Why I keep my money in a savings account instead of checking - Business Insider

I keep about a month's worth of expenses in my checking account and put the rest of my cash in a handful of high-yield savings accounts.

14.2.2020

Savings accounts offer several benefits, including higher interest rates, a buffer between your spending money and other funds, and help with managing your cash flow

I keep about a month's worth of expenses in my checking account and put the rest of my cash in a handful of high-yield savings accounts.

, Capital One, Simple, and SoFi, where it earns up to 20 times as much as it would in my checking account. Fewer fees and minimum balance requirements The best checking accounts in the US are free, with no minimum balance and no recurring fees. Not all banks follow those guidelines, however. And for checking accounts, the rules can be stringent. To qualify for free checking, you may have to keep a certain balance, use your debit card a minimum number of times per month, or jump through other hoops. Savings accounts are made to just keep your money safe while it slowly grows with interest. While Federal Reserve regulations limit savings accounts to six withdrawals per month, you should otherwise find it easier to avoid fees with a savings account. Some banks have minimum-balance rules to avoid a fee. If that's the case, you should consider switching to a bank that won't charge you to keep your money there. Avoid the temptation to spend Spending money from a checking account is second nature to many people. While many savvy spenders use a credit card and pay off the balance from their checking account, other people use a debit card and an ATM to quickly and easily withdraw from checking. If the money is in savings, however, it isn't as easy to spend, and it takes away some of the temptations of frivolous purchases . I consider my savings accounts walled off from my checking and daily spending needs. Most of my cash is in an . I save for property taxes and insurance in a dedicated high-yield savings account. I keep a little cash in other savings accounts for months when big bills come in or for other short-term financial goals. Keep your emergency fund safe An emergency fund is one of the most important uses of a high-yield savings account. According to data from the Federal Reserve , about 40% of Americans wouldn't be able to afford a $400 emergency with cash; 27% would have to borrow or sell something to come up with the money, and 12% said they couldn't cover it at all. Medical bills, home repairs, and broken-down cars often cost well over $400, so that's just a baseline for comparison. Most experts in an emergency fund. For people who are self-employed or don't have a stable income, it's wise to double that, to six months' worth of expenses in savings where you can't easily touch it. Steadily save for a major goal If you or car or make any other major purchase, it's a good idea to save up for it first. Where should you save so you don't accidentally spend the money on something else? A high-yield savings account, of course! I pay $13,000 in property taxes and homeowner's insurance every year. I to cover those bills and avoid spending that money on something else. The same strategy works for saving for a wedding, a down payment on a car or home, or anything else. Save more and save often A common regret among Americans in a wide range of age groups is that they didn't save enough when they were younger. I've never come across someone who regretted saving as much as they did. It's almost always better to save more if you're able. Getting on a Read more: Business Insider

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