checking account is like the heartbeat of your financial life, serving as the hub for all your financial transactions, from depositing your paychecks to paying bills and everyday expenses. But how much should you keep in this account? This is a crucial question, but with the ever-changing economy, the answer may be more complex than it used to be.

In this article, we'll dive into the various factors that determine the amount you should keep in your checking account, help you strike the perfect balance, and ensure that you're always financially prepared for whatever life throws your way. So, let's dive in!

Money jar
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Checking Account V/S Savings Account

Before diving into the topic, let's understand what a checking account is and how it differs from a savings account.

A checking account, also known as a transactional account, helps you manage your day-to-day finances, such as paying your bills, receiving your salary, and withdrawing cash from an ATM. With a checking account, there are no limitations to withdrawals or deposits; it's designed for flexibility and ease of use.

On the other hand, a savings account is like your personal savings jar. It's primarily used to save money and earn interest and is a safe haven for hard-earned cash. They offer higher interest rates than checking accounts. Since saving accounts are designed for saving your hard-earned money, there is a limitation on how much cash you can withdraw in a time frame.

Now that you are clear with checking and saving account, let's dive into the main issue,

How Much Should You Keep In Your Checking Account?

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The simple answer is that it depends.

You might have been expecting a specific dollar amount, but the truth is, there is no one-size-fits-all answer. Personal finance is personal, and everyone's needs and situations are different. So it's crucial to understand the reasoning behind keeping a certain amount in your checking account instead of just following a general rule.

Furthermore, it depends on your financial situation, including your income, expenses, and goals. Some people keep more money in their checking account for peace of mind, while others prefer to keep less to avoid overspending. It's essential to evaluate your spending habits and short-term and long-term financial goals to determine the right balance for you.

So, how can you strike the sweet spot and find your magic number? Consider the following:

Determine Your Checking Account Needs

First, look at your current financial situation and expenses, as your checking account needs are unique to your financial goals. Are you in saving mode and trying to cut down on expenses? Also, Are you saving for a down payment on a house? A dream vacation? In that case, keeping less money in your checking account may be ideal. Determine your financial needs and let that guide the amount you keep in your checking account.

One pro tip will be to consider your checking account as a wallet. You would keep the money you need for the expenses in your wallet, right? It's the same. How much you are willing and able to spend should go into your checking account.

Keep Enough Money to Cover Your Expenses

Since checking accounts are the go-to place to meet all your expenses, you need to ensure that it has enough money to cover your expenses. Predetermine how much money you will need to meet your monthly payments, including groceries, electricity, gas usage, education fees, etc. Start by calculating your monthly expenses and then set aside a portion for significant recurring expenses such as insurance premiums or annual property taxes. Remember that some bills may fluctuate, like electricity or gas usage, which can be higher in the winter.

Mobile checking account
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Maintain the Required Balance

Checking accounts usually has minimum balance requirements, which you must maintain to avoid fees or account closures. These can vary from institution to institution and range from as low as $5 to as high as $500 or $1,000.

Failing to maintain the required balance can result in monthly maintenance fees, penalties for non-sufficient funds, or even account closure. These fees can add up quickly. Thus, it's essential to have money that maintains the minimum balance.

Keep the Buffer to Avoid Overdraft Fees

Besides the minimum required by your financial institution, keep a buffer amount in your account to avoid overdrafts. An overdraft happens when a debit, such as a purchase, is greater than what you have in your account. For example, if you make a $50 purchase but only have $40 in your account, you will need to overdraft by $10. Most banks and credit unions charge a fee for overdrafts, ranging from $20 to $50 or even more.

So, always have a buffer of a few hundred dollars or 25% to 35% beyond your monthly expenses in your bank account that helps ensure your balance never dips too low.

Piggy bank deposit
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Build an Emergency Fund for Rainy Days

Finally, checking is the ideal account to keep instant-access emergency funds since there are no withdrawal restrictions. You never know when you might need that extra cash to pay for a flight, hotel, or medical bills, and that money should be available to use in a flash. So, keeping extra cash in your checking account does not hurt; it ensures you have that cash handy when emergencies hit you.

How Does Checking Account Balance Vary Across Generations?

With the change in the ideology, how much to put in a checking account also varies across the generations.

For example, older generations may prefer to keep a larger amount in their checking accounts as a safety net for unexpected expenses in their retirement years. Younger generations, on the other hand, may have fewer financial obligations and choose to keep a smaller amount in their checking accounts as they prioritize saving for long-term goals such as buying a home or starting a business.

That's why the younger generation ends up paying more for overdraft fees. According to a survey from Bankrate, it was found that Gen Z and millennials pay three times as much in service charges, ATM fees, and overdraft fees than older generations.

Additionally, older generations may be more risk-averse and prefer to keep more cash in their checking accounts. In comparison, younger generations may be more comfortable with investment options with higher returns.

COVID-19 and Checking Account Balance: Has the Pandemic Shifted Expert Opinion?

Corona virus and money
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When it comes to keeping money in your checking account, COVID-19 has been the ultimate game changer. It's made us realize that sometimes, life can deal us a curveball when we least expect it and how important it is to stay prepared for such uncertainties.

Before the pandemic, conventional wisdom said to have enough money in your checking account to cover at least one to two months of living expenses as an emergency fund. But now, it's more like a game of how much you can afford to keep in your checking account, and the goal is to have as much as you can to ensure you are financially secure.

The pandemic has shown that unexpected events can significantly impact people's finances and livelihoods, and having a larger emergency fund can provide a greater sense of financial security. Additionally, the pandemic has led to widespread job loss and economic uncertainty, emphasizing the importance of being prepared for unexpected financial challenges. Thus, experts now suggest having at least six months to one year of living expenses in your checking account.

The pandemic has changed the game of personal finance, making it more critical than ever to have a sufficient emergency fund, be prepared for unexpected financial challenges, and be adaptable to changes in one's financial situation.

Is the Traditional Checking Account Becoming Obsolete in the Digital Age?

When it comes to managing our money, traditional checking accounts have been the go-to option for decades. But with the rise of fintech and digital banking, it's worth asking - is the conventional checking account becoming less relevant or in danger of being phased out by some emerging technology? Not necessarily.

While new financial technology companies have introduced alternative banking options, such as online-only accounts and mobile apps that allow users to manage their money and make transactions from their smartphones, traditional checking accounts are still widely used and are not in danger of being phased out completely.

Traditional bank account
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For one reason, millennials and Genz prefer convenience in banking and are more attracted to the neobanks. But, the older generations tend to stick to one bank and are reluctant to change.

And another reason traditional banks are also adapting to the changing landscape, many now offer digital banking platforms and mobile apps that allow customers to manage their accounts and make transactions from their smartphones. They also have their own rewards program to attract customers.

It's worth noting that while alternative banking options are becoming more popular, traditional checking accounts still have a role to play in personal finance. They are still widely accepted and can be used to make everyday transactions, and they also offer the added security of being FDIC-insured.

Best Checking Accounts To Keep Your Hard-Earned Money

U.S Bank

US Bank Logo

U.S. Bank is one of the largest banks in the United States and is headquartered in Minneapolis, Minnesota. It offers a unique and smart banking solution - the U.S. Bank Smartly Checking account that empowers you to take control of your banking fees. Also, it comes with advanced overdraft prevention tools, ensuring you are protected from unwanted charges.

Key Highlights

  • APY ranging from 0.001%- 0.005%
  • A $6.95 Monthly fee required
  • $0 monthly maintenance fee for military and those who meet specific criteria of monthly direct deposit or minimum account balance requirement.
  • No ATM transaction fee
  • No-fee overdraft protection
  • Overdraft fee forgiven program.
  • Smart rewards program
  • Automated bill pay and contactless payment
  • 100 free trades per calendar year if you open a self-directed brokerage account from its affiliate U.S Bancorp investments.

Axos Bank

Axos Bank Logo

Axos Bank is a technology-driven online bank offering a wide range of checking accounts. It provides three general checking accounts and two specialized accounts personalized to your needs. Here's a quick overview of the accounts:

Essential Checking Rewards Checking Cashback Checking First Checking Golden Checking
Best for Direct deposits High Account balances Frequent use of debit card Teenagers between 13 and 17 People older than 55
Benefits Direct deposit up to two days in advance 1.25% APY 1% cashback on all of your transactions 0.10% APY 0.20% APY
Opening deposit N/A $50 $50 $50 $50
Monthly fee $0 $0 $0 $0 $0

Key Highlights

  • Unlimited domestic ATM fee reimbursements
  • No monthly maintenance fees
  • No overdraft or non-sufficient funds fees
  • Bills automation
  • FDIC insurance
  • Specialized accounts to meet your needs


NBKC Bank Logo

NBKC bank is an award-winning online bank with a few branch locations in Kansas City. The NBKC Everything Account is a game-changer for those who value financial flexibility and convenience. This account combines the best of both worlds - the ease of access to a checking account and the savings potential of a savings account. With this account, you'll have the power to spend, track, save and earn all in one place without switching between different accounts.

Key Highlights

  • APY of 1.26%
  • A $25 opening deposit required
  • No minimum balance and a monthly fee
  • Free ATMs accessible with a money pass
  • Autopay for bills
  • Snapshot of your finances
  • Set up saving goals

Capital One

Capital One Logo

Capital One is American Bancorp headquartered in Virginia, specializing in a wide range of banking services. The Capital One 360 Checking Account is the perfect solution for those who like to keep cash on hand. Unlike many other checking accounts, this account allows you to deposit cash at any CVS location, making it easier to add to your balance. It also offers a fee-free overdraft option to give you added peace of mind.

Key Highlights

  • APY of 0.10%
  • No minimum balance and a monthly fee
  • No opening deposit required
  • Overdraft options
  • Add cash in store
  • FDIC insurance and fraud coverage
  • Early paycheck to access money two days sooner than a paycheck

Ally Bank

Ally Bank Logo

Ally Bank is well-known for its excellent customer service, competitive rates, and wide range of banking services. Ally Interest Checking Account is an all-around solid choice for those looking for an account that will help them save more with its interest rate, automated savings features, and the Round Ups feature. It charges no service or maintenance fees and waives fees for most account activities, such as overdrafts, ACH transfers, and bill payments.

Key Highlights

  • APY of 0.25%
  • No monthly maintenance and minimum balance
  • A robust defense system against accidental overdrafts
  • Early direct deposit
  • Boost savings with round-ups
  • Remote deposits
  • FDIC insured

Should You Keep All Your Money in a Checking Account?

Simple answer, Big No! Think of your checking account as your wallet; only keep the money that you need for expenses plus some extra cash in case of emergencies. The remaining money? Put it in a savings account or invest it somewhere else.

The money in the checking account is for transactional purposes only. If you are keeping the money that's lying over there, then essentially, they are dead money. It's because checking accounts do not pay much interest, and putting the extra cash there, you are killing its capacity to generate interest and ROI.

So, only keep the money you need for everyday expenses and emergencies in your checking account. Let the rest of your money hustle for you by placing it in a savings account or investment.

Where to keep your extra cash?

Growing Money
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If you have extra cash lying, it's time to branch out and put your money to work. You can either place it in high-interest-bearing saving accounts or enter the world of investment. Managing investments that give higher returns on investment (ROI) is a great way to grow your wealth. There are many different types of investments to choose from, including stocks, real estate, digital currency, and even charitable donations.

Here are some resources to help you with investing and saving :

Don't let your hard-earned money sit idle; instead, let your money work hard for you!


Finding the sweet spot on how much to keep in your checking account is like hitting a bullseye. It's a delicate balance that depends on various factors, such as your financial situation, expenses, and unexpected events. It's crucial to calculate your monthly expenses, set aside money for large recurring expenses, and keep a buffer to avoid costly overdrafts. Typically, keep how much money you are willing to spend with the extra emergency fund in case you hit any emergencies.


Jan 25, 2023

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