How Much Cash to Keep in Checking vs. Savings Accounts - NerdWallet (2024)

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How Much Cash to Keep in Checking vs. Savings Accounts - NerdWallet? ›

Aim to keep about one to two months' worth of living expenses in your checking, plus a 30% buffer, and another three to six months' worth in savings.

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.

How Much to Keep in Checking vs. Savings. Knowing the right balance depends on how you use money each month. If you rarely have overdrafts and keep a substantial cushion in your checking, you may want to consider putting most excess funds each month into savings.

The general rule of thumb is to try to have one or two months' of living expenses in it at all times.

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.

One of the most common types of percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings.

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.

While you want to make sure you keep enough money in your checking account to cover your expenses, you don't want to keep too much in it, either. One reason is that it isn't going to earn you much interest. The national average for interest-bearing checking accounts is 0.07% APY.

In addition to keeping funds in a bank account, you should also keep between $100 and $300 cash in your wallet and about $1,000 in a safe at home for unexpected expenses. Everything starts with your budget. If you don't budget correctly, you don't know how much you need to keep in your bank account.

Is $1000 a month enough to live on after bills? ›

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.

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.

By the time you reach your 40s, you'll want to have around three times your annual salary saved for retirement. By age 50, you'll want to have around six times your salary saved. If you're behind on saving in your 40s and 50s, aim to pay down your debt to free up funds each month.

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.

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.

The standard recommendation is to have enough to cover three to six months' worth of basic expenses. As a goal, that number can be steep. In reality, you can benefit from saving any amount.

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.

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.

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.

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.