Many people own checking accounts with massive amounts of money in them – sometimes up to $10,000. I always wonder why they don’t have that money in savings accounts. It turns out, very few people in the United States even own a savings account.

The first thing we must explore before talking about which is right is the difference between a checking and savings account.

Checking Account

A checking account works much like a virtual wallet. You put money into it as a safe storage place, but chances are that money will not stay for long. You have a few ways to spend the money. The traditional way is to write a paper check, but they are slowly being faded out. A new and more efficient method is a check card. It works much in the same manner that a debit card does. It only allows you to spend as much as you have in your account. If you need cash, you can use an ATM.

Savings Account

A savings account would be the same as putting money under your mattress or inside a shoebox under your bed. You deposit it, and then let it sit, and sit… and sit. Savings accounts, unlike checking accounts, earn interest over time. This interest isn’t very significant, but it will amount to something if you have a large enough balance. Withdrawing from a savings account is also more complicated than a checking account. There are certain limits to how much you can withdraw and how often you can withdraw. Many times, the only way to withdraw is to go to the bank in person and withdraw, or transfer to a checking account.

Checking or Savings?

That that you know the basics of each type of account, you can make a decision about which type of account is right for you. Here are few questions you should ask yourself before choosing which account to use:

Do you withdraw money daily? – If yes – a checking account will be better suited for you.

How much money do you have in your account? – If more than $1000, then a savings account is probably right for you.

Do you have trouble maintaining a minimum balance? – If yes, then choose a checking account.

Can you survive with just cash? – If you answered yes to this question, you can get by with a savings account; with a savings account you will have to spend all of your money in cash format.

Hopefully by reading this article you have learned the difference between a savings account and checking account. Knowing this knowledge, you should be able to determine which type of account is right for you.