How Much Cash to Keep in Checking vs. Savings Accounts - NerdWallet (2024)

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How much should be in savings vs checking? ›

Be Prepared for an Emergency

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.

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.

You should keep enough money in checking to cover your monthly bills with some wiggle room – about a month of expenses. That's much lower than the three to six months' worth of expenses you should keep in your savings account for emergencies.

Keeping a minimum amount of money in checking at all times is wise because it can help you to avoid banking fees. The fewer fees you pay to the bank, the money you get to keep. Banks charge a variety of fees for checking accounts, including monthly maintenance fees and overdraft fees.

One of the most common types of percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings.

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.

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.

But keeping all of your money in your checking is also a bad idea. Checking accounts are not meant for long-term savings because they offer low (or no) interest rates. If you put your money in a different account, like a high-yield savings account, you could earn some interest and grow your balance over time.

In terms of savings accounts specifically, you'll likely find different estimates from different sources. The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.

Reasons people keep cash at home include emergency preparedness, financial privacy concerns and mistrust of banks. It's a good idea to keep enough cash at home to cover two months' worth of basic necessities, some experts recommend.

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.

“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.” Why do millionaires approach their checking accounts so differently and across the board?

In conclusion, banks cannot seize your money without your permission or a court order. However, there are scenarios where banks can freeze your account and hold your funds temporarily.

How much do Americans have in savings? Overall, Americans have a median of $5,300 and an average of $41,800 in savings, according to the Federal Reserve.

The FDIC insures up to $250,000 per account holder, insured bank and ownership category in the event of bank failure. If you have more than $250,000 in the bank, or you're approaching that amount, you may want to structure your accounts to make sure your funds are covered.

It's a common rule of thumb to keep one to two months' worth of expenses in a checking account, but many Americans aren't meeting this benchmark.

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.