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How Much To Keep In Your Checking Account: What’s The Right Amount?

Sarah Li Cain4-Minute Read
UPDATED: October 31, 2022

A checking account is an important part of your personal finance toolkit. Since a checking account offers more liquidity than a savings account, it’s helpful for you to use for frequent transactions, such as paying bills, everyday spending (like on groceries) or ATM withdrawals.

If you’re wondering how much you should keep in a checking account, know that there’s a rule of thumb you should follow. It’s better to have more than enough funds to pay bills and manage your monthly budget. However, having too much means you’re missing out on potential earnings in an account with higher interest rates.

How Much Money Should You Keep in Your Checking Account?

When it comes to how much you should keep in your checking account, financial experts typically recommend 1 – 2 months of everyday expenses to be on the safe side. That being said, you want to check to see whether your specific checking account requires a minimum balance.

Let’s take a further look at some of the considerations when determining the exact amount to keep in your checking account.

Everyday Expenses

Like mentioned above, you want to keep at least 1 – 2 months’ worth of money set aside for everyday expenses. This is in addition to your bills. Expenses to consider are ones you’ll need money for regularly, such as transportation, food, school supplies, and even entertainment. The rest of the money can be set aside in a separate savings account for emergencies and occasional expenses.

Bills And Utilities

While expenses such as your mortgage, internet, cell phone, or rent payments tend to stay consistent, ones for utilities, cable and other subscriptions can fluctuate every once in a while. For instance, you pay more for electricity during the summer because you’re using your air conditioning system more.

Even if you know exactly what you pay each month, it’s a good idea to have a bit of a cushion just in case. This is especially important if you make automatic monthly payments for your regular bills. If your payment doesn’t go through, you could be at risk of being charged late fees or face other negative consequences.

Even if you have some extra funds in your account just in case, you’ll still want to keep track of due dates of your bills and when the money will be withdrawn from your checking account. That way, you have a plan on making sure you have enough to cover your bills.

Overdraft Fees

Even with the best of intentions, overdrafts on your account can happen and with that come fees. In other words, if you make a withdrawal (such as a purchase) that’s more than what’s available in your account, an overdraft fee may kick in.

For instance, if you have $25 in your checking account and you try to make a purchase for $30, you’ll overdraft by $5. When this happens, you could be charged an amount that varies by financial institution.

To keep this from happening, it’s a smart idea to have extra money in your checking account. That way, if you accidentally go over your budget or have to spend more due to an unexpected situation, you can do so without worrying about overdrafts.

Don’t forget about pre-authorization charges that could eat into your account’s funds temporarily. What happens is that some retailers and restaurants will send a pre-authorization charge through so that it verifies your checking account is valid. Once it does, the charge will be taken off and you’ll be charged for your full purchase amount.

Granted, pre-authorization charges aren’t huge, but every dollar can make a difference, especially when it comes to potentially being charged an overdraft fee.

How Much Money Can You Keep In Your Checking Account?

Some banks and credit unions may require that you keep a daily minimum balance in order to keep your account fee-free. In some cases, you may have your checking account closed if you continually do not meet the minimums. Many of these balance requirements may be low (like $5 – $10), while some can be much higher (like in the hundreds of dollars). Check with your financial institution to make sure.

Otherwise, you can keep as much as you want, though that’s not a good idea if you want to set aside money for savings and other financial goals.

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Should You Keep All Your Money In A Checking Account?

The short answer is no, you shouldn't. If you're just starting out as an adult and that's all you have, that's fine. However, you should probably set your sights on having more than one account to help you with different financial goals.

In any case, having a savings account, for instance, is a great place to store your emergency fund. Savings accounts tend to offer higher interest rates and are aimed at those who want to keep money in an account for a longer period of time.

If you’re looking to reach long-term financial goals like having enough money for retirement, then you can consider putting funds in different investment vehicles at a reputable brokerage.

How To Calculate How Much Money To Keep In Your Checking Account

To determine how much you should keep in your checking account, start by tracking your spending for at least 3 months. This includes bills, subscriptions, regular and occasional expenses. Don’t forget to include any automatic payments you’ve set.

Once you’ve tracked your spending, take the average of those 3 months. That’s roughly how much you spend each month. Use this number to figure exactly how much 1 or 2 months’ worth of expenses will be. Then, add a 10% – 30% buffer in case of overdrafts and other unexpected expenses.

The Bottom Line: Knowing How Much Money To Keep In Your Checking Account Will Help You

Knowing the exact amount of money to keep in your checking account will help you keep from overdrafts, help you pay your bills on time and ensure that you have enough money for the occasional unexpected expense. Plus, it’ll protect you from having to pay a monthly maintenance fee if you fail to keep your minimum balance requirement.

Now that you know exactly how much you need, you can work on opening other types of accounts and reaching other financial goals. Make sure to track your spending and keep reading resources on the Rocket HQSM Learning Center to maintain your financial health.

Sarah Li Cain

Sarah Li Cain is a freelance personal finance, credit and real estate writer who works with Fintech startups and Fortune 500 financial services companies to educate consumers through her writing. She’s also a candidate for the Accredited Financial Counselor designation and the host of Beyond The Dollar, where she and her guests have deep and honest conversations on how money affects our well-being.