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How Much Money Should I Keep in My Checking Account?

How Much Money Should I Keep in My Checking Account?

Your checking account provides a handy, central place to track and manage your income and expenses on a day-to-day basis but, like many people, you might be wondering “How much money should I keep in my checking account?”

We take a look at why it’s important to have sufficient funds on hand, but also consider how your financial goals might affect how you manage your checking account balance.

On Tap: How Much Money Should I Keep in Checking?

Your checking account is the heart of your personal financial system, the place where your paycheck gets deposited and from where you pay the bulk of your monthly expenses.

While you need to be sure there’s always enough in your checking account to meet upcoming payments and unforeseen expenses, that’s also money that could be earning interest in an investment or money market account.

So, how much excess cash is it smart to keep in your checking account? It really depends on your personal situation, money management style, and long-term goals. But first, you need to be certain your financial bases are covered.

Why Do You Need Money in Your Checking Account?

While the balance in your checking account may fluctuate throughout the month, you need to be sure you always have sufficient money in place to meet your day-to-day financial needs. Be sure your that checking account always has enough money to cover:

  • Monthly service charges or account minimum balance requirements
  • Any unforeseen overdraft or non-sufficient funds (NSF) charges
  • Typical pre-authorization and clearance holds on your debit card
  • ATM access to a minimum amount of cash as required

While it can be difficult to estimate how much money you would need to cover a series of pre-authorization holds or prevent going into overdraft in an emergency, failing to cover these expenses will result in immediate disruption to your account and will in most cases simply end up costing you more money.

Related: What Is An ACH Debit Or Credit?

Related: What Is A Checking Account Typically Used For?

How Much Do You Need in Your Checking Account?

How much you choose to keep in your checking account at any time is a personal choice, and depends directly on how much you earn and how quickly you choose to spend it. That said, breaking down where you want your money to go each month will help you come up with a minimum number that works for your financial situation.


First up, be sure you’re able to make monthly payments on anything you owe, including your mortgage, auto loan, credit card debt, and any student or personal loans. Failing to meet any of these obligations has serious financial implications, including penalty charges, damage to your credit score, and possibly even putting your home or car at risk.

Fixed Expenses

Next, you should include the fixed monthly expenses you are currently committed to, such as utilities, insurance, membership fees, and service subscriptions. This is especially important if you use automatic payment authorizations allowing vendors to debit your account directly.

Monthly Expenses

While this will vary, try to get an idea of how much you spend on unavoidable day-to-day expenses like groceries, household products, personal grooming, work lunches, and so on. If you don’t have a set budget, take a look at past bank statements to get an idea of your costs and how much they vary from month to month.

Discretionary Spending

Now take a hard look at what you’re spending on things you don’t necessarily need including dining out, clothing, hobbies, and recreation. If this is not covered in your budget, you might need to go through past statements, making notes of spending on discretionary items.

While this can be difficult, remember we’re simply trying to account for spending, not necessarily limit it.

How Much Should You Keep in Your Checking Account?

Taking the time to understand your spending will give you an idea of how much money flows through your checking account each month. While your average balance is most likely far below this amount, this is not necessarily a problem—provided you pay major obligations like your mortgage first.

That said, operating your checking account at a minimum requires a good deal of planning and organization to make sure that funds are there when you need them, and can leave you open to unexpected financial shocks.

In fact, many financial experts suggest keeping 1-2 months of income in your checking account at all times, with some recommending a further 30% on top of that for good measure. On the other hand, many people feel excess funds in their checking account could be better used earning interest as an investment or in a money market account.

Spender, Saver—or Both?

How much money you keep in your checking account balance really boils down to your individual situation, money management habits, and financial goals.

If you’re looking to build a financial cushion but don’t have excess income to put into an interest-earning money market, certificate, or investment account, getting started can be difficult. Fortunately, there are now interest-bearing checking accounts that allow you to earn significant dividends while keeping your hard-earned cash easily available.

Listerhill’s Growth Checking account, for example, is a full-service deposit account that also pays rates equivalent to those on many money market amounts on deposits over $1,000, allowing you to earn decent dividends while still allowing you to keep plenty of cash on hand.

On the other hand, if you prefer to run a bare-bones checking account to free up cash for savings or necessities, our no-minimum-balance Everyday Checking account allows you to keep just the cash you need on hand.

Whatever your financial priorities, Listerhill’s checking accounts make it easier to choose between saving and spending with generous rates, low fees, and benefits including:

  • Debit cards linked to the LCU Cards App which allows you to add spending alerts, lock your card, or set travel notifications for increased security and more control of your plastic
  • Free checking
  • Unlimited access to your money

Click below to learn more about Listerhill’s Everyday Checking and Growth Checking Accounts.

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Common Links

Frequently Asked Questions

  • How do I know what kind of interest I have?

    If you are not sure what kind of interest your loan has, check your loan documents or contact your lender.

    (Source: Banzai)

  • Is Simple or Compound Interest Better?

    It depends on what you need! If you are saving money in an account or being repaid for a loan, compound interest may be a good choice for you.

    If you are borrowing money, you may be able to pay less over time with simple interest.

    (Source: Banzai)

  • How do you calculate interest on a savings account?

    The simplest way to calculate interest is to use an online savings calculator like this one. But if you want to do the math yourself, you can plug your information into the compound interest formula of A = P (1 + r/n)^(nt).

    (Source: Banzai)

  • How does compound interest work?

    Compound interest means that the money you earn in interest also earns interest, rather than just the principal. Basically, the amount of interest you earn will grow every time interest is added (or compounded) rather than staying the same. This makes it ideal for savings accounts. The formula for calculating compound interest is A = P (1 + r/n)^(nt). The variables for this formula are:

    • A = Total amount
    • P = Principal or staring amount
    • r = Annual interest rate
    • n = Number of times interest is added per time period
    • t = Number of time periods

    (Source: Banzai)

  • What is an average interest rate?

    Interest rates vary greatly depending on the type of account, supply and demand, and what the Federal Reserve sets. For a typical savings account, you could expect anywhere from 0.01-0.08%. For a high yield savings account, on the other hand, it’s not uncommon to see interest rates of 0.2%-0.6%. A CD (certificate of deposit) can earn 0.07-1.2%, or even higher, depending on the length and financial institution.

    (Source: Banzai)