In this article we’re going to cover the types of bank accounts, which ones you should have, and what each one can do for you.
The two main types of bank accounts are your checking and savings accounts. These two are the main types and are essential to a healthy financial life.
It’s important to know how to set them up and how to make them work for you to get the most out of them.
Your checking account is the backbone of your financial system. It’s where your money will first go before it’s “filtered” to different parts of your system, like your savings account, your investing account, and your guilt-free spending. That’s why I believe in picking the best account, then moving on.
As you know, checking accounts let you deposit money and withdraw money using debit cards, checks, and online transfers. I think of my checking account like an email inbox: All my money goes in my checking account, and then I regularly apportion it out to appropriate accounts, like savings and investing, using automatic transfers.
I pay most of my bills through my credit card, but the bills that I can’t pay with my card—like rent or my car payment—I pay directly from my checking account using automatic transfers. Checking accounts are the number one place where Fees are levied, and unnecessary we’re going to fix that.
Think of savings accounts as places for short-term (one month) to mid-term savings (five years). You want to use your savings account to save up for things like vacations and holiday gifts, or even longer-term items, like a wedding or the down payment on a house.
The key difference between checking and savings accounts is this: Savings accounts technically pay more interest. I say “technically” because on a practical level, the interest on your savings account is essentially meaningless.
The interest rate on your savings account is not all that important. Let’s assume you…