What’s The Difference? Checking vs. Savings Account

My daughter sat on the couch beside me, crossed her legs and said, “Father, explain the difference between a checking account and a savings account.” It was a fantastic question, and I was thrilled to answer it. She currently only had a checking account, and I was hoping she was asking as a precursor to wanting to open a savings account to save up for something in the future

I have her a basic definition of the two types of accounts, and how they differed:

General Description

Checking accounts are for daily use for the transactions of every day life, while a savings account is used as a place to park money for longer periods of time for a future financial goal.

Fund Access

Access of funds in a checking account is very easy. One can make purchases or pay bills by writing a physical check, using a debit card or initiating a digital transaction.

To use funds in a savings account, the account owner usually has to first transfer the funds from athe savings account to a checking account.

Funds from both account types can usually be withdrawn from an ATM.

Transaction limitations

Most banks enforce monthly limits on how many transactions (withdrawals) can be done from a savings account. Transactions that exceed this limit can incur a service fee.

Since checking accounts are meant for every day use, there are no limits on the number of transactions initiated.


Checking accounts typically earn very nominal interest, or none at all while savings accounts enjoy a slightly higher rate. These interest rates vary between banks, but even a savings account interest rate is extremely low.

Jars Analogy

After hearing my explanation, she went on to ask, “Why would anyone ever want a savings account?” I used the analogy of using jars to hold her money.

I told her to imagine having two jars on her desk, one with no lid and one with a lid that was screwed on tightly, but the lid had a little opening just big enough to slide a dollar bill into. The jar with no lid is like her checking account money can go freely into and be taken out of. Her saving account is the one with a tightly screwed lid. Money can be slid into the jar through the little opening, but getting the money out is slightly more difficult.

She seemed satisfied with our conversation and expressed interest in opening a savings account to start putting money away for college. We agreed upon a date to do so, and I smiled as I said, “It’s a date!”

About Travis

2 Responses to “What’s The Difference? Checking vs. Savings Account”

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  1. Kay says:

    I know this was supposed to be just a basics talk, but rewards checking should really be included. It may take a bit more discipline, but with my savings that pays around .5%, and my checking that pays 2.1%, I keep as much as I can in checking. 🙂

    • Travis says:

      Great point, Kay – the concept of rewards checking is something I didn’t even think of mentioning to my daughter and really should have. Thanks for the comment!

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