How much money should I keep in my checking account

By Sarah R Reviewed by Nooreen B Edited by Izzy M
Modified on September 15, 2023
how much money should I keep in my checking account

It’s essential to keep money secure in the bank for emergency expenses and satisfy minimum balance requirements. But you may wonder, “How much money should I keep in my checking account?”

If you want more information on savings or checking accounts, keep reading below to learn how to maintain the right balance for bank accounts.

What Is a Checking Account?

A checking account, also known as a transactional account, is an account with a financial institution that allows you to deposit and withdraw money. Having a checking account is essential, as you can take advantage of online financial tools. For example, you may send or receive money electronically to your bank account, withdraw cash from ATMs, pay using a debit card or check, and more.

If you do not have a checking account, you miss out on several financial opportunities. If you need extra money this month, you may be ineligible for installment loans because many installment loan lenders require a bank account. Cash is typically sent via direct deposit. Without an account, you will be unable to receive your emergency cash.

How Much Money To Keep In a Checking Account

You need money in your checking account to pay bills and treat yourself. But how much is too much money to keep in a checking account? You may not want all your money to be held in the bank. The average checking account balance in the United States is $40,000, while the median household balance is $5,300.

It’s essential to consider a few factors to help you decide how much cash to keep readily available in your checking account.

Check Your Minimum Requirements

A minimum balance requirement is a monetary amount you need to have available in your financial account. For example, a bank may require a checking account balance of $50. You may keep as much cash as you want in your checking account, but you must not leave less than the minimum required.

The value of a minimum balance requirement varies. Some financial institutions do not impose minimum balance requirements, while others require customers to require minimums as high as $1,000 in their accounts. Check your bank’s website for information on checking account requirements.

Calculate Your Monthly Expenses

Ensure you have enough money in your checking account to cover all of your monthly bills. To accurately calculate how much money you need for expenses, you need to track your monthly payments.

There are various ways to keep track of how much money you withdraw from your checking account. You can use expense tracking apps, spreadsheets, or a basic spending worksheet. Take a look at your past three bank statements to calculate the average amount you spend on variable expenses, such as gas.

You need to track two main types of expenses: necessary and desirable expenses.

Necessary Expenses

A necessary expense is a bill you cannot refuse to pay. A few examples of necessary costs include rent, groceries, gas, utilities, and debt payments. Most necessary expenses are fixed, so they are easy to track. However, you may have to calculate the average of variable costs, such as food, to know how much money to keep in the bank.

Desirable Expenses

A desirable expense is any cost that you do not need to make. For example, your monthly Netflix bill is a desirable expense. This financial category may be harder to assess since the amount of money you spend on entertainment and food varies per month. Calculating the average, you spend on desirable expenses can only benefit you.

Establish an Emergency Fund

If you already have enough money in the bank to cover monthly expenses, consider a financial safety net. How much cash should you save? Financial experts advise that everyone keep at least two to three months of expenses in their checking or savings account. This money will tie you over when you face unpredictable life events.

What if I Don’t Keep Enough Money in My Checking Account?

Keeping money in checking accounts can help you secure it from theft. But there are financial consequences if not enough cash is held in your checking account. These are some penalty fees that financial institutions charge their customers when there are insufficient funds:

  • Overdraft Fees — When more money than you actually have available in your checking account is withdrawn, you can expect an Overdraft fee.
  • NSF Fees — NSF is short for non-sufficient funds. Your bank will issue an NSF fee if you write a check or have an automatic payment withdrawn when there is insufficient money in your account. Nsf fees are also called returned-check charges.
  • Late Fees — If you miss a payment because you do not have enough money in your bank, the creditor will likely charge a late fee.
  • Dishonored payment fees — A dishonored payment fee is also referred to as a returned payment fee. You can expect this type of fee when there is not enough money in your bank account to cover the cost of a scheduled payment.
  • Minimum Balance Fees — You can expect a minimum balance fee if your bank has minimum balance requirements.

How to Open a Checking Account

If you don’t yet have a checking account, it’s vitally important that you get one. A bank account keeps your money secure and allows you to conveniently handle your finances online.

Opening checking accounts is easier than ever! You don’t even have to visit a local branch in-person to open an account. You can complete the signup process entirely online. And if you have a low credit score, don’t worry! You can still open a bank account with bad credit!

Before applying for an account with a financial institution, it’s essential to consider your preferences. Every financial institution is unique. They all offer different services and charge different fees. For example, some financial institutions charge monthly fees for additional features. Consider your lifestyle and what benefits you want to take advantage of.

Some financial institutions require a minimum deposit. How much cash you need to keep in your account depends on the financial institution you choose to work with. Plenty of financial institutions do not impose a minimum deposit, so you can open an account with absolutely no money. If you open an account with a financial institution that requires a minimum deposit, consider how much money you have. Can you maintain that account balance?

Types of Financial Institutions Available

You may open a checking account with a traditional bank, online bank, or credit union.

Traditional Bank

A traditional bank has several brick-and-mortar locations and readily available ATM machines. Traditional banks typically also offer online services, so you can choose to perform financial exchanges in person or online. The benefit of traditional banks is that you can visit a location in person to talk about your finances and financial goals.

Online Bank

An online bank handles most, if not all, financial services online through customer support hotlines. Some online bank options have physical branch locations, but most do not. Online banks may offer customers fewer fees than traditional banks because their out-of-pocket expenses are lower. Whether you work with a traditional bank or an online bank, pick an option that is insured by the Federal Deposit Insurance Corporation (FDIC).

Credit Union

The main difference between retail banks and credit unions is that a credit union is a membership-based not-for-profit financial cooperative. You must apply and pay a one-time membership fee to take advantage of credit unions. Credit union members can enjoy lower fees, educational programs, and higher rates on savings accounts. Credit unions have fewer branch and ATM locations than traditional banks, and many credit unions do not offer online banking features. If you choose to open a checking account with a credit union, ensure that it is insured by the National Credit Union Administration (NCUA).

Documents Required to Open a Checking Account

To open a Checking account with a financial institution, you need to be at least eighteen years of age and provide a few identifying documents.

Suppose you want to open a checking account in person. In that case, all you have to do is visit a branch location and hand your documentation over to an agent. If you prefer to open a checking account online, you can simply take photos of your paperwork and upload the images online.

Typically, you will need to provide the following documents to open a checking account:

Proof of Identification

You will need to provide some form of government-issued photo identification to open a financial account. Most financial institutions accept a valid driver’s license, state identification card, or U.S. passport.


You will need to provide a Social Security number (SSN) or individual taxpayer identification number (ITIN) to further prove your identity. Providing a personal identification number helps prevent fraudulent activity.

Proof of Address

You must show proof of residence to obtain a financial account. You can typically provide a recent utility bill, credit card statement, insurance statement, cellphone bill, etc.

How to Open a Savings Account

A savings account is vastly different than a checking account. However, you can use the same documentation to open an account. There are pros and cons for every type of savings account option. Having a separate savings account helps you secure your money and earn interest to grow your money! Financial institutions and banks set offer generous interest rates that can help you earn money simply for keeping it in a savings account.

Traditional Savings Account

Traditional savings accounts can help people save money without long-term restrictions. Most traditional banks and credit unions offer savings accounts. You can typically withdraw money more often with traditional savings accounts. If you lack monthly spending money in your checking account, you can simply transfer funds from your savings account. There may be a monthly transfer limit, so check with your financial institution.

High Yield Savings Account

A high yield savings account offers a higher annual percentage yield (APY) than traditional savings accounts. Higher interest rates can help you earn more money just for securing your funds. If you don’t have too much cash when you initially open a savings account, you can quickly make more with a high yield savings account. If you open a high yield savings account with an online bank, you may get fewer fees.

Money Market Account

Money market accounts may offer better interest rates than traditional savings accounts. A money market account is similar to a checking account because it allows you to write checks and easily access your money. The downside to this type of account is that you may have to pay a monthly fee, and a high minimum deposit may be required.

Certificate of Deposit Account

A certificate of deposit (CD) is perfect if you have spare money you don’t need to keep in your checking account. A time deposit requires you to leave your money in the account for a set period. The benefit is that you can earn more interest. High yield savings accounts are similar, but you cannot withdraw your money from a certificate of deposit. If you withdraw cash, you will be fined an early withdrawal penalty fee.


How Much Money Should You Keep in Checking and Savings?
Guide to Checking Accounts
What Is the Average Bank Account Balance?
How to Choose a Bank

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