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Why You Should Keep Your Savings in a Separate Account


If you don’t think it matters where you put your emergency savings, think again. While keeping your savings in your chequing account is better than nothing, it doesn’t hold a candle to a separate savings account.

Opening a separate account for your emergency fund comes with a lot of perks. Here are some of them below.

Earn Extra Savings in a Sign-On Bonus

Most banks offer an initial sign-on bonus for opening a new account with them. You can earn as much as $300 depending on the promotion. That will undoubtedly give a boost to your goal.

Make Your Emergency Fund Hard to Spend

It’s easy to blur the lines between expendable cash and savings you mean to shelter when they both coexist in the same account. If you forget how much money you’re supposed to reserve for emergencies, you can dip into these funds to spend on other things — bills, shopping trips, vacations, and meaningless items.

While you might not notice your mistake right away, you can’t miss it in an emergency. After all, those savings won’t be there to help you with an unexpected expense.

There’s no need to panic in a situation like this. Lines of credit exist to help you when you accidentally spend your savings. You may find a short-term solution in a lender like Fora. As you can see when you visit Foracredit.ca, you can also apply for an online line of credit. If approved, you can draw against your limit to handle your unexpected expense and pay it back on time.

Access Your Funds without Problems

A savings account makes it harder to spend your emergency fund without making it impossible to access it in an emergency. Most savings accounts are fairly liquid, which means you won’t have to wait to see your transfers come into effect.

Be careful when shopping for a new account, as not all banks provide quick transfers. Some may place holds or account limits that penalize you when you fall below this arbitrary amount.

An account with these limitations can put you in a tough spot — it can be like you don’t have an emergency fund at all. In some urgent cases, you may have to rely on a line of credit until your transfer goes through.

Clinch Higher Interest

Most basic chequing accounts don’t pay interest on your balance, so you won’t be earning anything for keeping your emergency fund here. In fact, there’s a good chance you could pay for a basic chequing account, as many of them come with monthly fees, transfer limits, and other terms.

Savings accounts, on the other hand, earn far greater interest. Even the basic ones earn closer to 1% APY, while you can score a high-yield account earning as much as 5% if you’re lucky.

In your search for the highest yield, be careful not to lock in your funds in GICs or bonds. Many banks provide higher returns with restrictions on when you can withdraw these funds.

Consider Changing Where You Keep Your Emergency Fund

Where you stash your savings can have a big impact on how easily you handle your next emergency fund. If you don’t have a separate savings account yet, consider opening one now. 

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