Many people think that the more you have in a savings account, the better. But that’s not necessarily true. It’s important to keep enough in your account to cover unexpected expenses, but having too much means you might be missing out on higher returns elsewhere. Just how much money should you have in your checking account? Let’s find out. 

How Much Money Should You Have in Your Checking Account?

The answer can vary depending on who you ask, but many financial experts suggest having both of the following:

• One to two months’ worth of living expenses
• A 30% buffer

Let’s say your monthly living expenses total $4,500. One to two months of living expenses would be $4,500 to $9,000. An additional 30% buffer would be $1,350. That means you should maintain a checking account balance of $5,850 to $10,350.

You might wonder why that buffer is necessary. The main point is to protect you from overdraft fees. If you have an unexpected expense and overdraw your account, you might end up owing a fee to the bank.

Many people’s financial situations prevent them from having this much in their checking accounts. If you’re in that situation now, don’t be discouraged. Just work toward getting as close to that goal as possible.

If you’re currently just barely covering your living expenses, start by saving up a $500 emergency fund. That’s an accomplishment in itself. From there, you can aim to save another $500.

What Factors Influence How Much Money to Keep in a Checking Account?

What is a good amount to keep in your checking account? There’s no single answer that applies to everyone. How much you should keep in your checking account depends on a few different factors, including:

• Your total income
• Whether your income is steady or irregular
• Your total living expenses
• The timing of your bills
• Whether your bank has a minimum required balance

If your checking account has overdraft protection linked to your savings account, you might also be able to safely maintain a lower balance.

How Can You Budget to Maintain a Healthy Checking Account Balance Over Time?

One common budget that might help with this is the 50/30/20 budget:

• 50% of your earnings go to needs
• 30% goes to wants
• 20% goes to savings and paying off debt

You can adjust the budget to better suit your situation. For example, if you have a lot of debt to pay off, you might allocate 20% to wants, 30% to savings, and the rest to paying off debt. If you have a low income or live in a high-cost-of-living area, a 70/20/10 budget might be more realistic.

When you know how to plan payments and expenses to avoid overdrafts in a checking account, you’ll get closer to better financial health. You’ll probably find that you’re less stressed about your finances overall, too.

Is It Okay to Have a Lot of Money in a Checking Account?

There’s not necessarily anything wrong with keeping a lot of money in your checking account, but it might not be optimal. Putting extra money in a high-yield savings account or retirement account will generate more interest over time. As that interest compounds, your money may grow faster than you’d expected.

Progress Over Perfection

Saving money can be hard, especially when you’re on a tight budget. Keep in mind, though, that every little bit you save adds up and gets you closer to financial stability.

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