App version: 0.1.0

How Much Money Do People Keep in Their Checking and Savings Accounts?

How Much Do People Keep in Savings vs Checking?
Austin Kilham
Austin KilhamUpdated March 10, 2023
Share this article:
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.
Both checking and savings accounts play a key role in your financial life. Checking accounts are designed for day-to-day money management, like paying bills and using your debit card. Savings accounts, on the other hand, provide a safe place to store and grow the money you don’t need right away. But how much should you keep in one versus the other?The answer will depend on your monthly expenses and short-term financial goals. However, there are some basic formulas that can help you determine the best way to split your cash between checking and savings. Here’s what you need to know.

How Much Money Do People Keep in a Savings Account?

A general rule of thumb is to keep at least three to six months’ worth of living expenses in a savings account. This is money you can turn to if you get hit with an unexpected bill or should ever lose your job and need to rely on savings for several months until you get back on your feet. If you’re self-employed or work seasonally, you may want to have nine to 12 months’ worth of living expenses in your savings account.Known as an emergency fund, consider keeping this money in a savings account that pays a competitive annual percentage yield (APY), such as a high-yield savings account. When you need to spend the money, it’s generally easy to transfer it into your checking account, even if the accounts are at two different banks. Just keep in mind that savings accounts typically come with withdrawal limitations, such as six or nine per month. You may also want to open a savings account for other short-term savings goals, such as going on vacation, buying a car, or paying for a wedding. You're less likely to "accidentally" spend money if it isn't lying around in your checking account. The amount you save there will depend on the size of your goal. 

Why Not Less?

A solid emergency savings fund protects you from falling into debt should you get hit with the unexpected, such as a trip to the ER, a major car repair, or sudden loss of income. If you end up relying on high-interest credit cards to get by, you can end up in a debt spiral that can take months, even years, to get out from under.

How Much Do People Keep in a Checking Account?

A good rule of thumb is to keep enough money in a checking account to cover one to two months’ worth of living expenses. This helps ensure you’ll have enough to cover your monthly bills and everyday spending and won’t bounce a check or overdraft the account — and get hit with hefty fees. You may want to aim a little higher, however, if you’re a freelancer or gig worker (and your income is sporadic) and/or you don’t check your account balance and activity frequently.When coming up with the right amount to keep in a checking account, also check to see if your account has a minimum balance you are required to keep. If so, you’ll want to make sure you keep enough in the account to avoid dipping below the minimum and triggering a fee.

Why Not More?

Checking accounts are designed for day-to-day money management and allow you to easily deposit and withdraw money for daily transactions. However, checking accounts pay little to no interest on your deposits. As a result, there’s no incentive for you to keep a lot of cash there. In fact, your money will likely work harder for you in other savings vehicles, such as a high-yield savings account, money market account, certificates of deposit (CD), or retirement account. 

What Do People Do With Additional Cash? 

Once you have the appropriate amount of cash in your checking and savings accounts, you may want to explore other places to put any additional cash you have on hand. Good options may include a retirement account, such as a 401(k) at work, and, if you have children, a college savings account (such as a 529), both of which offer tax advantages.Once you’ve covered your checking and savings and are funding your retirement or college account, you may want to consider opening a brokerage account. A brokerage account is a taxable account that allows you to buy stocks, bonds, mutual funds, and other investments. Investing carries risk, but has the potential to earn more than you could earn in a savings account. You might consider a brokerage account for savings goals that are at least five years away.

Compare Top Savings Accounts

When shopping for the best place to store your short-term savings, be sure to look at and compare APYs. This is the amount you actually stand to earn in a year on your money and takes compound interest (when your interest also earns interest) into account. You’ll also want to look at any balance minimums and fees.If you’re not sure where to start your savings account search, 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 does the average person have in checking and savings?
How much money should you keep in a regular savings account in the U.S.?
Is it better to keep money in checking or savings?
Photo credit: iStock/Jelena Stanojkovic

About the Author

Austin Kilham

Austin Kilham

Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
Share this article: