Should I have a checking account or a savings account? (The answer is both.)

There are plenty of situations you may find yourself in that warrant opening a new bank account. Maybe you're getting ready for your first real account opening experience — not like the youth savings account your grandma started for you at her financial institution, but one where you showed your ID, deposited your own money, and signed for it all by yourself. Congratulations. You are adulting.

Or perhaps you’ve just moved to a new town and want to open a bank account locally. Finding a new bank or credit union is just the next step as you settle into your new community. Makes sense.

Sometimes you’ll just want a better account with better rewards (oh, and with fewer fees), but wait! You've got everything connected to your current account — your bill pay, your direct deposit, your digital wallet, your debit card. You are hoping to ease your way into a better account. Maybe you're thinking of just getting a little checking account and nothing more.

But when it comes to the type of accounts you should choose, a word to the wise is consider both a checking and a savings account. Why? Well, having, just one or the other is like having a cheeseburger with only the top or bottom bun. Sure, you can eat it like that, but it makes life a lot more sloppy, especially if you are getting all the extra good toppings piled on there, too. Simplify your finances by having two accounts, each designed for their own purpose: a checking account for spending, and a savings account for, well, saving.

What is the difference between a checking account and a savings account?

When deciding which accounts to open, it's really about how you want to use your account. Understanding what each bank account is designed for may help you see the advantages in each, and ultimately the benefit of having both checking and savings accounts working together.

Savings accounts and saving money

Plenty of people just have a simple savings account (sometimes more than one) — for keeping tabs on funds earmarked for home improvements, the next family vacation, or “just in case” emergency funds.

Obviously, a savings account is for saving money, but what you’re saving for (and when you need the money by) can make a difference which savings account you choose.

General savings

The real secret of choosing a tasty savings account is how it works in partnership with your checking account. Consider a savings account the bottom half of the bun (or the heel for those of you who worked under the golden arches). It's there to support the activity going on with your spending, even if it appears to be rather dull and not covered with sesame seeds.

It's easy to move money from a checking account into a simple savings account and it comes with the benefit of being readily accessible when you need it — without losing the interest you have earned. It’s as easy as logging into your online banking portal to transfer funds from savings to checking (or checking to savings!) in an instant. This type of simple savings account is a great place to begin putting money aside.

Retirement savings

Some people save money in their 401k or an individual retirement account (IRA) — that's also smart, but for different reasons. That's a long-term savings that you don't want to touch until you retire. With these accounts, pulling out funds earlier than expected will cost you stiff penalties like sacrificing a significant percentage of your account balance.

Health savings

A health savings account, or HSA, is another way to save, specifically for medical expenses, often with pre-tax money, which is also smart. It's easy to tap into when you fill a prescription, but it's not going to do much for you when you need to remodel your bathroom or fly back home to meet your new niece. HSA accounts are usually directly connected to your healthcare policies.

Targeted savings

A certificate of deposit offers extra earning opportunities, often paying a higher APY (annual percentage yield) than general savings accounts. Definitely think about saving money in a CD if you’re comfortable with not reaping the benefits for a set amount of time, usually one to nine years, depending on the CD.

Certificates of Deposit are relatively low-risk investments that reward longer-term deposits with higher returns. However, if you’re looking for savings that can be accessed when it's 90 degrees and the air conditioner just quit working, this isn't the ideal savings option. Bonus FYI: If you bank at a credit union, these may be referred to as “share certificates”.

Variable savings

When you invest in the stock market, cryptocurrency, real estate, or any commodity that changes in value, it can be a boom, a bust, or break-even. It has potential but no guarantees of its return on your initial savings. (In other words, you might not get back what you put in.) You can get your hands on it without too much trouble, but the timing of when you need it may not coincide with its best earnings. As with most financial products, bigger risks offer bigger payouts (should you stay lucky.)

Checking accounts and spending money

A checking account is your primary source of money — allowing both your incoming deposits and your debit card purchases and bill pay transactions going out. Not all checking accounts are the same, and as you shop around pay attention to differences in things like rewards (if any) and if there are any special fees.

Aside from the account’s small print, consider the institution’s ability to provide 24-hour assistance and convenient ATM access. If being able to deposit a check using just your smartphone is important to you, then make sure it is available. Such things are the crown that tops off the onions, ketchup, tomato, and bacon — all the bits that slide in and out of the sandwich.

Reliable and easy mobile banking is paramount these days. Today’s transactions happen 24/7 and when you have a question or concern (for example, “Did I pay my credit card?”, “Did my tax refund arrive?”, “How much did I spend on lunch yesterday at Bob's Beefy Burgers?”) you can’t be expected to wait till the bank opens the next day to know if you’re in the green. Check out what banking abilities you’ll have through the institution’s website and mobile app (if any).

Here's something to chew on: you can absolutely be rewarded with a free checking account that earns interest or other balance incentives. Yum! And although it's likely the checking account’s interest rates are less attractive than the savings account, that's not always true in every case so be sure to keep your eyes open to advantageous possibilities.

Why you should have both a checking and savings account

But if you're still considering snagging just the checking account (and skipping a savings) there are reasons you may want to reconsider. Right up front, there’s the benefits of overdraft protection which can easily be reaped through a checking-savings combo. The fact is, some financial institutions charge overdraft fees for accidentally spending more than what’s in your account. Without that savings account to offer overdraft protection, one spending goof can quickly snowball into a sizable negative balance.

Keep in mind however, that overdraft protection is not automatic (you need to enroll to avoid an overdraft fee), but if you are using your checking account like a powerhouse spender, this is where the meaty morsels of both accounts really come together.

When it comes to checking, It may be easier to select your that account first and then choose a complementary savings account. For example, a checking account could come with a monthly service fee or a minimum balance requirement. Skip both of those. Anything with a monthly fee isn't worth biting into, since there are plenty of delicious alternatives. (We know a pair that comes with both halves of the bun: Kasasa Cash^® and Kasasa Saver^®.)

How easy is it to save from here? Easy. Super easy. Just like the savings to checking transfer perk, open the app, move the money, and start saving. Even better, you can set up automatic transfers that coincide with your direct deposit, so you don't have to lift a finger to save money. With Kasasa Cash, you can not only get that pesky ATM withdrawal fee refunded*, but you can even have that refund added directly to your Kasasa Saver account. Bing. Bang. Boom.

Finally, you may have thought you’d be limited in your checking and savings account choices based on whether you prefer traditional, in-person banking versus mobile banking. However, the good news is that you don’t have to choose one or the other like before the pandemic.

If you haven’t checked out the technology offered by smaller banks and credit unions in a couple of years, you should really do so. Just like having both a savings account and a checking account will give you the best of both for your spending and saving needs, today’s tech-friendly online and app banking provided by the “little guys” has evened the playing field for those who want both local service and 24/7 convenience.

So now if you’re shopping for a community bank or credit union and have the urge to ask, ""Can I just have a checking account without a savings account?"" you’ll understand why that’s like walking into a top-notch burger spot and asking, ""Can I just get the top bun? Be as picky as you want about mustard or mayonnaise, not compromising on features you’ve already decided are important. In the end, you’ll be proud you got the whole package to handle your financial life just the way you ordered it.

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