Most banks offer customers a wide range of accounts to keep their money in. The most basic bank accounts – and the most commonly held bank accounts–are chequing and savings accounts.
Although banks offer both, there are important differences between them. That’s why it’s wise to look at your needs and goals when opening any type of bank account.
A chequing account is an account you use every day or most days. You access the money in your chequing account to pay your bills, buy gas, pay for meals, or make other purchases. It’s also the account your paycheque is typically deposited into.
Chequing accounts are designed to be easily accessible at bank branches, ATMs, stores, and online. You can also set up pre-authorized payments and Interac e-Transfer transactions through your chequing account.
Chequing accounts allow for more transactions in a month, but you usually won’t earn interest on the money in the account. This makes chequing accounts not ideal for saving money.
Savings accounts are designed to help you save money for short and long-term goals. They accrue interest, so you earn money on the balance in that bank account.
Because they’re meant to help you save money, they typically come with transaction fees, so you aren’t meant to use your savings account for day-to-day transactions. Instead, the idea is to deposit your money and let it sit there for a long time–or until you need it for an emergency.
Savings accounts are often used to save money for
- Unexpected but important expenses
That said, you can access your savings account if you’re in an emergency. You may pay higher transaction fees to do so, and you’ll lose out on the interest you would have accrued with the money left in your account.
High-interest savings accounts give you even higher interest on your balance than chequing or basic savings accounts, which is why they’re ideal for saving your money. However, it’s important to note that some banks require a minimum deposit in the account before you earn interest.
Depending on your savings account type, you may pay income tax on the interest you earn. A tax free savings account (TFSA) enables you to put up to a maximum amount into the account annually without paying income tax on it.
Do I need a chequing or a savings account?
Ideally, ou should have both a chequing and a savings account. That’s because each helps you meet your needs in different ways.
By having both a chequing and a savings account, you can organize your money and split it where you need it. Some money can go into your chequing account to cover expenses, while the rest can go into savings for the future.
Setting aside some money in your savings account can also help you control your spending. With all your money in a chequing account, you might be more likely to spend it unnecessarily, and you’re missing out on interest.
If you’re looking to open a bank account, it’s worth considering your needs and goals before deciding on a chequing or a savings account. If possible, make sure you have at least one to manage your money more efficiently while covering your expenses.