MORE LIKE THISChecking AccountsSavings AccountsBanking
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
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
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.
The smartest place to shop
Compare top high-yield savings accounts side-by-side, complete with objective reviews from the Nerds.
FAQs
While most of it can live in a separate savings account, it's smart to keep a little in your checking account for instant access. Experts recommend keeping at least three to six months' worth of living expenses in your savings account.
Should you keep more money in your checking or savings? ›
Savings account: 2 to 4 months of expenses
After allocating one to two months of your expenses into a checking account, Anderson says that the two to four months of additional reserves should be put into a savings account — specifically a high-yield savings account.
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.
How much cash should I keep in my savings account? ›
The general rule is to have three to six months' worth of living expenses (rent, utilities, food, car payments, etc.) saved up for emergencies, such as unexpected medical bills or immediate home or car repairs.
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 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 is too much to keep in checking? ›
Unless your bank requires a minimum balance, you don't need to worry about certain thresholds. On the other hand, if you are prone to overdraft fees, then add a little cushion for yourself. Even with a cushion, Cole recommends keeping no more than two months of living expenses in your checking account.
Why you shouldn't keep a lot of money in checking account? ›
Compare that to a high-yield savings account that can earn as high as 5.00% APY or more. If you keep too much money in your checking account, you'll forfeit the opportunity to earn a higher yield on your cash. Another reason you want to be mindful of keeping too much money in your checking account is fraud and theft.
How much money should I have saved by 40? ›
By age 40, your savings goals should be somewhere in the neighborhood of three times that amount. According to 2023 data from the U.S. Bureau of Labor Statistics, the average annual income hovers around $62,000. This means retirement savings goals for 40-somethings should tip the scales at around $200,000.
How much does an average person have in their checking account? ›
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 do most people 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.
Is it smart to keep savings in cash? ›
For financial security, keep some cash in the bank. Double emphasis on some, because there are good reasons not to keep too much money in cash, too. Inflation decreases the value of any money you hold in cash. Inflation, aka rising prices over time, reduces your purchasing power.
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.
Is money safer in a savings account than checking? ›
In the traditional sense, checking and savings accounts are both incredibly safe places to keep your money. The National Credit Union Administration (NCUA) automatically guarantees accounts up to $250,000 for each member of a federally insured credit union.
Is 20K in savings good? ›
While $20K may not let you quit your job, it's enough to start building financial security, whether you max out your retirement accounts, invest in fine art, or divide your cash between multiple investments.
Should I keep more than 250000 in a savings account? ›
Bottom line. Any individual or entity that has more than $250,000 in deposits at an FDIC-insured bank should see to it that all monies are federally insured. It's not only diligent savers and high-net-worth individuals who might need extra FDIC coverage.
