Wednesday, July 19th, 2017
Your chequing account is the pillar of your financial life. It's where you keep the money for your daily spending, where your automatic payments are withdrawn, and the account from which you'll withdraw cash. Without your chequing account, your finances would be disjointed and without a centralized base of control.
But your chequing account is just one of several important parts of your financial life, and shouldn't be used as a catchall account or as a place for keeping large amounts of cash that you don't plan to use. There are best practices when it comes to using chequing accounts.
Here are the best uses for your chequing account:
Your Money's Home Base
Your chequing account is an excellent home base for your money. It's where you'll want to deposit your paycheque and where you funnel all other sources of income. This is the account from which you pay your bills, have automatic payments withdrawn (such as mortgage payments and insurance), and make your credit card payments. By having all of your income and expenses coming and going from a single account, it's easier to keep track of how much you're earning and spending in a given month — which is an important factor of sound financial management.
Your chequing account is also the ideal place to keep your monthly spending money. Whether you choose to live on a cash-only spending plan, regularly withdraw from your chequing account, or do all of your spending on a cash-back credit card, your chequing account is where your day-to-day spending money lives. If you choose to use cash only, withdrawing money periodically from your chequing account will make it easier to keep track of your money. If you plan to do all of your spending on a rewards credit card, you need to ensure you have enough money in your chequing account to pay the balance in full every month.
Beyond your monthly spending money, it's also a good idea to keep a buffer of cash in your chequing account for any unexpected expenses and purchases. We can't budget for everything, and your cash buffer will make those unexpected expenses easier to absorb instead of a lingering credit card charge.
Not a Place to Keep Significant Cash
While keeping a cash buffer in your chequing account is a good idea, you won't want to hold too much more money than you need to cover your expenses. This is important because most chequing accounts don't pay much interest, if any, and that money would be better off in a high-interest savings account.
A chequing account is an essential part of your finances. By using these best practices, you can ensure you get the most out of this account.