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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 0.45% — 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 should be in savings vs checking? ›
Though the amount you want to save may vary based on your living expenses, the number of dependents you have, and risk tolerance, aim to put away one to two months' worth of living expenses in a checking account and an additional two to four months in a savings account.
Should you keep more money in your checking or savings? ›
On the other hand, if you face widely varying monthly expenses or income, it may prove a good idea to maintain a larger checking account balance to cover unexpected changes. Keeping more in checking versus savings can eliminate stress and ensure that money is always available when needed.
How much cash should I keep in my savings account? ›
You should keep enough money in checking to cover your monthly bills with some wiggle room – about a month of expenses. That's much lower than the three to six months' worth of expenses you should keep in your savings account for emergencies.
What is a good amount of money to keep in the bank? ›
Most financial experts suggest you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. Personal finance guru Suze Orman advises an eight-month emergency fund because that's about how long it takes the average person to find a job.
How much money should you keep in a regular checking account? ›
The general rule of thumb is to try to have one or two months' of living expenses in it at all times.
What is the 50 20 30 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
How much does the average American have in a checking account? ›
To get a sense of where you stand compared to other Americans – the average checking account balance is just under $9,000, for instance – USA Today Blueprint broke down figures from an analysis of Federal Reserve data by the University of California at Berkeley. Note: All averages are mean figures.
Why you should not keep all your money in a checking account? ›
Maintaining higher balances in checking can put you at a disadvantage if you're not earning any interest on your money. If you have more than two months' of expenses in a basic checking account, you might consider shifting some of that over to savings.
Is it better to keep money in savings or cash? ›
Before you start investing for longer-term goals, it's important to have an emergency fund with around three to six months' worth of expenses. Keeping these in a checking, savings, or MMA is best because these accounts are liquid.
But it is possible to live well even on a small amount of money. Surviving on $1,000 a month requires careful budgeting, prioritizing essential expenses, and finding ways to save money. Cutting down on housing costs by sharing living spaces or finding affordable options is crucial.
How much cash can you keep at home legally in the US? ›
The government has no regulations on the amount of money you can legally keep in your house or even the amount of money you can legally own overall. Just, the problem with keeping so much money in one place (likely in the form of cash) — it's very vulnerable to being lost.
How much cash does the average person 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.
Should you keep more money in checking or savings? ›
How Much Cash to Keep in Your Checking vs. Savings Account. 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.
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 does the average person have in the bank? ›
In 2022, the average savings account balance in the United States was $62,410, while the median balance was only $8,000. The average and median balances vary depending on age, with older generations having more savings.
What is the ideal amount to have in savings? ›
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.
What percentage of check should I put in savings? ›
At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
How much should I put in my savings per check? ›
The Bottom Line: Saving 20% Of Your Income Is A Great Start
For example, you might reserve a portion of this percentage for a retirement account, unexpected expenses, a family trip or a home purchase.
What is too much to have in savings account? ›
FDIC and NCUA insurance limits
This insurance protects your money if the financial institution you bank with goes out of business or otherwise can't afford to let you withdraw your money. So, regardless of any other factors, you generally shouldn't keep more than $250,000 in any insured deposit account.
