Most married couples maintain a small amount of emergency money in their bank accounts to cover their checkbook against overdrafts and unexpected expenses. This amount ranges from a couple of hundred dollars to several thousand dollars, depending on income. When you have $1,000 to spare, you may not want to leave it in a checking account. While checking accounts have advantages, the return on your investment is low and with such easy access you may spend the money.
Small Return on Your Investment
With few exceptions, most checking accounts do not offer interest accrued on money kept in a checking account. The accounts that do offer interest usually do not offer competitive rates. For an investment, keeping your $1,000 in a checking account offers a low or no return on investment. Make sure to use a high-yield checking account to get the most interest on your investment.
Debit Cards and Checks
Money in checking accounts is easily accessible through debit cards and checks. By not investing your money in certificates of deposit, stocks or bonds, you keep your money liquid. Your money remains yours for use however you see fit. Almost all checking accounts offer checks and debit cards for easy withdrawal of your money. This works as an advantage and disadvantage. You get easy access to your money in an emergency. You may also be tempted to spend that money on non-essential items.
Banks are insured by the FDIC. This means if the bank goes under you are guaranteed your $1,000 back. Other investment vehicles do not offer this guarantee and come with the risk of losing your money on a bad investment. When you want stability, you can't go wrong with keeping your money in a bank.
Opening a checking account often requires a minimum amount of money. You may be required to maintain a minimum daily balance to avoid a maintenance fee. These limits are typically below your $1,000 threshold. There are usually no fees when it comes to letting your money just sit there. Other investment options involve trading fees, withdrawal penalties and maintenance fees.
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