Checking vs Savings Account

Summary

In this video, Andrew Scheer explains the key differences between checking and savings accounts, focusing on access and interest earnings. Checking accounts allow unlimited transactions and offer minimal interest, while savings accounts provide limited access but higher interest rates. He also highlights the importance of choosing accounts with no fees and good interest rates. Additionally, Andrew introduces three other account types: money market accounts, cash management accounts, and certificates of deposit, each with unique features. This informative guide helps viewers understand how to effectively manage their money and choose the right banking options.

Takeaways

• 😀 Checking accounts provide easy access to your money through various methods like ATMs, debit cards, and checks.
• 😀 Savings accounts typically earn interest but have limited access and transaction restrictions (usually six per month).
• 💰 Savings accounts are better for storing money and earning interest, while checking accounts are for spending.
• 🏦 Online banks often offer higher interest rates due to lower overhead costs compared to traditional banks.
• 🔒 Both checking and savings accounts are insured by the FDIC or NCUA, protecting deposits up to $250,000.
• 💳 High-yield checking accounts may offer competitive interest rates similar to savings accounts.
• 📈 Money market accounts combine features of both checking and savings accounts but often require a higher minimum balance.
• 💼 Cash management accounts at investment brokerages provide savings-like benefits with investment options.
• 📅 Certificates of Deposit (CDs) offer higher interest rates in exchange for locking in funds for a specific time period.
• 📊 Consider other investment options, like index funds, for money you won't need for several years instead of keeping it in low-interest accounts.

Q & A

What are the primary differences between checking and savings accounts?

The primary differences lie in how you access your funds and how interest is earned. Checking accounts offer easy access through various methods like ATMs and debit cards, with no transaction limits. Savings accounts have more restrictions on access, typically allowing only six transactions per month and no debit cards.

How can you access money in a checking account?

You can access funds in a checking account by visiting a bank branch, using an ATM, using a debit card, or writing checks. There are generally no limits on the number of transactions you can make.

Why do savings accounts typically earn interest?

Savings accounts earn interest because banks can use the deposited money for loans and other investments. Since people usually do not withdraw from savings accounts frequently, banks are more comfortable lending that money out.

What is the usual limit on transactions for savings accounts?

Savings accounts typically limit transactions to six per month, but this can vary, so it's best to check with your bank for specific rules.

Are there checking accounts that earn interest?

Yes, some checking accounts, especially high-yield or online checking accounts, offer interest rates that are competitive with those of savings accounts.

What types of insurance cover the funds in these accounts?

Funds in checking and savings accounts are insured by the FDIC for banks and by the NCUA for credit unions, covering deposits up to $250,000.

What is the best use of a savings account?

The best use of a savings account is for storing money, building an emergency fund, or saving for specific goals, while earning interest on the balance.

What are some features of money market accounts?

Money market accounts typically earn more interest than savings accounts, allow transactions through checks or debit cards, but also have a limit on the number of monthly transactions and may require a high minimum balance.

What should you consider when choosing a bank or credit union for your accounts?

When choosing a bank or credit union, look for accounts with no monthly fees, no minimum account balances, and a good interest rate on savings.

What is a Certificate of Deposit (CD), and when should it be used?

A Certificate of Deposit (CD) is a savings product that offers higher interest rates in exchange for locking your money away for a set period, ranging from three months to five years. CDs are not suitable for emergency funds due to withdrawal restrictions but can be a good option for money you won't need for several years.