How Much Money Should I Keep in My Checking Account?

Almost everyone has a checking account, but the amount of money in that account can vary widely. Checking account balances tend to vary with income, age and other factors. However, deciding how much money to keep in your personal checking account requires looking at more than just your paycheck. Here’s what to consider before your next bank deposit.

A financial advisor can help you create a long-term strategy for your checking, savings and investments.

Understanding the Role of Checking Accounts

Most checking accounts are used regularly for spending, often multiple times a day. You can tap into funds via debit cards, online transfers, automatic drafts, ATM transactions, cash withdrawals and old-fashioned paper checks.

Checking accounts are tools, not investments, but they are some of the most well-worn utensils in nearly everyone’s financial kit. They enable countless vital financial tasks, from paying rent and buying groceries to gassing up the car and keeping the electricity turned on.

You want to keep enough in your account to avoid overdraft fees that apply when your checks bounce. However, interest checking accounts generally pay lower interest rates than other types of accounts, such as high-yield savings accounts.

So, with this in mind, how much money should you keep in your checking account? The truth is that no single figure will suit everybody. Some people need more, some less.

These factors can help you determine the balance that’s right for you.

What’s the Typical Checking Account Balance?

The average checking account balance is about $9,100, but this might not be right for everyone. For one thing, that average is inflated by a relatively small number of people who keep large balances. The median, which is the middle point of all respondents, is about $2,900.

Not surprisingly, those with higher incomes tend to have larger checking account balances. As people grow older, checking account balances also tend to increase, peaking around ages 65-74.

The takeaway here is that no matter your ideal checking balance, be prepared to revise it as you age or if you start earning more.

What’s the Ideal Checking Account Balance?

A financial advisor contemplates which checking account to use for an upcoming purchase.

No matter your ideal checking account balance, it’s always good to leave a small buffer to cover any outflows. That will help you avoid any overdraft fees while not leaving a penny more than necessary in a no- or low-interest deposit account.

There’s more to consider:

Unanticipated outflows: If you fail to account for an irregular auto payment, such as a semi-annual insurance premium, you may get overdrawn and start having to pay overdraft fees and bounced check charges.
Pre-authorization holds: Some merchants may place a hold on a portion of your funds until a transaction clears, potentially reducing available funds in the account. A good balance helps ensure this doesn’t lead to an overdrawn account.
Account minimums: Many checking accounts charge monthly maintenance fees if your balance slips below a certain amount. To avoid these fees, it can be well worth it to keep enough in the account so that you always meet the minimum.
Emergencies and special cases: Certain situations can call for cash, not credit, such as when you are buying essential supplies before a natural disaster or making purchases from a small merchant at the local farmer’s market.
Lost earnings: While some checking accounts earn interest on cash balances, most do not. Those that do pay less than alternative accounts like high-yield savings accounts, money market accounts or certificates of deposit. Over time, keeping significantly more than you need in checking can cost you.

To complicate the issue, the type of account matters. For instance, some checking accounts don’t have minimums or charge low or no fees. If you ask your bank about basic or student accounts, you may be able to identify some of these and be less concerned about having a low balance.

To help you manage your checking account balance, consider a budgeting app that tracks your spending. You can use this to keep your account balance just a tap away for easier monitoring and management.

The general recommendation is to maintain one to two months’ worth of living expenses in your checking account. Some experts even advise adding an extra 30% as a cushion if you have higher expenses, have multiple dependents or lack an emergency fund.

How to Adjust Your Checking Account Balance Over Time

Your checking account balance doesn’t have to stay the same forever. As your income and expenses change, you may need to adjust how much money you keep in the account.

For example, if you get a raise or take on new bills like rent or a car payment, it may make sense to keep a little more in checking to cover those costs. On the other hand, if you’ve paid off debt or lowered expenses, you might not need as much of a cushion.

It’s also a good idea to revisit your balance during life changes. Moving to a new city, switching jobs, getting married and having kids can all affect how much money flows in and out of your account. You may want to increase your balance during times of uncertainty or when you expect irregular expenses. Checking in at least once a year can help ensure your balance still fits your needs.

Finally, if you notice you tend to keep more money than you spend, you might want to move extra funds into a savings account or another interest-earning option. That way, your money can grow instead of sitting idle.

Adjusting your balance over time helps you avoid fees, cover surprises and make smarter use of your cash.

Bottom Line

A young professional checks her checking account balance.

The ideal checking account balance varies based on individual circumstances and the need to balance competing concerns. At a minimum, you want to keep enough on-hand to avoid bounced checks and overdrafts. However, be careful not to put all your money in a checking account where it will not earn interest. You could miss out on extra earnings you could gain by putting it in an interest-bearing account or investment. You can also ask a financial advisor the best way to structure your accounts so you can maximize your earnings while keeping the cash you need on hand.

Financial Planning Tips

Review your finances regularly and, if you see something you don’t understand or just aren’t sure what to do, consider consulting a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Why put your money into anything less than the best? SmartAsset’s regularly updated Best Checking Accounts feature lists, descriptions and provides links to the top checking accounts on the market.