Knowing how much money should be in your checking account

Checking Account

This may seem like a trick question, right? We all want more money in our checking accounts so shouldn’t we keep as much as possible in there? Keeping too much cash in your checking account could mean you’re missing out on high-yield savings accounts while having too little could incur overdraft fees and minimum balance violations. Determining how much you actually want to keep in your checking account isn’t a complicated process, it just takes a bit of leg work to determine what will work best for your lifestyle.


Tally up expenses

Your checking account should first and foremost be able to cover all of your mandatory expenses every month. Think of rent, utilities, bills, and automatic subscription payments. You’ll want to make sure you always have enough to take care of the essential costs and then you can focus on adding in some buffers for more discretionary spending decisions. This is also a great time to factor in any savings goals you have in mind. Once you have a clearer picture of the absolute must-haves for your monthly expenses you can start to factor in some safety nets.



At the end of the day, banks are for-profit businesses and the hidden fees and extra charges on accounts is a big way they make their money. Do some quick research with your bank and determine exactly what they charge for things like overdrafts and account balance minimums. Typically, when you overdraft on your account balance the bank will charge you a fee. If your bank charges for every single transaction after your initial overdraft, that can add up in a hurry. At the same time, checking accounts will often have balance minimums that banks require you adhere to – fall below the account minimum and you could be charged. Knowing this, it’s an important factor in how much you’re keeping in your checking account. If there’s a $500 balance minimum, ensure you’ve always got that covered when adding up your monthly expense requirements. It will also help buffer you against any potentially costly overdraft fees as well.


Break out the calculator

So now that you’ve done the hard work of figuring out all your costs and fees, the math is actually pretty simple. Just take your monthly bills and expenses + your checking account minimum balance requirement + an appropriate overdraft fee buffer and boom, you’ve got a checking account balance number! Of course, this is a bit oversimplified and every person will have personal reasons for keeping more or less in their account but this provides a good baseline to start from. Remember, you want your money to be working for you so finding ways to get as much of it into interest-generating accounts is important.


Now what?

Now that you’re armed with a better idea of what your minimum checking account balance can be, it’s time to start looking for other areas to put the rest of your hard-earned cash. The most obvious choice is a simple savings account which you can almost certainly open up with the same bank you have a checking account with. It’s worth doing a quick search for a high-yield savings account as these can often carry higher interest rates than your typical savings account. We’ve spoken before about IRAs which have awesome tax advantages but are designed for retirement savings. Another excellent option is a certificate of deposit more commonly known as a CD. These can offer higher interest payments but require you to keep your money in the account for a set period of time otherwise risk early withdrawal penalties.


Your money can work hard for you if you know what you’re doing. With some smart budgeting and a little research, you can optimize your checking account allowing you to put more money into higher-yield buckets. If you’ve learned anything about financial health and wellness, you should know that being informed of your options is one of your most powerful tools when it comes to setting yourself up for success!

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