How Much Money Should I Keep in My Checking Account?
The importance of having a savings account and how much you should keep in it is often talked about. But what about our checking accounts? Every swipe of a debit card, every bill we pay and every personal check we write takes money out of our checking. So, just how much money should we be keeping in these super-convenient accounts? Let’s take a look:
What’s your magic number?
According to a 2019 NerdWallet survey, the average American checking account balance is approximately $2,900. However, this number may not be right for you since everyone’s financial priorities are different. The general rule of thumb is always to try to have one or two months of living expenses in your checking account. Some experts recommend adding 30 percent to this number as an extra cushion.
Why keep that much money in your checking account?
Your checking account is where you’ll draw money for all your spending throughout the month. You’ll want to make sure you have enough funds to cover your monthly expenses. But the reasons extend beyond that – here are three reasons you want to make sure your checking account is well-padded at all times:
- Avoiding overdraft fees – why risk being charged overdraft fees when you can easily avoid this mistake?
- Pre-authorization holds – pre-authorizations can reduce your available checking account balance by up to $100 per hold. Merchants that commonly place pre-authorization holds include gas stations, hotels, and car rental agencies.
- Cash is still king sometimes – while most vendors accept various forms of payment, it’s a relief knowing you have cash available if you need it.
Once you’ve determined exactly how much money you should keep in your checking account, you may want to consider how to get more out of your checking account. After all, shouldn’t you be getting something more? It's not just about spending anymore – it’s about earning too. Interested in learning about how checking account features work, so you can choose the account that best fits your needs? Check out our Checking Account Essentials online topic.