Checking vs. Savings Accounts: How Both Accounts Help Achieve Your Financial Goals

Keeping some cash on hand for emergencies is a smart move, but storing your money under a mattress isn’t the safest or most practical option. In today’s world, having an actual account is essential — it’s how most people receive their paychecks, pay bills, and manage their day-to-day expenses. 

If you’re unsure which type of account is right for you, understanding the checking account vs. savings account differences can help. Let’s break it down to help you decide which option is best for your needs. 

WHAT IS A CHECKING ACCOUNT?

Checking accounts are offered by banks and credit unions. They are the accounts that most people use for their daily spending needs. There are typically no limits on how many deposits or withdrawals you can make, which makes it ideal for managing your money.

Most people use checking accounts to receive direct deposit paychecks, pay bills electronically, and transfer money. Accounts also typically come with debit cards, which makes it easy to make purchases and withdraw cash at ATMs.

Although most checking accounts don’t earn dividends, Fibre Federal Credit Union’s Choice Checking account earns dividends on balances up to $20,000. All you have to do is complete three easy steps per cycle:

1. Make 12+ debit card transactions of $5+ 
2. Receive E-Statements
3. Have one direct deposit or automatic electronic payment, or one credit card purchase

Even if you miss a step, you’ll still earn dividends, just at a lower rate.

You only need a low $25 minimum deposit to open a checking account with Fibre Federal. Choice Checking accounts also have no minimum balance requirements or monthly maintenance fees. And if you follow the steps above each cycle, you can earn ATM fee refunds!

WHAT IS A SAVINGS ACCOUNT?

A savings account is used to save money for future use. It’s ideal for building an emergency fund, saving for a vacation, or working toward a long-term savings goal. Unlike a checking account, a savings account isn’t meant for everyday transactions. Instead, it’s a place to park your money and keep it separate from your regular spending.

One of the benefits of a savings account is that the money you keep in the account earns dividends, which allows your balance to grow over time. However, the dividend rate typically isn’t as high as other savings options, like money market accounts or high-yield savings accounts.

You only need a low minimum deposit of $5 to open a savings account with Fibre Federal. There are also no withdrawal limits with Personal Savings Accounts, so you can access your funds anytime. 

KEY DIFFERENCES

To understand the differences in how savings vs. checking accounts help you manage your money, it’s important to look at how each one works. Some of the most important differences include whether they pay dividends, the number of withdrawals you can make each month, and potential service fees.

Difference Between Checking and Savings Account Dividends

Most checking accounts don’t earn dividends due to their frequent use for transactions, although some do. Depending on the financial institution, you may have to maintain a minimum balance requirement to qualify. Rates and requirements vary, so it’s worth shopping around if earning dividends is important to you.

Nearly all savings accounts earn dividends. Although the rates are typically lower than investment accounts, they tend to be higher than those offered by checking accounts. If your goal is to grow your money over time, a savings account is a better choice.

The following checking vs. savings account comparison chart highlights the key differences in Fibre Federal’s Choice Checking and Personal Savings Accounts:

CAN I HAVE BOTH A CHECKING AND SAVINGS ACCOUNT?

Absolutely! Having both a checking and savings account is a smart way to manage your money. Let’s take a look at how the two accounts can be used together.

Benefits of Having Both Checking and Savings Accounts

Having both account types allows you to keep your spending money separate from your savings. This simplifies budgeting, and it also helps you avoid the temptation to dip into your savings for everyday purchases. If you ever need to access your savings, you can easily transfer money to your checking account with online banking.

Unlike many checking accounts, savings accounts earn dividends, which helps you grow your money for an emergency fund or a savings goal. If both accounts are with the same financial institution, you can also set up automatic monthly transfers from your checking account to your savings account each month to help you save on autopilot.

You can also set up overdraft protection in case you accidentally spend more than you have in your checking account. You may be able to link your checking and savings accounts so that funds are automatically transferred from your savings to your checking to help you avoid overdraft fees or declined transactions.

How Much Money Should I Keep in Each Account?

The amount you should keep in your checking and savings accounts depends on your needs and goals, and can change over time. 

Your checking account should have enough to cover your regular monthly expenses, like rent or mortgage, utilities, and groceries. You’ll also want to keep a little extra as a buffer to avoid overdraft fees. A good rule of thumb is to have 1-2 months’ worth of expenses in your checking account.

The amount you keep in your savings account will vary depending on your unique goals and your saving progress. Most financial experts recommend building an emergency fund to cover at least 3-6 months’ worth of living expenses. Additional funds can be saved each month for your long-term goals.

CHOOSE THE RIGHT ACCOUNT—AND START REACHING YOUR GOALS

Whether you’re managing everyday spending or saving for the future, having the right mix of accounts can make all the difference. With Fibre Federal’s low opening deposit requirements and dividend-earning options, it’s easy to get started.

Join Now & Open An Account