How Much Cash Should I Keep in the Bank? (2024)

Everybody has an opinion on how much cash you should keep in your bank account. The truth is, it depends on your financial situation. What everyone needs to keep in the bank from month to month is enough to cover the regular bills and discretionary spending, and a bit over for an emergency fund.

In addition to keeping funds in a bank account, you should also keep between $100 and $300 cash in your wallet and about $1,000 in a safe at home for unexpected expenses.

Everything starts with your budget. If you don't budget correctly, you don't know how much you need to keep in your bank account.If you don't have one, now’s the time to develop one.

Key Takeaways

  • The 50/30/20 rule and financial guru Dave Ramsey’s method are two popular approaches to budgeting.
  • Both recommend allocating money monthly to regular monthly bills, discretionary spending, and an emergency fund.
  • All of these should be kept in "cash." That means a checking account that allows you immediate access to your money when you need it.

The 50/30/20 Rule

First, let's look at the ever-popular 50/30/20 budget rule.

Senator Elizabeth Warren introduced this rule in the book, All Your Worth: The Ultimate Lifetime Money Plan, which she co-authored with her daughter. Instead of trying to follow a complicated, crazy-number-of-lines budget, you can think of your money as sitting in three buckets.

Costs that Don't Change: 50%

It would be nice if you didn't have monthly bills, but the electricity bill cometh, just like the water, internet, car, and mortgage or rent bills. Assuming you've evaluated how these costs fit into your budget and decided they are musts, there's not much you can do other than pay them.

Fixed costs should eat up around 50% of your monthly budget.

Granted, not all of these costs are fixed. Electricity costs, for example, change with the seasons. But you should get a good sense over time of approximately how much you'll need to cover the expense every month.

Discretionary Money: 30%

This is the bucket where anything (within reason) goes. It’s your money to use on wants instead of needs.

Interestingly, most planners include food in this bucket not because eating is discretionary but because the costs vary so widely depending on your habits and preferences. You can eat at a restaurant or cook at home, you can buy generic or name brands, and you can buy flank steak or prime rib.

Whatever you choose, list it under discretionary, at least as a constant reminder that you can cut back on the fine dining if you're busting this part of your budget every month.

This bucket also includes a movie, buying a new tablet, or contributing to charity. You decide.

The general rule is 30% of your income, but many financial gurus argue that 30% is much too high.

Financial Goals: 20%

If you're not aggressively saving for the future—funding an IRA or 401(k), a 529 plan if you have kids, or another retirement plan, if possible—you're setting yourself up for hard times ahead. This is where the final 20% of your monthly income should go.

This funding is essential for your future. Retirement funds like IRAs and Roth IRAs can be set up through most brokerages.

If you don't have an emergency fund, most of this 20% should go first to creating one. This is the accessible cash that you can turn to when the roof falls in, literally or figuratively.

The percentages of the 50/30/20 rule should be applied to your after-tax income, which is your take-home pay.

Another Budget Strategy: Dave Ramsey's Method

Financial guru Dave Ramsey has a slightly different take on how you should carve up your cash.His recommended allocations look something like this (expressed as a percentage of your take-home pay):

  • Charitable Giving: 10%
  • Savings: 10%
  • Food: 10%–15%
  • Utilities: 5%–10%
  • Housing: 25%
  • Transportation: 10%
  • Medical/Health: 5%–10%
  • Insurance: 10%–25%
  • Recreation: 5%–10%
  • Personal Spending: 5%–10%
  • Miscellaneous: 5%–10%

About That Emergency Fund

Beyond your monthly living expenses and discretionary money, the major portion of the cash reserves in your bank account should consist of your emergency fund. The money for that fund should come from the portion of your budget devoted to savings—whether it's from the 20% of 50/30/20 method or Ramsey's 10% estimate.

How much do you need? Everybody has a different opinion. Most financial experts suggest you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000.

Personal finance guru Suze Orman advises an eight-month emergency fund because that’s about how long it takes the average person to find a job. Other experts say three months, while some say none at all if you have little debt, a lot of money saved in liquid investments, and good-quality insurance.

Should that fund really be in the bank? Some of those same experts will advise you to keep your five-figure emergency fund in an investment account with relatively safe allocations to earn more than the paltry interest you will receive in a savings account.

The main issue is that the money is instantly accessible if you need it. And there's virtually no risk of losses if the money is in an FDIC-insured bank account.

If you don’t have an emergency fund, you should probably build one even before putting your savings money toward retirement or other goals. Aim for building the fund to three months of expenses, then splitting your savings between a savings account and investments until you have six to eight months' worth tucked away.

After that, your savings should go into retirement and other goals—investing in something that earns more than a bank account.

How Much Should I Keep in Checking?

Checking accounts are designed to handle everyday transactions, such as depositing paychecks, paying bills, and withdrawing cash for daily expenses.

The amount of money in your checking account should be enough to cover the bills and the daily expenses so that you don’t get hit with overdraft fees.

It should also include a buffer. David Ramsey recommends that the amount of the buffer should make you feel comfortable, but not so comfortable that you're tempted to overspend.

How Much Cash Should I Keep on Hand?

We'll interpret "cash on hand" as money that is immediately available for use in an unexpected emergency. That should include a little cash stashed in the house, enough to cover the monthly bills in a checking account, and enough to cover an emergency in a savings account.

For the emergency stash, most financial experts set an ambitious goal at the equivalent of six months of income.

A regular savings account is "liquid." That is, your money is safe and you can access it at any time without a penalty and with no risk of a loss of your principal. In return, you get a small amount of interest. Check rates online as they vary greatly among banks.

How Much Cash Should My Business Have on Hand?

The U.S. Chamber of Commerce recommends that a business keep three to six months worth of operating expenses on hand.

As in the case of your personal finances, this means "liquid" money that can be accessed as needed.

How Much Cash Should I Take When Traveling?

Unless you're going to a truly remote part of the world, your usual cash habits will work where you're going. Your ATM card should work at any major bank's ATM, and you can get cash in the local currency. Your major credit cards should work for purchases as usual. (You will pay a foreign currency fee for every transaction. The amount can be found in the fine print on their websites.)

You will find that cash is preferred to plastic in many places outside the U.S., particularly outside the big cities.

The Bottom Line

Federal Reserve data from the Report on the Economic Well-Being of U.S. Households for 2022 revealed that 32% of Americans would be able to come up with $500 or less to pay for an unexpected expense.

Most financial gurus would probably agree that if you start saving something, that’s a great first step. Plan to raise that amount over time.

How Much Cash Should I Keep in the Bank? (2024)


How Much Cash Should I Keep in the Bank? ›

Most financial experts suggest you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. Personal finance guru Suze Orman advises an eight-month emergency fund because that's about how long it takes the average person to find a job.

How much cash should you keep in bank? ›

If you're following the expert recommendation for emergency funds, you'd need to save three to six months' worth of expenses. Using $4,000 as an example again, that would mean keeping $12,000 to $24,000 in savings. You might decide to aim for nine to 12 months' of expenses instead if you'd like a larger rainy day fund.

How much money in the bank is enough? ›

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.

What is a good amount of money to keep in your checking account? ›

"It makes sense to have at least enough in your checking account to cover one month of expenses," he said. The average consumer checking-account balance, adjusted for inflation, was about $6,000 in 2023, according to the financial-research firm Moebs Services.

How much cash can I put in the bank without questions? ›

Banks are required to report when customers deposit more than $10,000 in cash at once. A Currency Transaction Report must be filled out and sent to the IRS and FinCEN. The Bank Secrecy Act of 1970 dictates that banks keep records of deposits over $10,000 to help prevent financial crime.

Is $1,000 a month enough to live on after bills? ›

Bottom Line. Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.

How much cash can you keep at home legally in US? ›

The government has no regulations on the amount of money you can legally keep in your house or even the amount of money you can legally own overall. Just, the problem with keeping so much money in one place (likely in the form of cash) — it's very vulnerable to being lost.

How much cash is too much in savings? ›

How much is too much savings? Keeping too much of your money in savings could mean missing out on the chance to earn higher returns elsewhere. It's also important to keep FDIC limits in mind. Anything over $250,000 in savings may not be protected in the rare event that your bank fails.

What is considered a large amount of money to a bank? ›

Depositing a big amount of cash that is $10,000 or more means your bank or credit union will report it to the federal government. The $10,000 threshold was created as part of the Bank Secrecy Act, passed by Congress in 1970, and adjusted with the Patriot Act in 2002.

How much does the average person keep in their bank account? ›

One commonly cited data point comes from the Federal Reserve Survey of Consumer Finances, which finds that Americans hold an average balance of $42,000 in transaction accounts. This average is skewed by people holding high balances, so it might be better to look at the survey's median balance figure, which is $5,300.

How much money can you have in your bank account without being taxed? ›

There is no specific limit or threshold that would cause the IRS to tax it. That being said, ant cash deposits of $10,000 or more would be reported by the bank in a Currency Transaction Report (CTR) to FinCEN, an arm of the Treasury Department.

Is money safer in a savings account than checking? ›

In the traditional sense, checking and savings accounts are both incredibly safe places to keep your money. The National Credit Union Administration (NCUA) automatically guarantees accounts up to $250,000 for each member of a federally insured credit union.

How much money do millionaires keep in a checking account? ›

“Millionaires' checking accounts are all over the place,” Thompson said. “Some clients will only keep enough to pay for immediate expenses (e.g., $10,000) and others will have $150,000 in checking on any given day.”

What is the $3000 rule? ›

The requirement that financial institutions verify and record the identity of each cash purchaser of money orders and bank, cashier's, and traveler's checks in excess of $3,000.

How much can I deposit without getting flagged? ›

Banks are required to report cash into deposit accounts equal to or in excess of $10,000 within 15 days of acquiring it. The IRS requires banks to do this to prevent illegal activity, like money laundering, and to curtail funds from supporting things like terrorism and drug trafficking.

Is depositing $2000 in cash suspicious? ›

There is nothing illegal about depositing less than $10,000cash unless it is done specifically to evade the reporting requirement.

Is $20000 a good amount of savings? ›

Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.

How much should a 30 year old have in savings? ›

If you're looking for a ballpark figure, Taylor Kovar, certified financial planner and CEO of Kovar Wealth Management says, “By age 30, a good rule of thumb is to aim to have saved the equivalent of your annual salary. Let's say you're earning $50,000 a year. By 30, it would be beneficial to have $50,000 saved.

How much cash does the average person have saved? ›

How much does the average household have in savings? While the median bank account balance is $8,000, according to the latest SCF data, the average — or mean — balance is actually much higher, at $62,410.

What is the 50 30 20 rule? ›

The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

Top Articles
Latest Posts
Article information

Author: Pres. Lawanda Wiegand

Last Updated:

Views: 6087

Rating: 4 / 5 (71 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Pres. Lawanda Wiegand

Birthday: 1993-01-10

Address: Suite 391 6963 Ullrich Shore, Bellefort, WI 01350-7893

Phone: +6806610432415

Job: Dynamic Manufacturing Assistant

Hobby: amateur radio, Taekwondo, Wood carving, Parkour, Skateboarding, Running, Rafting

Introduction: My name is Pres. Lawanda Wiegand, I am a inquisitive, helpful, glamorous, cheerful, open, clever, innocent person who loves writing and wants to share my knowledge and understanding with you.