INSPIRATION – GON DEC
Many people rely solely on their checking account as a savings vehicle, keeping excess funds in the linked debit card account. While convenient, a checking account has major limitations as a long-term savings strategy. In this blog post, I’ll explain why your checking account shouldn’t be your only savings and recommend better alternatives.
First, checking accounts offer extremely low or zero interest rates. The interest you earn, if any, will likely be less than 1%. This means your savings are losing value over time due to inflation. Your money cannot truly grow in a checking account.
Meanwhile, other investment accounts like high-yield savings, CDs, and mutual funds offer significantly higher returns. Even conservative investments can earn 2-3% or more in interest. Over decades, the compounding impact of these higher returns is enormous.
Checking accounts also lack security features of dedicated savings vehicles. They are more susceptible to fraud and have lower FDIC insurance limits. Only $250,000 is insured per bank, versus $500,000 for a savings account. This provides less protection for large balances.
Using your checking account as an emergency fund defeats the purpose of having easy access to cash. Large balances tempt overspending and reduce available funds for bill paying. A separate savings account removes this temptation while keeping emergency funds readily available.
Many checking accounts charge fees if minimum balance requirements are not met. These fees can easily negate the little interest you earn. Dedicated savings accounts typically have no minimums or monthly fees.
Finally, tracking progress is difficult with a checking account. Without automatic reporting, you may not notice your balance growing or realize you’ve saved enough to meet financial goals. Online savings accounts make it effortless to monitor progress.
Instead of relying solely on your checking account, establish these alternative savings vehicles:
•High-yield savings account – Earns higher interest with no fees and easy access to funds.
•CDs – Lock up savings for higher rates and force discipline.
•Brokerage account – Invest excess funds in mutual funds for optimal long-term growth.
Don’t let your checking account be an inadequate savings strategy. Open better accounts today designed specifically for growing and protecting your money. Your future self with thank you.
