How to Manage Money Using Checking and Savings Accounts

There are two tools every person should have to effectively manage their finances: a checking account and a savings account. With just these two simple tools (and access to online banking and a debit card), it becomes possible to gain greater control over the inflow and outflow of monthly finances. These two tools reflect the two basic rules of managing your money well. The first rule is to spend within your means, and the second rule is to save for the future. The checking account and savings account will each facilitate your ability to meet these two goals in your personal financial life.

The Function of the Checking and Savings Accounts

The function of the checking account is to allow you to manage your monthly, weekly, and daily expenses without spending beyond your means. The goal for a checking account should be to maintain a balance just slightly in excess of what you anticipate your monthly expenses to be. The function of the savings account is to save up funds to invest into other investment options and provide a cushion should monthly expenses exceed estimates due to an emergency.

Using Online Banking Tools to Manage Money

With the advent of online banking and linked accounts, most banks offer features that allow customers to transfer funds between their checking and savings accounts, to access funds via a debit card at a network of ATM's, as well as to deposit funds, check balances, and make direct payments online.

Keeping Control of Banking Fees

Many financial institutions will waive fees for checking accounts if the customer also opens a savings account and keeps a minimum balance in that account. There are a number of options for controlling banking fees and opening both a checking and a savings account is one way that fees can be controlled or eliminated.

Manage Your Balance in Each Account

It can be exciting to open a savings account and begin to imagine money stockpiling into that account for a rainy day, a fun vacation, a new investment, or other financial treat. However, many banks now charge fees for overdrafts to the checking account, even if accounts are linked. Take care to manage the balance in each account so overdrafts to the checking account are less likely to occur.

Consider Unlinking Your Checking from Your Savings Account

It can be easy at times to take a look at the balance in the savings account and make an impulse decision to spend that money on something you've had your eye on. If you suffer from this tendency, make the transfer less accessible by unlinking your accounts. With each extra step you have to take to gain access to the money you have placed into savings, you have extra time to reconsider impulse decisions and continue to save responsibly for the future.

Use Direct Deposit to Save

Make saving easier by asking your employer to put your paycheck on direct deposit, then set up a percentage of each paycheck to be automatically drafted into savings.