How Much Money Should I Keep In Savings vs. Checking? (2024)

How Much Money Should I Keep In Savings vs. Checking? (1)

How much money should I keep in my savings account?This is a valid question to ask if you’re interested in making the most of your money. Savings accounts can offer liquidity, so you have convenient access to your money. And you might be able to earn a decent interest rate on deposits, depending on where you choose to bank. There are several factors to keep in mind when deciding how much to keep in savings.

For help with saving in the most efficient way, consider working with a financial advisor.

What Is a Savings Account Good For?

Savings accounts are designed to be a safe, secure place to hold money that you plan to spend at some future date. You can use savings accounts to fund a variety of financial goals. Some of the most common uses for savings accounts include:

You can open a savings account at traditional banks, online banks and credit unions. Savings accounts can earn interest and the rate you earn typically depends on where you open the account. Online banks tend to offer higher rates than brick-and-mortar banks and they can also charge lower fees.

A savings account is liquid since you can withdraw money from it as needed. You can link savings to checking for convenient transfers. Keep in mind that your bank might limit the number of withdrawals you can make from a savings account each month. If you go over the limit, the bank may charge you an excess withdrawal fee.

Money in a savings account is safe when the account is held at an FDIC member bank. The FDIC insures savings accounts and other deposit accounts up to $250,000 per depositor, per account ownership type, per financial institution. The National Credit Union Administration offers similar coverage for savings accounts held at member credit unions.

How Much Money Should I Keep in My Savings Account?

There is no one-size-fits-all answer to the question of how much money to keep in savings. The amount of money you keep in savings can depend on your financial situation and what you’re saving money for.

For example, your financial advisor may recommend keeping three to six months’ worth of expenses in savings for an emergency fund. An emergency fund is for the money you can tap into when you have an unexpected expense or life situation that you didn’t budget for. So if your car breaks down or you lose your job, your emergency fund could help to fill the gap temporarily.

If you make $5,000 a month, then the right amount of money to keep in savings for emergencies would be anywhere from $15,000 to $30,000 if you follow the three to six-month rule. It’s possible that you might want a larger cushion, however, if you’re worried about how you might cope with an extended bout of unemployment or a serious illness that keeps you from working.

In that case, you might bump your savings target between nine and 12 months’ worth of expenses instead. So you’d need to have $45,000 to $60,000 in emergency savings.

The amount of money you should keep in non-emergency savings will depend on what you’re saving the money for. In other words, the amounts are goal specific. If you want to save $20,000 for a wedding, $3,000 for new furniture and $2,000 for a vacation, for example, then your total savings goal is $25,000.

How Much Money Should I Keep In Savings vs. Checking?

How Much Money Should I Keep In Savings vs. Checking? (2)

Savings accounts are meant to hold money that you don’t plan to spend right away. A checking account is designed for the money you know you’ll spend in the near term. Checking accounts can give you access to your money via a debit card and checks. You can use either one to pay bills, make purchases and cover day-to-day expenses.

How do you decide how much money to keep in savings vs. checking? And should you keep a lot of money in a checking account?

The answers will depend on the kind of savings and checking accounts you have. If you have an online savings account that offers a highly competitive APY and charges no monthly fee, then it could make sense to keep more of your money in that account. Keeping all of your emergency funds in a savings account is generally advisable as well since it may be easier to spend it on things other than emergencies if it’s sitting in a checking account.

A good rule of thumb you could apply when deciding how much to keep in savings is to aim for one to two months’ worth of expenses. So again, if you make $5,000 a month then you’d want to keep $5,000 to $10,000 in checking.

Having that amount in checking at all times means you have a cash cushion in place. If your paycheck is delayed for some reason or you run a business that has irregular cash flow, you can use your checking account cushion to cover bills until more money comes in. A cushion can also help you to avoid steep overdraft fees. And if you have an interest checking account, you can earn a little interest on your balance as well.

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. For example, you might quickly run through that amount of money if you get sick or laid off and are out of work for six months.

Finding the right amount of money to keep in savings means understanding your expenses and how much you’d be able to realistically live on if your income were to dry up. It also takes into account the kinds of one-time emergency expenses you’re more likely to have.

If you have pets, for instance, then it’s possible you might need to drop $5,000 at the vet if one of them gets sick. Or if you have an older car you may end up spending more on unanticipated repairs than someone with a newer vehicle. Looking at the bigger picture can help you decide how much to keep in savings and what to allocate to checking.

How Much Cash Is Too Much In Savings?

You might have too much cash in savings if part of your balance isn’t covered by FDIC insurance. Again, the coverage limit is $250,000 per depositor, per account ownership type, per financial institution. If your combined balances at the same bank exceed this limit, part of your savings may not be protected. That could mean losing money in the rare event that your bank fails.

Having too much cash in savings can also be a drawback if that money is not working as hard for you as it could. Savings accounts can earn interest but the rates are generally well below the rate of return you could earn by investing your money instead, or even putting it in a certificate of deposit. Keeping all of your money in savings can help you avoid the risk of losing money in the market, but it could drastically affect the amount of growth you see over the long term.

The Bottom Line

How Much Money Should I Keep In Savings vs. Checking? (3)

Deciding how much money to keep in a savings account is a personal decision and there is no single dollar amount to go by. Instead, figuring out how much to save means looking at where you are financially and factoring in any situations that might affect your budget and ability to pay bills.

Savings Tips

  • Consider talking to your financial advisor about how much to keep in savings and what to do with any surplus. Your advisor can help you decide whether it makes sense to invest extra cash, use it to pay down debt or fund another goal. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • If you’re looking for a new savings account, take time to weigh what you need and compare the options. As mentioned, online banks can offer favorable rates with fewer fees but the trade-off is that you don’t have branch banking access. In addition to the rates and fees, consider the minimum deposit requirements for opening a savings account.

The post How Much Money to Keep in a Savings Account appeared first on SmartAsset Blog.

How Much Money Should I Keep In Savings vs. Checking? (2024)


How much should be in savings vs checking? ›

While most of it can live in a separate savings account, it's smart to keep a little in your checking account for instant access. Experts recommend keeping at least three to six months' worth of living expenses in your savings account.

Should you keep more money in your checking or savings? ›

After allocating one to two months of your expenses into a checking account, Anderson says that the two to four months of additional reserves should be put into a savings account — specifically a high-yield savings account.

What is a good amount to keep in a savings account? ›

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 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.

What is too much to have in savings? ›

In the long run, your cash loses its value and purchasing power. Another red flag that you have too much cash in your savings account is if you exceed the $250,000 limit set by the Federal Deposit Insurance Corporation (FDIC) — obviously not a concern for the average saver.

Is 20K in savings good? ›

While $20K may not let you quit your job, it's enough to start building financial security, whether you max out your retirement accounts, invest in fine art, or divide your cash between multiple investments.

Should I keep all my money in one bank? ›

Keeping all of your money at one bank can be convenient and is generally safe. However, if your account balances exceed the deposit limit that's insured by the FDIC, some of your money may not be protected if the bank fails. And if you're a fraud victim, having cash all in one place could compromise more of your money.

How much money should I have saved by 40? ›

By age 40, your savings goals should be somewhere in the neighborhood of three times that amount. According to 2023 data from the U.S. Bureau of Labor Statistics, the average annual income hovers around $62,000. This means retirement savings goals for 40-somethings should tip the scales at around $200,000.

Is it bad to have too many checking and savings accounts? ›

Really, there's no hard and fast rule about how many checking accounts any one person should have. The number and type of accounts that works for you will depend on many factors, including your financial goals, spending habits, and comfort level with monitoring and managing multiple accounts.

How much is too much in 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.

Where should I be financially at 35? ›

One common benchmark is to have two times your annual salary in net worth by age 35. So, for example, say that you earn the U.S. median income of $74,500. This means that you will want to have $740,500 saved up by age 67. To reach this goal, at age 35 you may want to have about $149,000 in savings.

Is $100 000 a good amount in savings? ›

Now all I would have to worry about is food and transportation - and I could cover that easily with pretty much any job, part time or full time, or even working from home. Having over $100k in savings is generally considered a good financial position in the United States.

How much does the average person have in their checking account? ›

Average household checking account balance by gender
Gender of reference personAverage checking account balance in 2022Median checking account balance in 2022
Oct 18, 2023

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 should the average person have in their bank account? ›

Key Takeaways

The median savings account balance for all families in the U.S. was $8,000 in 2022. Generally, higher-income earners and older individuals save more than younger ones. Some experts suggest three to six months' living expenses as a goal.

What is the 50 30 20 budget rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

Should I keep more than 250000 in a savings account? ›

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.

How much money should I have in my savings account at 30? ›

Fidelity Investments recommends saving 1x your salary by 30. At the end of 2021, the average annual salary was $49,920 for 25 to 34-year-olds and $58,604 for 35 to 44-year-olds. So the average 30-year-old should have $50,000 to $60,000 saved by Fidelity's standards.

How much money should I have in my savings account at 25? ›

By the time you're 25, you probably have accrued at least a few years in the workforce, so you may be starting to think seriously about saving money. But saving might still be a challenge if you're earning an entry-level salary or you have significant student loan debt. By age 25, you should have saved about $20,000.

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