Is It Bad To Take Money Out Of Your Savings Account? (Updated!)

Is It Bad To Take Money Out Of Your Savings Account

Do you know if it is bad to take money out of your savings account? this is one of the questions our readers ask a lot. Well, we´ve got you covered.

You only ever open a savings account, for one thing, to save money. Anything non-critical withdrawal that is in direct opposition to that endeavor is, quite sensibly, labeled as an obstacle towards that very goal. 

So, Is it bad to take money out of your savings account? It’s not bad to take money from your savings account if the money that you take is being used for the very thing that you set the savings account up for, to begin with. If your saving account is primarily an emergency fund, then it needs to be used for emergencies only. 

However, it’s an important tip that you should take to heart that anytime you can avoid removing money from your savings account, you should do so.

If there is an unexpected expense in your life and shifting around some of your income can tackle it, by all means, shift the money around.

Much of it just really depends on why you set aside a savings account, to begin with. If you don’t intend to utilize it, then there shouldn’t be any reason to open one. 

Consequences Of Taking Money From Your Savings Account

The immediate effect of withdrawing money from your savings account is generally going to depend on your banking institution and what their terms are for opening and withdrawing money from your savings.

Some will charge a fee. Most of the time, it’s a pretty nominal fee, such as $5 or $10 for each transaction, which can add up quickly if you’re making a bunch of small withdrawals.

These include withdrawal limit fees and excessive usage fees. 

Regulation D is at the heart of the types of penalties you can expect from financial institutions when it comes to withdrawing money from your savings account.

Regulation D limits the withdrawal transactions from your savings to a total of 6 per month.

Because of the COVID-19 pandemic, Regulation D has been relaxed so that people can access money in an obvious time period of financial stress.

However, the 6 withdrawal transactions typically limited by Regulation D are:

  • Overdraft Transfers
  • Third-party Checks
  • Debit Card Transactions
  • ACH Transfers (Automated Clearing House)
  • EFTs (Electronic Funds Transfers
  • Phone, Fax, Computer, or Mobile Transactions

Any of the above withdrawal transactions, including combinations, cannot exceed six in a single month’s period.

The purposes behind Regulation D are twofold.

The first reason is to ensure that the funds held by banks are not depleted due to wide-open usage through unlimited withdrawal transactions from savings accounts. 

This really translates to checking accounts. Banks aren’t required by federal law or guidelines to hold money in reserve for savings accounts, however, they are required to do so for checking accounts. 

This means that money transferred to savings and withdrawn depletes the reserve funds for checking accounts. 

The second reason is that it’s the government’s way of encouraging you to use a savings account for its intended purpose, which is to save money.

Of course, this is just an added sort of “saving-face” gesture for the government, but it just so happens to be effective, at least somewhat. 

Read also: Someone Forged My Signature On A Check And Cashed It

How To Get Around The Limitations

This isn’t an encouragement for getting around savings account restrictions so that you can deplete all of your hard-earned funds.

However, times are hard, especially with COVID-19 and the frequent political and economic uncertainties. 

  • Limit your withdrawals to bills that are not monthly
  • Don’t overdraw your checking account
  • Use your checking account to pay bills
  • Don’t make small, individual withdrawals
  • Talk to your bank

Try not to use your savings account to pay for bills that come along monthly. If you pay monthly, that’s one out of six towards your six transaction limitation each month. 

Pay very close attention to your automatic withdrawals from checkings, such as monthly subscriptions, automated bill pay, and unforeseen withdrawals. 

The last thing you want to do is accidentally overdraw your checking, which automatically draws off of your savings, depleting your six, monthly transactions.

Also, though banks will never admit it, when you have multiple transactions coming through at once and they will overdraw your account, the bank will approve the biggest ones first, that way you get hit with several smaller overdrafts, racking up that $25 fee.

Make it a habit to pay your bills from your checking account only, or with cash that you’ve withdrawn directly from your checking account. 

If you have to withdraw from savings, take a long, hard look at what you will need for the rest of the month and try to draw what you’ll need in one large sum.

It’s better to do it this way, rather than hitting your limit on the 20th of the month, with ten more days until it resets. 

If you’ve already hit your limit, contact your bank. No matter how stressed you are, you’re still dealing with another person, who goes through their ups and downs as well.

Most banks will be considerate enough to waive the six transaction limit and let you draw a seventh if life necessitates it. 

Replace Your Savings Funds As Quickly As You Are Able

Taking money from your savings should only ever be a last resort deal or an emergency situation.

Most people set aside simple savings accounts for emergencies anyway, as there are much better accounts out there for saving money aimed at a particular purpose.

If you’ve managed to deplete your savings remember, you started at zero in the beginning and you just have to start from zero again.

When you have a little bit of extra, even if it’s only a couple of dollars, go ahead and deposit it into your savings account and begin building it again. 

Final Word

It’s never a bad thing to take money from your savings account in emergency situations, to feed your family, or keep the lights on.

If you’re taking it out because you want to upgrade from a 4k TV to an 8K, well that’s definitely silly. 

For now, Regulation D rules have been relaxed somewhat but that likely won’t last forever.

Be sure to replenish the savings that you’ve withdrawn as soon as you can. Before you know it, the situation will again be right as rain. 

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Marissa K.

Hi! I'm Marissa. A personal finance nerd, content writer, and Managing Editor. I'm here to bring you all the latest cool ways to save, make and invest extra money. So, helping you to live your dream life!

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