Eric Rosenberg is a writer focusing on topics like technology, travel, and finance. But once upon a time he was a bank manager. And now, he’s sharing some important tips on what kind of bank account to use when it comes to more efficient saving.
Taking Advantage of Higher Interest
According to Rosenberg, people should consider having not just a checking account but also a savings account. While the checking account can serve as the ‘financial clearinghouse’ where paychecks come in and out, the savings account can be the place where one grows their money.
So, what makes the latter better? For starters, savings accounts tend to come with higher interest rates than their checking counterparts. Rosenberg compares his checking account at the Schwab Bank, which pays just up to 0.04% interest, to his high-yield savings accounts, which can earn as much as 20 times more. Thus, he encourages people to open a separate savings account.
Keeping Savings Safe
Another perk of keeping one’s extra cash in a savings account as opposed to a checking account is that keeping it in the latter makes it easier for a person to spend money. This can then lead to overspending, compromising one’s budget or financial goals.
That said money in a savings account will be harder to spend, keeping the temptation to use it on unnecessary purchases at bay. This also makes a savings account an ideal place to build and store an emergency fund.
Preparing for a Major Purchase
Rosenberg also recommends using a savings account, especially for people who are trying to build a downpayment for a major purchase like a car or home.
In his case, he makes sure to regularly stash $250 in a high-yield savings account to afford the $13,000 in homeowner’s insurance and property taxes that he needs to pay each year.
This helps him avoid using the money for something else. The same strategy will work for other expenses such as an upcoming wedding.