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You're probably pretty eager to deposit each of your paychecks and figure out what needs to go to bills and what you can use for discretionary spending. But, how do you know if that money should go into your checking or savings account?

Choosing which type of account to deposit money into isn't always as cut and dry as it may at first seem. Follow these guidelines to choose between the two accounts.

Checking vs. Savings

A checking account is a bank account that gives you easy access to your money. You can withdraw at any time by writing checks, using a debit card or mobile payment, or transferring money into another account. This type of account is ideally suited for convenience. This is where you should keep money that you need for bills and everyday spending. The downside is that checking accounts typically pay little to no interest.

On the other hand, a savings account is ideal for holding onto money long-term. A savings account pays interest, so your money will grow as long as you keep it in the account. This allows your savings to increase in value.

Since each type of account has its own strengths, it's generally advisable for people to have both. If you only had a checking account, you would miss out on earning interest on savings. At the same time, using a savings account to pay bills or buy groceries usually doesn't make sense because there are limits on how often you can take money out.

How Much Do You Need in Each Account?

A general guideline is to keep enough money in your checking account to cover your basic living expenses for two months. You may also want to add more money to this account if you have a big purchase coming up. When you know you're going to need to write a larger check than usual — like for a down payment on a car — you should first move the money into your checking account so that you have enough to cover it.

The rest of your money should probably go into a savings account so that it can accrue interest. If you don't need the money in the next month or two, it should be in an interest-bearing account that will help you build up a nest egg.

How to Transfer Money Between Checking and Savings

Transferring money between checking and savings accounts is usually pretty straightforward. If you're enrolled in online banking, you can transfer money using your online account or through the bank's mobile app. You can also go into any bank branch and transfer funds in-person. Another option is to automatically deposit a portion of your paycheck into your checking account and the rest into your savings. For example, you could automatically put 10 percent of each paycheck into savings and 90 percent in checking. Just ask your bank for a direct deposit form, and set up a deposit that's split between the two accounts.

There's no designated time to transfer money between accounts, but it's smart to look over your accounts at least a few times a month and see if you want to check your balance, add to your savings, or move funds into checking for immediate use. If you get paid once every two weeks or once a week, those are also good times to transfer money. Try to avoid transferring funds more often than once every one or two weeks, because there are limits on how frequently you can withdraw from a savings account. Besides, transferring every few days can make it more complicated to keep track of your money.

So which is better, checking or savings? It really depends. Checking works best for regular spending, while savings is better for growing your money in the long run. To get the most out of your banking experience, use both.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

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