How to Make Your Personal Checking and Savings Accounts Work Together

Checking and savings accounts are often the first things that come to mind when talking about finances, in part because these two products are the most popular services that banks offer. While each product serves a unique purpose for storing money, using them together can maximize your earnings and fund flexibility. Understanding the power and limitations of each is important when deciding when and how to transfer your money.

Checking accounts are generally used for quick access to your cash. As a sort of one-stop-shop, your bills, groceries, paychecks, and regular spending likely come in and out of this account. They’re convenient, but that easy-to-reach cookie jar doesn’t help the saving mindset and generally doesn’t accrue interest.

Savings accounts, on the other hand, allow you to store money for the long-term. Whether you’re counting your coins for the jolly (and sometimes expensive) holiday season, while gearing up to buy a house, or while getting ready to retire somewhere down the line, having savings in the bank can be a relief. The money in your savings account also gains interest over time, helping you earn extra income while your money stays safe. With savings accounts, however, you have less flexibility with your funds, as your withdrawals are usually limited or associated with a fee.

Okay, so checking accounts are quick and easy, but savings accounts can set you up for the future. Now, how do you make the two work together?

Getting started and building up money in your savings account sounds hard, but it doesn’t have to be. If it’s possible in your budget, take the time to set up an automatic transfer to your savings account each month. Putting aside a fixed amount or a percentage of your check on payday (depending on what is within your means) adds up over time and can make a world of difference later when you’re thinking about loans or credit. By choosing a nominal amount and automating the process, you might not even notice that it’s missing.

Once you have money in both accounts, you can start thinking about interest rates and the best use of your money. While many people will continue to add money to their savings and let it sit, transferring money between accounts can be advantageous if done right. When interest rates for savings are high, you may want to add more money to your savings account. It takes money to make money in this case, as your contribution will accrue interest, rewarding your long-term investment with additional money from the bank. But when interest rates for savings are low, you may decide that inaccessibility to your funds isn’t worth the reduced reward. In that case, transferring money back into your checking account for quick access might have more appeal for you. Overall, it’s up to you — with your own personal savings philosophy and mindset — to make the right decision to meet your needs. To learn more, contact CNB today to speak to a representative about which options might work best for you.