The Role of Checking & Savings Accounts in Your Financial Health

Having a bank account might not seem like a big deal in your overall financial picture, but the truth is that having a checking and savings account is essential if you want to improve your financial health and work toward your most important financial and life goals.

At Addition Financial, we provide an array of financial accounts that include checking and savings options to manage your money. To help you understand why you need both a checking account and a savings account, we’ve created this guide to illustrate how each type of account can play a significant role in your financial well being and how they can work together.

How Does a Checking Account Affect Your Financial Health?

Checking accounts give people the ability to pay bills and keep their money accessible, so it can be used when they need it. Here are some of the ways that having a checking account can help you reach financial stability.

Direct Deposit

One of the most important ways that having a checking account can help you improve your financial health is that you can set up direct deposit with your employer to get access to your pay as quickly as possible.

With direct deposit, account holders often receive their pay the night before their official pay date. Contrast that with getting a check, where it may take one or more days after you deposit your check to get full access to your funds. Our checking accounts also allow for getting paid early! This is a benefit that can help you avoid an overdraft fee and be sure you’ll have the money you need to pay your bills. 

Automated Payments

Any financial institution you choose, whether you opt for a credit union or a bank, will have the option to set up automated payments from your checking account. For example, you might be able to automate your mortgage or rent payments, your utility payments, credit card payments and payments for car insurance and other regular expenses.

With online banking, you can easily set up automated payments. Once you’ve done that, you’ll save time every month because you won’t need to log into accounts and pay your bills or write checks, if that’s what you’ve been doing. You can simply review each bill when you receive it and let your financial institution do the rest.

Credit Score and Payment History

You know that your FICO score is one of the things that lenders use to determine whether they’ll approve you for a car loan, a personal loan or a mortgage. Your payment history is responsible for 35% of your FICO score, so it’s undeniably important to have a good or excellent credit score.

Having a checking account, especially if you use it to make sure that all payments are on time, can help you improve your credit score and build a solid credit history. The more consistent you are with your payments, the higher your score will be—and the more likely you’ll be approved for the loans you need, when you need them.

Debit Card

Your checking account comes with a free debit card that you can use to make purchases. While many of us use a credit card, some prefer not to use credit and to make purchases directly from their checking account instead.

Debit cards come with some purchase protection, although not as much as credit cards. If you’re someone who has difficulty with overspending, loading your debit card into your mobile wallet can help you avoid spending more than you can afford while still being protected when you use your card.

How Does a Savings Account Affect Your Financial Health?

Now, let’s talk about how having a savings account can impact your financial well being and help you work toward your most important financial goals.

Emergency Savings

Any good financial advisor will tell you that it’s essential to have an emergency fund with enough savings to cover your expenses for at least six months. That might sound like a lot of money to save, but doing so can help you if someone in your household loses their job or experiences a loss of income.

With a savings account, you can prioritize building an emergency fund and keep the money you need on hand while still earning dividends or interest on it. That means your savings will grow with time and you’ll have the peace of mind of knowing you won’t be left without the money you need to pay your bills. Choosing a savings account with a high interest rate will help you accrue savings as quickly as possible.

Saving for Financial Goals

We all have financial goals. Some of the most common goals we hear from our Addition Financial members include the following things:

  • Buying a new car
  • Buying a home
  • Paying for a child’s or a grandchild’s college education
  • Retiring in comfort
  • Pursuing passions and dreams, such as traveling the world

Having a savings account is the first step in working toward these dreams. When you choose the right financial institution, you can opt for different types of savings accounts that are designed to help you achieve your financial goals.

Dividends or Interest

Even the most basic savings accounts pay interest on the account holder’s deposits. Your money will grow and you’ll be able to take advantage of compounding interest, particularly if you choose a high-yield account like a money market account.

You should keep in mind that credit unions pay dividends and not interest. That means that as a member, you’ll share in the profits of the credit union. A credit union may offer a more advantageous annual percentage yield than a bank. If you choose a high-yield account, be aware that there may be minimum balance requirements to earn dividends or interest.


Many of our members have saved money that they then put into investments. We certainly encourage that, but one of the important benefits of having a savings account is that the money in it is liquid, meaning you can access it at any time. (This applies to checking accounts, too.)

Your retirement or educational savings are typically not liquid and may be difficult to access quickly when you need money. You may incur penalties if you use withdrawals to pay for expenses that aren’t eligible, too, so it’s important to have enough savings in an accessible account.

Tips to Use Checking and Savings Accounts to Improve Your Financial Health

When you have both a checking account and a savings account, they can work together to help you improve your financial health and work toward your most important goals. Here are some examples.

Paying Yourself First

The idea of paying yourself first is an important bit of savings advice that can help you achieve your financial goals. With an online checking account that’s linked to an online savings account, you can automate payments to yourself on a schedule that works for you.

A lot of people we talk to prioritize paying bills and we’re not suggesting that you shouldn’t pay your bills on time. That said, when people make saving a priority it helps them avoid overspending in other areas. If you know that an automatic transfer will be happening, you’ll be less likely to indulge in impulse purchases that could negatively impact your savings goals.

Maximizing Dividends and Interest

When you have linked checking and savings accounts, you’ll have the ability to maximize your dividends or interest by choosing where to keep your money. We often hear members talk about keeping the majority of their money in their savings account to earn as high a return on their deposit as possible.

With online banking, it’s easy to transfer money between accounts. Most financial institutions have banking apps that allow users to make instantaneous transfers. That means if you need to move money to your checking account to cover an automated payment, you can do so easily. Keeping money in your savings account until you need it means that you’ll always be earning dividends.

Saving for Specific Purposes

There’s a significant benefit to having multiple accounts with the same financial institution. If you can link a checking account and one or more savings accounts, it’s easy to pursue your most important financial goals.

For example, you might have a traditional or high-yield savings account where you keep your emergency fund. You might also want to save money for your child’s education with an Addition Financial Coverdell Education Savings Account or set money aside to pay for medical expenses with our Health Savings Account. There are some tax advantages associated with specialized savings accounts, too, so consult with a tax professional to be sure you claim any tax benefits that are available to you.

Use Addition Financial Accounts to Boost Your Financial Health

Checking and savings accounts both play a role in your financial health. When used together, they can help you build a solid credit history, improve your credit score and work toward your most important life and financial goals. If you want to buy a home or fund your retirement, having both accounts is an essential piece of the puzzle.

Do you need checking and savings accounts that work for you, with generous dividend rates and robust features? Addition Financial is here to help. Read about our checking and savings accounts and become a member today!

The content provided here is not legal, tax, accounting, financial or investment advice. Please consult with legal, tax, accounting, financial or investment professionals based on your specific needs or questions you may have. We do not make any guarantees as to accuracy or completeness of this information, do not support any third-party companies, products, or services described here, and take no liability or legal obligations for your use of this information.