Many Americans use checking accounts to manage their money. When things are going well for you financially, you could find yourself with more and more money sitting in your checking account. You may end up with $10,000 or more, if you earn an above-average income or just keep most of your savings there.
It's exciting to see a big balance when you log into your bank account. But it's also important to have your money in the right place. Here's how to figure out if your checking account is overfunded.
How much to keep in your checking account
A popular guideline is to keep enough money for one to two months of spending in your checking account. For extra security, you can add up to 30% on top of that amount.
So, if you normally spend $5,000 per month, then there's nothing wrong with having $10,000 and even up to $13,000 in your checking account. But if you normally spend $2,000 or $3,000 per month, $10,000 is more than you need there.
By following this guideline, you're unlikely to overdraft your account or have any payments declined for insufficient funds. After all, you have more than enough to cover your spending. You also don't need to check your balance too often. You could do that about once a month. If you only keep enough in your account to cover two weeks of expenses, then you'll be checking it a lot more often to confirm that you have enough for your upcoming bills.
Why you shouldn't overfund your checking account
A checking account is perfect for depositing your paycheck and paying your bills. It's not the place to keep most of your money, though. Checking accounts pay lower rates than other banking products, so your savings won't be earning as much as it could be.
Most checking accounts earn less than 1.00%. Here are a few examples of the rates available with other types of accounts:
If you have $10,000 in a checking account, there's a good chance it earns under $100 a year in interest. In a savings account, CD, or money market account, it could earn over $500. That doesn't mean it's a mistake to keep that much in your checking account. If you have high monthly spending and are going to use that money to pay bills in the near future, then it makes sense.
The mistake that some people make is treating their checking account like a savings account. While this may be convenient, it costs you money in interest.
Finding the right balance for your bank accounts
Ensure you have enough in your checking account for one or two months of expenses. In your savings account, aim to have enough to cover three to six months of expenses. That takes time, but it's the amount recommended for a suitable emergency fund.
A savings account is also a good place for money you have earmarked for any other savings goals, such as buying a home. CDs are another option if you want to lock in a fixed rate. Your checking account needs enough money to pay your bills, but that's all the money you should have there.
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FAQs
A popular guideline is to keep enough money for one to two months of spending in your checking account. For extra security, you can add up to 30% on top of that amount. So, if you normally spend $5,000 per month, then there's nothing wrong with having $10,000 and even up to $13,000 in your checking account.
What is a good amount to keep in checking account? ›
A common rule of thumb for how much to keep in checking is one to two months' worth of expenses. If your monthly expenses are $4,000, for instance, you'd want to keep $8,000 in checking. Keeping one to two months' of expenses in checking can help you to stay ahead of monthly bills.
Is it bad to keep a lot of money in your checking account? ›
While you want to make sure you keep enough money in your checking account to cover your expenses, you don't want to keep too much in it, either. One reason is that it isn't going to earn you much interest. The national average for interest-bearing checking accounts is 0.07% APY.
Is having 10000 in my bank account good? ›
There's nothing wrong with keeping $10,000 in a savings account. But it might not earn you the highest yields. CDs and brokerage accounts could be better homes for your cash in some situations.
How much money is too much to keep in your savings account? ›
How much is too much? The general rule is to have three to six months' worth of living expenses (rent, utilities, food, car payments, etc.)
How much is too much money in a checking account? ›
Unless your bank requires a minimum balance, you don't need to worry about certain thresholds. On the other hand, if you are prone to overdraft fees, then add a little cushion for yourself. Even with a cushion, Cole recommends keeping no more than two months of living expenses in your checking account.
How much does the average person keep in their bank account? ›
Average household checking account balance by gender
| Gender of reference person | Average checking account balance in 2022 | Median checking account balance in 2022 |
|---|
| Male | $20,221.19 | $3,800.00 |
| Female | $8,272.74 | $1,200.00 |
Oct 18, 2023
Key Takeaways. Banks must report cash deposits of $10,000 or more. Don't think that breaking up your money into smaller deposits will allow you to skirt reporting requirements. Small business owners who often receive payments in cash also have to report cash transactions exceeding $10,000.
Is it better to keep money in checking or savings? ›
Savings accounts — especially high-yield savings accounts — typically offer higher annual percentage yields (APYs) than checking accounts, allowing you to grow your money faster.
How much money should you always have in your bank account? ›
The general rule of thumb is to try to have one or two months' of living expenses in it at all times. Some experts recommend adding 30 percent to this number as an extra cushion.
For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency. For checking, an ideal amount is generally one to two months' worth of living expenses plus a 30% buffer.
Is $20,000 a good amount of savings? ›
All in all, depositing $20,000 in a savings account can be wise if you have a short-term plan for the money. Your deposit will be safe and you can generate decent amounts of interest in the meantime.
How much money should I left in my bank account? ›
The recommended amount of cash to keep in savings for emergencies is three to six months' worth of living expenses. If you have funds you won't need within the next five years, you may want to consider moving it out of savings and investing it.
What is a healthy amount to have in your bank account? ›
To help ensure that your bills are paid, you'd need to keep at least half a month's worth of expenses in your checking account to cover yourself until the next payday. If you want to create a wider buffer, you can increase that to a full month's worth of expenses or even two months.
How much balance should I keep in bank account? ›
Reserve 20% of your income for savings, including contributing to retirement funds and building an emergency fund. This ensures you are prepared for unexpected expenses and can work towards your long-term financial goals.
What is a good amount to keep in current account? ›
How much you put aside will depend on your circ*mstances. The recommendation is to have three months' worth of essential outgoings in your account to fall back on.
How much should be left in bank account? ›
Rule of 50-30-20
Also, your savings portion must be planned appropriately. You must ensure to save six times your monthly mandatory expenses in your savings bank account that yields a high bank savings account interest rate as emergency funds.
