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How much money should I keep in my checking account?

The general rule is to have to two month's worth of living expenses in your checking account.

The general rule of thumb is to have at least one to two month's worth of living expenses in your checking account, and up to three to six months in your emergency savings fund.

Date:
November 30, 2021

How much money should I keep in my checking account?

The right amount to keep in a checking account is different for everybody, depending on your budget and expenses. Different people have different financial realities, but generally, you should have about one to two months worth of living expenses in your checking. 

Monitor your balance throughout the month to safeguard against overdrafts or minimum balance requirements. Both can trigger fees and impact your credit score. Some transactions can be delayed. Others slip off your radar. To avoid falling short, keep one or two months of expenses in your checking to cover your regular withdrawals. 

Financial experts also suggest setting aside three to six months of expenses to cover emergencies. It's wise to keep your emergency fund in a savings account, separate from your checking but still easy to access, with fast, no-fee transfers to your checking when needed.

What should I use funds in my checking account for?

Use your checking account to cover regular spending in your budget, following these four categories:

  1. Essential expenses: Everyone has regular expenses every month, like your rent or mortgage or utility bills. These amounts should be accounted for in your monthly checking account balance, especially when autopay is involved and funds are withdrawn without notice every time.
  2. Everyday expenses: A checking account is a convenient way to access cash or make debit card transactions. It's ideal for purchases like groceries and entertainment, smaller expenses you might make throughout the month.
  3. Minimum balance requirements: Many checking accounts require a minimum balance to avoid overdraft fees. Be mindful when calculating how much to keep in your checking; make sure enough is in it to cover your essential and everyday expenses as well as your bank's minimum balance requirements. 

What kinds of accounts should I have?

A checking account is a good place to start and a smart way to keep cash at hand. But to use it well, make sure you have all three of these accounts:

  1. Checking Accounts- This is the easiest place to deposit money, pay bills and cover daily expenses. It's where most people deposit their salary, before transferring portions to other accounts. 
  2. Savings Accounts- A savings account is a place for reserving and putting away money you'll use in the future. Savings accounts typically pay interest on the funds you deposit, and interest rates vary depending on the account and the financial institution. Most banks offer basic savings accounts. Certificates of deposit and money market accounts are other types of savings accounts, though access to your deposits may be limited to a schedule or with early-withdrawal fees. 
  3. Retirement Accounts- A retirement account is a place to reserve and grow funds for use in retirement. Typically, retirement accounts are investments and other funds managed for long-term growth. They're usually built with tax advantages, delaying tax payments until you're in retirement when your income is likely in a lower tax bracket.

bright-money-how-much-money-to-keep-in-checking-account-with-bright
Grow your savings with Bright.

Bright adapts to your checking account

Once you connect your checking account to your Bright app, our AI learns about your finances, studies your spending habits and responds accordingly, week by week, based on what you can afford. Bright even adjusts automatically when your income, habits or goals change.

When you set up smart card payments with Bright, our overdraft protection is built in. Bright also provides a minimum balance limit, where Bright will pause transfers from your checking. You can adjust your balance limit whenever you like.

When you set up saving goals with Bright, our AI only moves funds when it makes sense for you, so you're saving more regularly and reaching your goals faster. 

Powered by MoneyScience™, your personal Bright Plan keeps your checking, savings, credit cards and other accounts all in on place. It's step-by-step path to getting debt-free and building more wealth. It's also an easy way to manage your checking account.

If you don't have it yet, download the Bright app from the App Store or Google Play. Connect your checking in a snap, set a few goals, and let Bright get to work.

Recommended Readings:

What are the best checking accounts?

5 Ways to Choose The Best Savings Account for You

MoneyScience™ Team
Bright Money

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