One of the perks of being financially independent has something to do with that warm glow you feel as soon as that first paycheck comes in. Unfortunately this perk comes coupled with a dilemma. What do you do with such a significant amount of money? Probably the best way to deal with this is to keep your money in a bank account for safekeeping. You can be sure that it would be secure, all the while giving you the freedom to dispense of it as you please. You can entrust it in either a savings account or a checking account. Your decision on which kind of account to open depends on how you would like your money to work for you.
A savings account enables you to keep money on deposit while accumulating interest on it over time. If you really want your money to grow, this is the better type of account to go with. But you are in a slight disadvantage when it comes to pulling out funds, since you would have to go to a bank or an ATM (if the bank offers you this option) every time you withdraw cash. If you are the penny-pinching, thrifty type, this account works well for you. The minimum balance for opening it is very reasonable, and your money multiplies as long as you sit on it. You need to talk to your bank concerning interest rates and transaction fees, just to make sure that you’ll know what you’re getting into. Do business with banks which offer the highest interest rate possible, while giving you as much freedom to release your funds as you would like to.
On the other hand, a checking account works well for you if you’re a practical spender. With a checking account, you can deal with transactions such as paying your utility bills and house mortgage with relative ease through the use of personal checks. This eliminates the need to go to a bank every time cash runs out. You can spend your money through checks anytime you please; you should be careful enough to track your spending, though, as there is a possibility that you could overdraw your account. Writing and releasing a check without the funds to back it up results in a bad credit rating. The bank will charge a penalty for the transaction and will return the check to you; this is called a bouncing check. It affects your credibility when you apply for loans or a credit card in the future, and in worst cases, a felony charge may be file against you.
Obviously the issues that you have to contend with in choosing which account to open with varies with how you plan to do away with your money. Do you want the profitability of a savings account? It lets your funds grow, and you are in no danger of overdrawing your account. Do you want the freedom and convenience of a checking account? It’s a safe and convenient way of liquidating your funds, but there’s that danger of writing that bad check. Your decision depends on your attitude towards money and how you would like to use it. If you’re in a situation wherein you constantly need to release substantial amounts of money, then you’ll need a checking account. If you want your money to sit tight for long periods of time, and you can deal with cash most of the time, you would go well with a savings account. There are advantages and limitations to both types of accounts mentioned. It’s for your own financial ease that you weigh and consider your options before you open with any of them.