A checking account is the workhorse of your finances: You typically receive your earnings by direct deposit, spend money with a debit card, and pay bills online from your checking account. So why have a savings account, especially when interest rates are low?

Savings accounts may not pay much, but rates have ticked up, and they may continue to rise in 2019. If that happens, your savings account will get more attractive, unless inflation moves along at a similar pace. 

Still, there are plenty of reasons to keep cash in a savings account.


Keep it Separate

A savings account allows you to get money out of your checking account and keep it separate from your everyday spending money. 

That alone can eliminate temptation and keep you from spending money that you'd prefer not to spend. By moving money to a savings account, you earmark it for longer-term goals—not this month's groceries or entertainment expenses.


Prepare for Surprises

Even if you're not saving for anything in particular, it's wise to keep cash in an emergency fund. 

A savings account is an excellent place for emergency savings. Why have emergency savings? When life catches you by surprise, it's easier to land on your feet if you can pay for expenses out of your savings. 

The alternative is to take drastic measures: Go into debt, make sacrifices (like putting your health or safety at risk), or sell things at less-than-perfect timing to pay for unexpected costs.


Grow Your Savings

Even though savings accounts don't pay much, you can earn upwards of two percent APY at some of the most competitive online banks. 

That's better than nothing. Most checking accounts don't pay interest, so you're almost sure to see your purchasing power erode unless you shift your cash to a savings account or another vehicle.


Save for Goals

If you're planning for upcoming expenses, savings accounts can help you organize your finances and reach your goals. 

It may even make sense to have multiple savings accounts—one for each goal. For example, you might have one account for emergency savings, another account for a vacation fund, and a third account for building up a down payment.

If you just keep all of your money in a checking account, it's hard to remember what you've saved. To help you organize and minimize fees, look for online savings accounts that let you set up multiple “subaccounts”.


Disadvantages of Savings Accounts

If you've decided that it makes sense to have a savings account, it's essential to understand potential pitfalls with these accounts. 

Fortunately, there are very few drawbacks. Almost everybody needs one, and it doesn't need to cost anything to open and maintain a savings account.

The primary drawback of having a savings account is probably the relatively low-interest rate that you earn. 

But that's to be expected if you take advantage of the benefits of a savings account. The idea isn't to get rich—it's to keep money safe and hopefully avoid losing too much to inflation.

For longer-term goals, a savings account might not be the ideal option. CDs pay more, but you need to lock up your money to earn the highest rates. 

Money market accounts may also make sense. For goals that are farther out, other types of investments may be appropriate—but beware of the significant risks that come with moving your money from bank investments to other strategies.