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How Much Money Should I Keep in My Checking Account?

How Much Money to Keep in a Checking Account
Walecia Konrad
Walecia KonradUpdated February 6, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Figuring out how much money to keep in your checking account can be tricky. You don’t want to run short and not have enough for everyday expenses and regular bills. On the other hand, you don’t want to keep a lot of extra cash sitting in a checking account, where it is likely earning zero (or near zero) interest. What’s the solution? There’s actually a simple rule of thumb you can use to strike the right balance between checking and savings. Read on to learn how to calculate the ideal amount of cash to keep stashed in your checking account.

How Much Money Is Recommended to Have in a Checking Account?

Checking accounts are designed for everyday money management, such as paying bills, taking out cash at the ATM, and setting up direct deposit for your paychecks. They are one of the most liquid types of bank accounts, meaning it's easy to access your money whenever you need it. However, checking accounts aren’t ideal for storing your extra cash, since they typically pay little to no interest. Having too much in your checking account means you’re missing out on the chance to grow your money in a high-yield savings account, money market account, or certificate of deposit (CD).The sweet spot for many people is to have enough money in a checking account to cover one to two months’ worth of daily and monthly expenses — plus a buffer. This helps guarantee you’ll have enough to cover your recurring bills and everyday expenses, plus some extra to ensure you never overdraft the account — and get hit with hefty fees. If your checking account has a minimum balance requirement in order to avoid a monthly maintenance fee, you may want to factor that into your calculation as well. You might use that amount as your “buffer” or, if you want to be certain you don’t end up with any bank fees, add it to your buffer to come up with a total amount to keep in your checking.Recommended: Checking vs Savings Account Differences 

Example Calculation of How Much to Keep in a Checking Account

To calculate how much to keep in your checking account, you’ll need to first add up all of your recurring bills, such as:
  • Housing
  • Utilities
  • Car payments
  • Insurance
  • Streaming services
  • Cell phone
  • Student loans
Next, roughly calculate what you spend each month on everyday expenses (like groceries, morning coffees, entertainment). One good way to do this is to actually track your spending for a month or two (there are even expense tracking apps that can make this easy).Once you determine your average monthly living expenses, you may want to add an additional 25% to 30% of your monthly spending total as an overdraft buffer. If your account has a minimum balance requirement to avoid a monthly fee, you’ll want to factor that in as well. However, if you add on a minimum balance amount, you may not need as much of an overdraft cushion.Recommended: Depositing More Than 10k: What to Know

Is There a Limit on How Much You Can Have in Your Checking Account?

There are typically no maximum limits for checking accounts. If you get a windfall and need a place to stash that money, your checking account can be a good short-term option.Keep in mind, though, checking accounts (like other types of bank accounts) do have insurance limits. The Federal Deposit Insurance Corporation (FDIC) covers up to $250,000 per depositor, per account ownership type, per financial institution, in the event of bank failure. The National Credit Union Administration (NCUA) offers similar coverage for accounts held at credit unions. Also, as mentioned above, if you have a lot of extra money in your checking, you could miss some opportunities to put your money to work for you somewhere else. Recommended: Guide to Opening a Savings Account 

What is the Average Amount of Money in a Checking Account?

According to the most recent Federal Reserve Survey of Consumer Finances (which was 2019), U.S. households had a median balance of $5,300 in transaction bank accounts (which includes checking accounts as well as other types of accounts like savings and money market accounts). Another survey, done by J.P. Morgan Chase at the end of 2021, looked more specifically at checking accounts. They found that people earning between $26,171 and $40,826 had about $1,750 in their checking accounts, and those earning $40,826 and $64,974 had roughly $3,000 in checking. These numbers may better represent the average amount of money people have in checking accounts because they don’t include other types of transaction accounts like savings and money market accounts.Recommended: Average American Savings by Age

What Can You Do With Extra Cash?

If you run the numbers and discover that you have more money than necessary in your checking account, here are some ideas for what to do with that extra cash.

Put it in a High-Yield Savings Account

A high-yield savings account is a savings account that pays a significantly more interest than the national average savings account interest rate. The interest rate is typically expressed as an annual percentage yield (APY). The higher the APY on a savings account, the faster your savings will grow. The top high-yield savings accounts are generally offered by online-only banks. Since these banks generally have lower overhead costs than banks with brick-and-mortar locations, they’re able to pass the savings onto their customers. It’s typically easy to transfer money from a savings account to a checking account (and vice versa), even if the accounts are held at different institutions.Recommended: How to Transfer Money From One Bank to Another 

Build Your Emergency Savings

If you don’t have a solid emergency fund, you might want to use any extra money in your checking to start or add to one. A common rule of thumb is to have at least three to six months’ worth of living expenses tucked away in a separate savings account (such as a high-yield savings account) for unexpected expenses or events, such as an expensive car repair or a job loss. Some people, such as those who are self-employed, may want to set aside 12 months’ worth of expenses. A rainy day fund can give you more than peace of mind. If unexpected expenses crop up or you were to lose your job, you wouldn’t be forced to run up expensive credit card debt that could take months or years to get out from under.

Pay Down Credit Card Debt

Speaking of credit card debt, if you’re carrying a balance on your credit card, you may want to use any extra cash you have sitting in your checking account to whittle it down. The average credit card interest rate was 20.15% in January 2023. So even if the amount you pull out of checking is small, using it to knock down your balance could add up to significant savings. If you can do this every month, so much the better.Recommended: Guide to Depositing Cash

The Takeaway

Keeping enough — but not too much — in your checking account can be a delicate balance. You generally want to have enough cash to cover your daily and monthly expenses for the next month or two, plus a cushion to avoid any overdraft or minimum balance fees. If you have more than that sitting in your checking account, consider moving it into an account where it can earn a competitive APY and grow over time.If you’re looking to get the best possible return on your extra cash, Lantern by SoFi can help. With our online banking marketplace, it’s easy to compare high-yield savings accounts based on APY, fees, and balance minimums.Lantern can help you compare online savings accounts and find today’s best rate.

Frequently Asked Questions

How much money should be kept in a checking account?
How much is too much in a checking account?
How much does the average person keep in a checking account?
Photo credit: iStock/Fortgens Photography

About the Author

Walecia Konrad

Walecia Konrad

Walecia Konrad is an award-winning financial journalist with 25 years of experience in print and digital media. She is a graduate of Syracuse University and specializes in the topics of health care, personal finance, and employer-sponsored benefits. Konrad's work has been seen on CBS MoneyWatch, The New York Times, Money, SmartMoney, BusinessWeek, and Forbes. She has been the recipient of both a Pearl Award for Best Web Publication of the Year and a National Magazine Award for Personal Service.
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