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The more cash in your checking account, the better, right? Not necessarily.
Money in a checking account is easy to access, and keeping balances above the bare minimum can help you avoid monthly maintenance fees. But having a bloated checking account means you're missing out on higher returns in a savings or retirement account.
In your checking account, it’s ideal to keep one to two months’ worth of living expenses plus a 30% buffer. Why the buffer? Banks earn billions of dollars from fees charged to customers who overdraw on their account or bounce a check. And running afoul of minimum balance requirements could mean being charged a monthly fee by your bank — so it’s best to have a cushion.
For savings, three to six months’ worth of living expenses in your emergency savings fund is a good goal to aim for. The right number for you might be higher or lower than for someone else. It's all about finding out what works for your budget. Here’s a quick look at how much cash to keep in your checking and savings accounts.
» Tend to overdraw your account? Check out the
Track your monthly spending
To figure out what your monthly expenses are, keep a daily spending log for one month. Include credit card purchases and payments that are automatically deducted from your checking account, like gym membership fees or loan payments. Use this base number to calculate how much you’ll need to keep in your checking account and how much savings you’ll need for your emergency fund.
» Looking for guidance? Learn what a rainy day fund is and why you need one
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Put additional cash in a high-yield account
Once you’ve arrived at how much you’ll keep in your checking account, direct anything extra someplace where it can earn interest. Online-only banks tend to offer the best rates on savings, including annual percentage yields of 5% or more. That is significantly higher than the national average of 0.46% — which means it'll put more money in your account, no matter how much you contribute. You can read more about some of NerdWallet's favorite high-yield savings accounts.
Once your savings account holds about three to six months' worth of living expenses, consider opening an additional retirement account or increasing your contributions to existing retirement funds. Those include 401(k)s and individual retirement accounts.
Keeping the right amount of cash in your checking and savings accounts ensures that you’re able to cover your daily needs and emergencies, avoid unnecessary bank fees and grow your long-term savings. Again, it's about finding what's right for you, not having the average checking account balance.
» Is inflation impacting your finances? Learn how to save more when inflation makes your money count less
Frequently asked questions
Is it better to keep money in checking or savings?
It’s advisable to have both types of bank accounts. You can:
Use a checking account for spending and paying off expenses, and
Use a savings account to build and hold your emergency fund while earning interest.
How much is too much cash in savings?
An amount exceeding $250,000 could be considered too much cash to have in a savings account. That’s because $250,000 is the limit for standard deposit insurance coverage per depositor, per FDIC-insured bank, per ownership category. If you keep more than $250,000 in your savings account, any money over that amount won’t be covered in the event that the bank fails. The amount in excess of $250,000 could be lost.
The recommended amount of cash to keep in savings for emergencies is three to six months’ worth of living expenses. If you have funds you won’t need within the next five years, you may want to consider moving it out of savings and investing it.
How much money do experts recommend keeping in your checking account?
It’s a good idea to keep one to two months’ worth of living expenses plus a 30% buffer in your checking account.
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FAQs
Aim for about one to two months' worth of living expenses in checking, plus a 30% buffer, and another three to six months' worth in savings. Alice Holbrook edits homebuying content at NerdWallet.
How much money should you keep in your savings and checking accounts? ›
For example, if you have two months' worth of expenses in your checking account and your emergency fund goal is to have six months, aim to save four months' worth of expenses in your savings account. Generally, you'll want to aim to have at least two to four months' worth of expenses in your savings account.
How much cash should I keep in my savings account? ›
For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency. For checking, an ideal amount is generally one to two months' worth of living expenses plus a 30% buffer.
How much money should you keep in your checking account group of answer choices? ›
Ideally, the amount put into your checking account each month should cover what it takes to live comfortably. How is this determined? To start, look at the monthly budget. Add up all of your monthly expenses required to live each month.
Is $20,000 a good amount of savings? ›
Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
How much money do millionaires keep in a checking account? ›
What about the checking accounts of millionaires? Things can get pretty complicated and personal here. “Millionaires' checking accounts are all over the place,” Thompson said. “Some clients will only keep enough to pay for immediate expenses (e.g., $10,000) and others will have $150,000 in checking on any given day.”
How much money should you really keep in the bank? ›
That should include a little cash stashed in the house, enough to cover the monthly bills in a checking account, and enough to cover an emergency in a savings account. For the emergency stash, most financial experts set an ambitious goal at the equivalent of six months of income.
Is it better to keep savings in cash or bank? ›
Nothing beats a sense of financial security. That said, there are some good reasons not to keep too much money in cash: Inflation decreases the value of any money you hold in cash. Inflation, aka rising prices over time, reduces your purchasing power.
Is it better to keep cash or put it in a savings account? ›
It's a good idea to keep a small sum of cash at home in case of an emergency. However, the bulk of your savings is better off in a savings account because of the deposit protections and interest-earning opportunities that financial institutions offer.
Is it smart to keep savings in cash? ›
While it's perfectly OK to keep some cash at home, storing a large amount of funds in your house has two significant disadvantages: The money can be lost or stolen. Hiding cash under the mattress, behind a picture frame or anywhere in your house always carries the risk of it being misplaced, damaged or stolen.
Average household checking account balance by gender
| Gender of reference person | Average checking account balance in 2022 | Median checking account balance in 2022 |
|---|
| Male | $20,221.19 | $3,800.00 |
| Female | $8,272.74 | $1,200.00 |
Oct 18, 2023
One commonly cited data point comes from the Federal Reserve Survey of Consumer Finances, which finds that Americans hold an average balance of $42,000 in transaction accounts. This average is skewed by people holding high balances, so it might be better to look at the survey's median balance figure, which is $5,300.
How much does the average American have in savings? ›
In terms of savings accounts specifically, you'll likely find different estimates from different sources. The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
What percentage of people have $20000 in savings? ›
Other answers revealed that 15 percent had between $1,000 to $5,000, 10 percent with savings of $5,000 to $10,000, 13 percent boasted $10,000 to $20,000 of cash in their bank accounts while 20 percent had more than $20,000.
What percent of Americans have 20k in savings? ›
Most Americans have $5,000 or less in savings
| Savings account balance | Percentage of respondents |
|---|
| $500 to $1,000 | 8% |
| $1,001 to $5,000 | 22% |
| $5,001 to $10,000 | 8% |
| $10,000 to $20,000 | 7% |
3 more rowsOct 18, 2023
How much is too much savings? Keeping too much of your money in savings could mean missing out on the chance to earn higher returns elsewhere. It's also important to keep FDIC limits in mind. Anything over $250,000 in savings may not be protected in the rare event that your bank fails.
How much should a 30 year old have saved? ›
If you're looking for a ballpark figure, Taylor Kovar, certified financial planner and CEO of Kovar Wealth Management says, “By age 30, a good rule of thumb is to aim to have saved the equivalent of your annual salary. Let's say you're earning $50,000 a year. By 30, it would be beneficial to have $50,000 saved.
How much money does the average person have in their bank account? ›
About 29% of respondents have between $501 and $5,000 in their savings accounts, while the remaining 21% of Americans have $5,001 or more. Few hold much cash in their checking accounts as well. Of those surveyed, 60% report having $500 or less in their checking accounts, while only about 12% have $2,001 or more.
How much money should I have saved by 40? ›
As a general rule of thumb, you'll want to have saved three to eight times your annual salary, depending on your age: 40: At least three times your salary. 45: Around four times your salary. 50: Six times your salary.
