Contact us today for a free debt assessment and see how we can help you get on the path to financial freedom today.
Related Questions:
Should my savings account or checking account have more money in it?
Generally, your savings account should have more money in it as it is meant for long-term savings goals. Your checking account should have enough to cover your monthly expenses and then some in case of an emergency.
How much should I save every month?
There is no set answer, as everyone’s savings goals and monthly expenses will be different. A good rule of thumb is to try to save 10%–15% of your income each month.
What is the average American’s net worth?
According to a 2019 study from the Federal Reserve, the average net worth of American families is $748,800.
Where is the safest place to invest money?
There is no one “safest” place to invest your money, as there are risks associated with all financial institutions. Traditionally, U.S. bonds have been considered to be a safe investment, but even those can lose value. Ultimately, it is up to the individual to decide where to keep their money based on their own risk tolerance.
