How Much Money Should You Keep in Your Checking Account?
March 20, 2025
Money Management for a Checking Account
Your checking account is where you keep money for everyday spending. It’s where your paycheck goes and where you pay bills. But how much cash should you keep in checking? If you have too little, you might not have enough to cover expenses. If you have too much, you could be missing out on better ways to grow your money.
Over 40% of Americans say they keep $500 or less in their checking accounts[1]. But, is this a financially healthy amount?
This guide will help you figure out the right amount to keep in your checking account. You’ll also learn what to do with extra money so it works for you instead of just sitting there.
How Much Money You Should Keep in Your Checking Account
At a minimum, a good amount to keep in your checking account may be one to two months’ worth of necessary expenses. This should give you enough to cover your cost of living while you make sure you don’t overdraft your account.
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How To Figure Out Your Monthly Expenses
To determine your monthly expenses:
- Add up all your regular bills, like rent or mortgage, utilities, insurance, and car payments.
- Estimate how much you spend on groceries, gas, and other daily needs.
- Multiply that total by one or two months.
For example, if your total monthly expenses are $3,500, you should aim to keep $3,500 to $7,000 in your checking account. This cushion can help you make sure you don’t run out of money before your next paycheck. It also can also prevent overdraft fees if a bill is higher than expected.
How Much Is Too Much To Keep in Checking?
While it’s good to have enough money in your checking account, too much can be a bad thing. While interest checking accounts are an exception, many checking accounts don’t earn interest. So, keeping extra cash there can make you miss out on potential growth.
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Why Does it Matter?
First of all, if your money is just sitting in a checking account, it’s not growing. Interest-earning accounts can help you grow your funds.
Over time, the value of your money decreases because prices go up with inflation. A checking account doesn’t help fight inflation. Plus, when you see a large balance in your account, it might be tempting to spend more than necessary.
So, if you keep more than two months’ worth of expenses in your checking account, consider moving the funds. To find out how much you could save if you start today, try our future savings calculator.
What To Do With Extra Cash
If you have extra money beyond your monthly needs, saving it in a safe place may be a smart move. Savings accounts, certificates of deposit (CDs), and money market accounts (MMAs) are some options.
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1. Open a Savings Account
A savings account may help your money grow over time. These accounts earn interest, which means the bank pays you to keep your money there.
A savings account may be great for:
- Emergency funds.
- Short-term savings goals.
An emergency fund may help you save money for unexpected expenses like car repairs or medical bills. Short term goals can include saving for a vacation, new furniture, or a big purchase.
For more information, learn how high yield savings accounts work.
2. Put Your Money in a CD
A CD is a type of savings account where you agree to leave your money in for a certain time, like six months or a year. In return, the bank typically offers a higher interest rate than a regular savings account.
CDs may be a good choice if:
- You don’t need the money right away.
- You want a safe place for your savings to grow.
To learn more, find out what a CD is and how it works.
3. Consider an MMA
An MMA is like a mix between a checking and savings account. It offers a higher interest rate than a regular savings account, but still allows you to withdraw money when needed.
Money market accounts may be great to:
- Earn more interest while you keep your money accessible.
- Hold savings for big expenses, like a house down payment or college tuition.
If you want to explore this option, see what an MMA is and how it works.
How To Balance Your Accounts
To split your money between checking, savings, CDs, and MMAs, here’s a simple guide:
- Keep one to two months of expenses in your checking account for daily spending and bills.
- Save three to six months of expenses for emergencies in your savings account.
- Use CDs for short-term savings goals.
- Consider MMAs for larger, longer term savings goals.
When you diversify your money across different accounts, you can keep enough for daily needs. Meanwhile, you can still make sure your savings grow over time.
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Create a Bright Financial Future With Centier Bank
The right amount to keep in your checking account is one to two months' worth of expenses. This can help keep you prepared for bills while you avoid overdrafts. If you have extra cash, consider moving it into a savings account, CD, or MMA.
Want to make the most of your money? To start planning your savings and build a brighter financial future today, use Centier’s financial calculators.
Source:
[1] https://finance.yahoo.com/news/much-money-americans-bank-accounts-120105182.html
