How much money should I keep in my checking account

By Sarah R
Modified on May 4, 2023
How Much Money Should I Keep In My Checking Account

With digital currency and credit cards taking precedence over cash these days, it’s easy to forget about just how much money is in our checking accounts. But how much cash should you keep in a checking or savings account? Is it possible to keep too much money at the same bank? 

When it comes to how much money you should keep in your checking and savings, some experts say you should keep up to six months worth of expenses at all times. If that sounds utterly impractical to you, you’re not alone. Instead, just keep enough money on hand to cover your everyday spending and financial goals. 

What You Need To Know About Checking Accounts 

When you get a checking account, your bank connects a debit card to your account. With that, you can spend money directly from your checking account for whatever you want. However, be sure to track transactions closely and practice discretionary spending to avoid Overdraft fees

Many checking accounts also come with a monthly maintenance fee. Banks charge monthly fees on certain types of checking accounts in exchange for keeping the account open and available to a customer. 

In some situations you’ll need to have a checking account or online wallet. For example, if you wanted to sign up for Direct deposit with your employer, you would need to give them checking account information. 

Should I Keep More Money in My Checking Account or My Savings Account? 

Any certified financial planner will tell you that it’s wisest to keep your money in an account where your money will serve you most. How much cash you need for your living expenses should dictate how much you keep in your checking account. How much money you’re looking to save should be in a separate bank account or high yield savings accounts. 

Depending on your financial starting point, you may want to keep more cash in your savings account or your checking account. Generally, a checking account is for monthly expenses or living expenses you spend money on regularly. On the other hand, a separate savings account is for saving, building wealth, and accumulating interest. 

So if your monthly spending expenses are on the higher side, you may want more funds to keep in your checking account. But suppose your expenses are taken care of, and you have additional funds left over at the end of the month. In that case, you may want to store your money in emergency savings accounts. 

Are There Better Places To Keep My Money Besides a Checking Account?

What if you’re already meeting your minimum balance requirements easily and have plenty set aside in your checking and savings accounts? In that case, you may want to try one of these financial products and start letting your money work for you. Sure, you could leave your money in a savings account, but did you know other special accounts could give you higher annual percentage yields? 

Investment Account 

Instead of letting your money just sit in a checking account accumulating little interest, try investing your money. Depending on how much cash you put in, investing has the potential to bring in months worth of expenses within a relatively short period of time. But before you invest too much cash in a project, you may want to consult with investment financial experts first to confirm you’re making a smart choice. 

CD Accounts 

A CD account, also known as a Certificate of Deposit, is another financial product with the potential to earn you more money than a regular savings account. CDs are considered high yield accounts because they usually have much higher interest rates compared to other financial products. However, Certificates of Deposit come with a set date in the future, and the CD owner cannot access the money before that date without consequences. That being said, it is best to keep money in a CD when you know you won’t need it for a while. 

Money Market Account 

Similar to a high yield savings account, a money market account is a special kind of interest-generating account held with a bank, credit union, or similar financial institution. With money market accounts, you earn interest at a higher rate than with other types of bank accounts. Because of this increased annual percentage yield, money market accounts may be a smarter place to store your excess emergency funds rather than keeping them in regular savings accounts. 

Benefits of Having Additional Money in a Checking or Savings Account

When your finances are in order, you have the freedom to do virtually whatever you want with your money. No matter where you are keeping your money, there are some valuable Personal finance benefits to saving additional income.

Having extra money in your checking or bank accounts can help you pay off debt faster. Instead of just meeting the minimum balance requirements, use your extra money to pay a bit more each month on debt like student loans, utility bills, or money owed to credit unions. 

If you’re already caught up on bills and debt, start saving for your future. Putting extra cash into a 401K to save for retirement, or towards a down payment on a house can be a great way to maximize the benefits of having additional money. Furthermore, 401K accounts are considered a tax-advantaged account, giving their owner the extra financial protection of being exempt from taxation. 

Having enough money in your checking and savings account is essential. Still, it is also wise to keep in mind that there might be more beneficial places to store your money. Make sure you have enough for your regular bills and expenses. Then, store your extra funds anywhere that makes you feel comfortable and financially productive!

And if you’re currently struggling and don’t have enough money to pay your bills, there are cash advance loans to help you make ends meet.


Investopedia—Money Market Account

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