How Much Money Should You Keep in Checking and Savings?
Knowing how much money to keep in your checking and savings account is important for several reasons. Having enough money in each account can help you avoid monthly maintenance fees and overdraft fees.
Transferring money from a check to a savings account can make your money more secure and can also earn interest on your balance.
Find out how much money to keep in your checking and savings accounts, when to move money, and what the experts say about managing your account balances.
How much to keep in a checking account
There are several things to consider when deciding how much money to keep in your checking account.
First, this is what you plan to use your checking account for. If you only have one checking account, you can use it for both bill payments and expenses.
On the other hand, you can set up a checking account only for accounts and another for expenses.
Second, you will need to decide how much dollar you want to keep. For some, this could mean a dollar amount unrelated to their expenses, such as $ 5,000.
However, it may be best to keep about two months of living expenses in your checking account, along with an additional reserve of 25% to 30% on top of your monthly living expenses, Brian Milton, Union Retail Bank Deposit Manager Bank, he told The Balance by email.
"Keeping a mattress will help you avoid overdrawing your checking account and incurring expensive fees, so it's best to have a reserve," Milton said.
The typical overdraft fee is $ 31, which makes it important to know how to budget your checking account to avoid this fee. This relates to how you budget your money for the month and how often you get paid.
Choosing overdraft protection from your bank can help you avoid overdraft fees, although you can still pay a fee for the bank to transfer money from savings to checks to cover transactions.
For example, if you receive every two weeks, you can decide to pay your bills twice a month. Your checking account balance at any given time may reflect what you need to have on hand to cover half of your bills for the month, along with whatever money you've budgeted for groceries, transportation, and discretionary expenses.
When deciding how much to deposit in a check, also remember the bank's requirements. For example, your bank may charge you a minimum balance fee or a monthly maintenance fee if your balance falls below a certain amount, such as $ 500 or $ 1,500.
These fees can easily damage your checking account balance over time.
If you are willing to keep all your money in your checking account and not just a fixed number, chances are you have money there that you will never use.
Shirley Yang, Marcus' vice president of deposits for Goldman Sachs, told The Balance via email that she should consider transferring this extra money to an interest rate account.
"Although a large account balance is rarely bad, if you have a lot of money in your checking account that earns little or no interest, you may want to consider putting some of that money in another type of account where it can grow." Yang said. "Savings accounts and CDs, for example, can be options for your surplus funds."
How much to keep in a savings account
How much you should keep in savings may depend on the purpose for which you are saving.
If your savings account serves as an emergency fund, for example, you may want to aim to spend three to six months. The actual dollar amount varies based on your monthly expenses and the number of months you choose to save.
Remember, you are saving money for emergencies and unexpected expenses, such as if you lose your job or need to pay for a car repair, not for a family vacation or a home improvement project.
On the other hand, you can base how much you should save on the goal you are saving for. For example, if you want to set aside $ 15,000 to renovate your bathroom, that's the amount you want to have in your savings account. Or if you are saving for a house payment, you could be raising at least $ 10,000 or more.
Note that the Federal Deposit Insurance Corporation (FDIC) guarantees single owner deposit accounts of up to $ 250,000 on all of your accounts.
Remember that money kept in savings should not often be used in the same way as a checking account. Your bank may limit you to a certain number of withdrawal transactions per month. If you exceed this number, your bank will be able to:
Charging an excess withdrawal fee
Convert your account to a checking account
According to Milton, sending excess money to a savings account can also protect you.
"(Another) reason to keep the rest of your money in a savings account is security," he said. “ATMs, debit cards, and online payment credentials are opportunities for criminals, and separating any excess balance in a savings account can not only earn additional interest, but is a prudent security precaution.
We hope you enjoy watching this video about How Much Money Should You Keep in Checking and Savings
Source: Finance Sister
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