Checking vs. savings: the right setup

Quick check on this lesson

Answer each question and we’ll show you why the right answer is right, and why the others aren’t.

1. 1.

   Per the lesson, what's the basic difference between checking and savings accounts?

   AChecking pays high interest; savings pays nothingBChecking is for daily transactions and pays near-zero interest; savings is for storing money, pays more interest, but limits withdrawalsCChecking is FDIC-insured; savings is notDThey're identical, different names for the same product
2. 2.

   What three-tier setup does the lesson recommend?

   AThree checking accounts at three different banksBChecking at any major bank with a month of bills, high-yield savings at an online bank, and optionally a brokerage for long-term investmentsCAll cash in a single high-yield savings account, no checking neededDA CD ladder, a checking account, and physical gold
3. 3.

   In the lesson's worked example, $20,000 sitting in a Bank of America checking account at 0.01% APY earns $2/year. What would the same $20,000 earn in a high-yield savings account at 4% APY?

   A$20/yearB$200/yearC$800/yearD$2,000/year
4. 4.

   Per the 'friction is a feature' section, why does the lesson recommend keeping savings at a different bank than your checking?

   AFDIC insurance only applies if accounts are at separate banksBBanks charge less in fees when accounts are split upCThe 1-2 day transfer delay acts as a built-in cooling-off period that helps avoid impulse spendingDInterest rates are higher when you have only one account at each bank
5. 5.

   What does the lesson's tip callout recommend automating?

   ABill payments from savingsBStock purchases on paydayCTransfers from checking to savings on payday, the money you don't see in checking is the money you'll actually saveDCredit card payments to your checking account