Where to Keep Your Savings

How to save for retirement is a simple question that often begets a simple answer, save more and spend less. However, it’s always harder to do because it involves changing our behavior.

The first financial step that most people take is to open a savings account. A savings account should be the basic foundation of a person’s financial structure and it is an important resource for many reasons. There are actually many types of accounts where you can hold your savings. It may be helpful to utilize more than one account to achieve different goals

Savings Accounts vs. Checking Accounts

The use of checking accounts and savings accounts are both important components to every person’s financial picture. It is helpful to know the distinctions and purposes of each as the starting point.


A checking account is not for savings. The amount that you keep in a checking account should allow you to pay your bills and expenses each month. Checking accounts offer little to no interest as a reward but they do offer maximum access or liquidity for your money. Typically, withdrawals from a checking account are not restricted and can be done via a debit card, checks or ATMs.

Savings Account

Savings accounts are usually held at banks or credit unions and are not subject to market risk. The bank pays a guaranteed interest rate and the account has FDIC insurance. Savings accounts should have less frequent withdrawals than checking accounts. The savings balance earns a low interest rate (currently less than 1%), but there may also be restrictions on the frequency of withdrawals and the minimum balance that is maintained. To compare current interest rates on available savings accounts in real-time, see Bank Rate.com.

Savings accounts should be used for unexpected events or financial emergencies such as replacing an appliance or buying new tires for the car. They are also appropriate for short term goals, such as an annual vacation or accumulating a down payment for a new house. Most financial advisors recommend holding enough in a savings account that could support your needs for at least six to nine

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