Importance of Separating Spending and Savings Accounts

woman balancing checkbook

November 2020

Whether you’re great at managing your money or bad at it, chances are you have room for improvement. You can accelerate your savings goals while staying on top of routine expenses when you establish two different accounts for your spending and saving.

Unique benefits of each type of account

Both accounts have distinct characteristics. According to Nerdwallet’s Margarette Burnette, the main difference is the accessibility of your funds. Checking accounts come with checks and a debit card, so you can easily withdraw money at ATMs, pay for purchases at the store and pay bills. However, they typically earn no or little interest, so you only want to keep the money you need to pay for your immediate needs. If you have money left over, you should move that to a savings account.

Savings accounts often yield higher interest, however they have a limit on the number of withdrawals you can make during a month. This gives you an incentive to keep your hands off of your funds and let your balance grow so you have the money when you need it.

Advantages of keeping separate accounts

The main benefit of keeping the two accounts separate is to avoid the temptation of dipping into your savings for non-emergency items. It’s a way to “protect yourself from yourself,” as The Balance’s Justin Pritchard puts it.

Another key advantage is that having a designated savings account can make it easier to budget for major expenses during the year such as car repairs or future vacation. Pritchard recommends setting aside money each month to grow the savings account so that when these events happen, you’ll have enough funds to cover the costs.

Ways to get the most out of your checking and savings accounts

While establishing two different accounts for spending and saving is a good place to start, there are other strategies you can implement to cultivate healthy finances.

Certified financial planner Sophia Bera suggests opening separate savings accounts for each of your savings goals. For instance, all her clients have travel savings and emergency savings accounts. This lets them withdraw funds from that one account instead of dipping into their emergency savings.

Another way to take advantage of your accounts is to set up automatic monthly transfers from your checking to your savings account. It’s a simple way to grow your balance and prioritize savings goals, especially if you’re forgetful or busy and could use this convenient tool to help keep you on track. 

By implementing these strategies, you’ll be well on your way to using your checking account wisely and being more disciplined with saving so you can achieve your financial goals.