How Much Money Should You Keep in Checking and Savings?

Decide how much cash to put in your deposit accounts

A woman checks her deposit accounts.
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Knowing how much money to keep in your checking and savings accounts is important for many reasons. Having enough money in each account can help you avoid monthly maintenance fees and overdraft charges. Moving money from your checking to your savings can make your cash more secure, and you may be able to earn interest on the balance, too.

Learn how much money you should keep in your checking and savings accounts, when to move money around, and what the experts say about how to handle your account balances.

How Much to Keep in a Checking Account

There are several things to consider as you decide how much money you should keep in your checking account.

First, there's what you plan to use your checking account for. If you have only one checking account, you may use it for both bill payments and spending. On the other hand, you might set up one checking account just for bills and another for spending.

Second, you’ll need to decide on a dollar amount you want to maintain. For some, this may mean a dollar amount unrelated to your expenses, such as $5,000.

However, it may be best to keep about two months of living expenses in your checking account, along with an additional 25% to 30% cushion beyond your monthly living expenses, Brian Milton, head of retail banking deposits at Union Bank, told The Balance via email.

“Keeping a cushion will help you avoid overdrawing your checking account and incurring costly fees, so it’s best to have a buffer,” Milton said.

The typical overdraft fee is $31, which makes it important to know how to budget your checking account to avoid that fee. This ties in to how you budget your money for the month and how often you're paid.

Opting into your bank's overdraft protection can help avoid overdraft fees, though you may still pay a fee to have the bank transfer money from savings to checking for you to cover transactions.

For example, if you're paid every two weeks you may decide to pay bills twice a month. Your checking account balance at any given time might reflect what you need to have on hand to cover half the month's bills, along with any money you've budgeted for groceries, transportation, and discretionary spending.

When deciding how much to put in checking, also keep the bank's requirements in mind. For example, your bank may charge a minimum balance fee or monthly maintenance fee if your balance dips below a certain amount, such as $500 or $1,500. These fees can easily eat into your checking account balance over time.

If you’re inclined to keep all your cash in your checking account and not just a set number, there’s a good chance you’ll have money in there you’ll never use. Shirley Yang, vice president of deposits at Marcus by Goldman Sachs, told The Balance via email that you should consider moving that extra cash to an account with an interest rate.

“While a robust account balance is rarely bad, if you have too much money in your checking account that’s earning little to no interest, you might want to consider placing some of that cash into another type of account, where it can grow,” Yang said. “Savings accounts and CDs, for example, could be options for your excess funds.”

Tips for Choosing a Checking Account

If you're in the market for a new checking account, there are a few things the Consumer Financial Protection Bureau recommends you keep in mind when comparing options:

  • Checking account fees
  • Minimum balance requirements
  • Initial opening deposit required
  • Banking services and accessibility (for example, mobile and online banking)

Also, consider whether you're more comfortable opening a checking account with a traditional or online bank. Banking exclusively online means you don't have branch access but you may pay fewer fees for a checking account. Some online checking accounts, like Ally’s Interest Checking, also allow you to earn interest on your balance.

According to Yang, you should view the account as your daily workhorse, whether you choose an online or traditional bank.

“People should think of a checking account as a place to keep money that they want access to for typical, everyday expenses,” she said. 

Consider Using a Credit Card, Too

If you're concerned about paying banking fees for overdrafting or not meeting a minimum balance requirement, credit cards could help. Using a credit card to pay for everyday spending, for instance, while reserving your checking account for paying bills might make it easier to budget your checking account balance and avoid fees.

At the same time, you may be able to earn money-saving rewards such as points, cash back, or travel miles by using a credit card. 

The most important thing to remember is that using a credit card only saves you money if you avoid paying interest charges. To do that, you'll need to pay your balance in full each month.

How Much to Keep in a Savings Account

The amount you should keep in savings may hinge on what you're saving money for.

If your savings account serves as your emergency fund, for example, then you may want to aim for anywhere from three to six months' worth of expenses. The actual dollar amount will vary based on what your monthly expenses are and how many months’ worth you choose to save.

Remember, this is money you're saving for emergencies and unexpected expenses, like if you lose a job or need to pay for car repairs—not a family vacation or a home renovation project.

On the other hand, you might base how much you should keep in savings on whatever goal you're saving for. For example, if you want to earmark $15,000 to remodel your bathroom, that's the amount you'd want to have in your savings account. Or if you're saving for a down payment on a home, you may be shooting for at least $10,000 or more.

Remember that the Federal Deposit Insurance Corporation (FDIC) insures single-owner deposit accounts for up to $250,000 across all accounts you own.

Keep in mind that money held in savings isn't meant to be tapped into frequently the way a checking account would be. Your bank may limit you to a certain number of withdrawal transactions per month. If you go over that number your bank could:

  • Charge you an excess withdrawal fee
  • Convert your account to a checking account
  • Close it altogether

According to Milton, sending your excess money to a savings account can protect you, too.

“(Another) reason to keep the rest of your money in a savings account is security,” he said. “ATMs, debit cards, and online payment credentials are all opportunities for crooks, and segregating any excess balances into a savings account can not only earn additional interest, but it is a wise safety precaution.”

Tips for Choosing a Savings Account

Similar to choosing a checking account, it's important to look at the basics when choosing a savings account:

  • Minimum deposit required to open
  • Monthly maintenance or minimum balance fees
  • Banking products and services

You should also look closely at the annual percentage yield (APY) a bank is offering for savings accounts. The higher the APY, the more your money could grow over time through the power of compounding interest.

While some more traditional banks still offer less than 0.50% APY,  you may be able to open a high-yield savings account and earn much more than that on your monthly balance.

Average Checking & Savings Account Balances

The average amount of money that Americans keep in both checking and savings is hard to pin down. The best data available as of June 2020 comes from the Federal Reserve’s 2017 Survey of Consumer Finances. According to that survey, the median balance across all transaction accounts in 2017—including checking, savings, and money market accounts—was $4,500. The mean balance across all transaction accounts was $40,200.

It's important to remember that these figures don't necessarily represent the amount of cash savings or spending money people who are unbanked have. In 2017, 8.4 million American households were unbanked, meaning they had no bank account of any kind. While the Federal Reserve figures do include money stored on prepaid debit cards, those may not be used by every unbanked household. 

Because the data for average checking and savings balances is tough to narrow down, it’s best to use your particular financial situation and your bank’s account fee structures to determine the minimum amount you should keep in your accounts.

The Bottom Line

Managing your checking and savings account wisely can help you stay in control of your money and avoid unnecessary fees. Everyone's target balance amount is different so what matters is finding the number that you feel most comfortable with and making a habit of maintaining it.

Be smart about what you do with the extra money (such as cash you don’t need for bills and spending) in your checking account. While it’s easier to maintain one account, putting your surplus in a savings account or even a certificate of deposit (CD) could help you earn interest, while also protecting your money from fraudulent transactions.

Article Sources

  1. CFPB. "A Closer Look: Overdraft and the Impact of Opting-in." Accessed June 10, 2020.

  2. HousingWire. "The Average Down Payment Is Much Smaller Than You Think." Accessed June 10, 2020.

  3. Federal Reserve. "Federal Reserve Bulletin: September 2017." Page 19. Accessed June 10, 2020.

  4. FDIC. "2017 Household Survey Results." Accessed June 10, 2020.