March 31, 2020

Should Your Accounts be Checking or Savings?

Profit First Methodology
Ronald B. Allen

Which Profit First Accounts Should Be Checking Accounts and Which Ones Should Be Savings Accounts?

Are you confused on how to organize your accounts using the Profit First Method?

It
 is important to understand the difference between a checking account and a
 savings account. As a general rule, savings accounts yield interest, but are
 limited in the number of withdrawals allowed during the statement period. A
 checking account typically offers an unlimited number of withdrawals and
 checks, but does not yield interest.

Income, Profit, Owner's Comp, Tax, and Operating Expense should all be
 set up as checking accounts. The flexibility offered by checking accounts far
 outweighs any minuscule interest you get by using savings accounts. 

The two "no-temptation" accounts set up at your
 secondary bank - Profit Hold and Tax Hold - should be set up as savings
 accounts. This is where you will collect interest because your money will
 pool for a while.

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