What’s the difference between a checking account and a savings account? Don’t feel bad if you don’t actually know. It’s one of those adulting things that everyone assumes is understood without, well, any explanation at all! Fear not, friends. This quick guide walks through key differences and tips for setting up your accounts clearly and simply so you can make confident decisions that suit your unique deposit needs.

In this article we’ll cover:

• What is a checking account?
• What is a savings account?
• Key differences between checking accounts and savings accounts and why they matter.
• Tips for choosing which account to use
• Tips for using additional banking services
• Where to find more resources and information

What is a Checking Account?

A checking account serves as a hub for everyday transactions, offering convenience for depositing, withdrawing, and paying for expenses. It provides a secure and easily accessible way to manage your finances while keeping a record of transactions that also helps you monitor spending habits. Additionally, checking accounts often come with features like overdraft protection, ensuring that your transactions are smooth and reliable.

Laura Bryant, Senior Personal Banking Manager at Cornerstone Bank, recommends asking your banking professional questions upfront. “When you’re opening an account, don’t hesitate to ask questions. Sometimes we bankers use jargon that might go over your head, but there’s no such thing as a dumb question. The better we understand your needs, the better we can guide you to the right account.”

For those interested in earning interest on their checking account balance, Cornerstone Bank offers options tailored to your needs. “We have interest-bearing checking accounts, like our Interest Rewards account and our Gold account. The Gold account is especially great for customers 50 and older, offering higher interest for larger balances. It’s a great way to make your money work for you,” Laura explains.

What is a Savings Account?

A savings account acts as a secure storage spot for your funds, providing a simple way to save for future needs and track your financial growth. It offers easy access to your money and the ability to deposit money at any time. A potential feature of a savings account could be the opportunity to earn interest over time. This means, in addition to securely storing your funds, your savings may grow through the accumulation of interest, helping your money work for you!

How Checking and Savings Work Together

Though the difference between checking and savings accounts may seem obvious, they serve distinct purposes, and can work in tandem to help you achieve your financial goals. Laura explains how these accounts complement each other: “Your checking account is a transaction account—buying groceries, gas, and other daily needs—while your savings account is for financial goals like vacations, unexpected expenses, or college. The two can definitely work together. For example, connecting your savings to your checking can help cover overdrafts, adding a layer of security while you focus on your financial goals.”

Knowing the purpose of each account type can help you more effectively manage your money. Here is a breakdown to help you decipher which account aligns best with your financial objectives:

	Checking Account	Savings Account
Purpose	Primarily for daily transactions and immediate financial needs.	Geared toward accumulating money over time and/or saving for future goals.
Access to Funds	Quick access to funds.	May have restrictions on withdrawals.
Transaction Frequency	Used frequently for everyday expenses.	Not intended for frequent transactions; designed for saving and accumulation.
Interest	Generally does not accrue interest.	May offer potential to earn interest, allowing your savings to grow over time.
Financial Goals	Ideal for managing short-term cash flow and immediate finances.	Supports savings for future endeavors, emergencies, large purchases, or long-term objectives.

Tips for Choosing Checking & Savings Accounts

When using your checking and savings accounts, consider both their features and how they protect your finances. Checking accounts, for instance, often come with debit cards for convenient purchases, but Laura emphasizes the importance of understanding the risks involved: “Fraud is such a big topic nowadays. One way to protect yourself is to keep most of your money in your savings account and transfer funds to your checking account as needed. This way, even if someone gets access to your checking, they won’t drain all your savings.”

Let’s dive into more  practical tips for using each of these account types based on your financial needs and goals.  Here are some real-life scenarios that show the practical application of both accounts, as well as how they work together:

• Emergencies

Emergencies, like a sudden car repair or medical bill, require immediate access to funds, which should be accessed through your checking account. However, maintaining a savings account can allow a quick replenishment of those withdrawn funds.

• Future Education Expenses

If you’re saving for your child’s education or your own, a savings account is a strategic choice. The higher interest rates can help your education fund grow over time, providing a financial cushion when it’s time to cover costs like tuition, books, and living expenses.

• Vacation

Vacations involve various expenses, from flights and accommodations to daily spending money. Using a checking account for these short-term expenses provides flexibility and easy access to funds during your travels. Simultaneously, consider using a savings account to build  a travel fund, allowing you to set aside money specifically for your getaways, without compromising your budget.

Additional Banking Services

Once you’ve established a solid foundation with your checking and savings accounts, consider additional services to optimize your finances. Here are some options to explore:

• Certificates of Deposit (CDs): If you have a lump sum of money that you won’t need anytime soon, CDs can be a helpful tool. When you put money in a CD, you agree not to touch it for a set period, which can range from a few months to several years. In return, banks usually offer higher interest rates than typical savings accounts, ensuring your money is growing. However, if you need to take your money out before the agreed-upon time, you may face penalties, so it’s important to be sure this is a good fit for your needs. Whether it’s a major future purchase, a down payment, or you’d just like to watch your savings grow, just make sure to choose a term that aligns with your goals and timelines.
• Money Market Accounts: These accounts combine elements of both checking and savings, providing higher interest rates than a standard checking account, while maintaining liquidity. Money Market accounts usually come with check-writing privileges, making them suitable for short-term saving, where you may need occasional access to the funds. They are ideal for those looking to earn a bit more interest without sacrificing quick access to their money.
• Credit products: Credit cards can be useful for managing short-term expenses and building credit, when handled responsibly. Look for credit cards with reward programs or cashback capabilities that align with your habits. Always pay attention to interest rates and terms to ensure that the card suits your needs.

Remember, these products should make your life and managing your money easier! If you’re ever unsure about your needs or the options that suit them, the team at Cornerstone Bank is here to help. Stop by or reach out to our team of experts for help.

Additional Helpful Resources
Common Financial Mistakes
Cash Management Services
More Information about Debit Cards
Should I Use A Debit or A Credit Card?