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When considering where to put your money, have you weighed the benefits of using a checking vs. savings account? Both accounts can be used for many different purposes and not understanding those differences can literally cost you hundreds — even thousands — of dollars.

Knowing when to use one over the other starts with understanding the purpose intended for each account.

What Is the Purpose of a Savings Account?

The purpose of a savings account is to give you a safe location to place your money for a long period of time. It also provides an opportunity to help your money grow so that you can more quickly meet your savings goals and build up a safety net.

It's important to have a safety net for all of those unexpected expenses such as a burst hot water tank, a flat tire, a leaky roof, your phone get the idea. Without this cushion, you might need to turn to loans or credit cards as a way to cover these "unexpected" costs, which could set you way back on your financial goals. Having some extra dollars saved up also gives you some peace of mind that you can cover any of those emergency expenses and actually contributes to a happier and healthier you, since you won't have that nagging 'what if' feeling.

For that reason, a savings account is a place where you should feel encouraged to save. As a way to help you reach your goals faster — as well as a way to reinforce saving instead of spending — banks pay you an interest rate on the money you keep in this account, allowing the balance to grow over time.

What Is the Purpose of a Checking Account?

The purpose of a checking account is to have a place to hold your money before it's spent in the near future, as well as to facilitate the spending of that money.

When you deposit your money into a checking account, as soon as the deposit "clears" and the actual money makes it to your bank, you can start using that money for whatever you may need. This comes in handy when paying your bills, writing checks to a parent who spotted you $50 last month and getting cash out from an ATM for a fun Friday night.

When Does It Make Sense to Use One Over the Other?

When deciding whether to put your money in a checking vs. a savings account, it's best to think about what you are using the money for. Do you intend to spend it on bills? Or do you intend to hold onto it for longer?

Here's some guidance for when to use which type of account.

  • Use a checking account when you need to spend the money on bills or other expenses in this month or even the next. You won't want to park money in a checking account for longer periods of time though, as it typically doesn't earn as much interest as a savings account. A checking account gives you easy access to that money, which means the ability to spend it via checks, cash withdrawals or debit card purchases in the most convenient way, usually without restrictions on the number of transactions you can make.
  • Use a savings account, like Key Active Saver, when you're saving up for a specific goal and you want to get to your goal even faster by growing that money through interest. Put money into savings that you don't plan on spending for at least a month into the future (and ideally much longer than that). Think of it as a safe place to park your money until you need it.

Of course, it's a sound money strategy to have both a checking account and a savings account, as these two accounts will cover several of the different purposes you have for your money. While having a savings account without a checking account would be quite inconvenient for everyday money needs, having a checking account without a savings account means you're not thinking about building your financial future. Finding a balance between short- and long-term funds is a great start to Financial Wellness. So if you haven't already, open a savings account and start saving today.


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.

By selecting any external link on, you will leave the KeyBank website and jump to an unaffiliated third party website that may offer a different privacy policy and level of security. The third party is responsible for website content and system availability. KeyBank does not offer, endorse, recommend, or guarantee any product or service available on that entity's website.

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