How Much Cash to Keep in Your Checking vs. Savings Account

Aim for about one to two months’ worth of living expenses in checking, plus a 30% buffer, and another three to six months' worth in savings.
Alice Holbrook
By Alice Holbrook 
Updated
Edited by Yuliya Goldshteyn Reviewed by Kathleen Burns Kingsbury

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The more cash in your checking account, the better, right? Not necessarily.

Money in a checking account is easy to access, and keeping balances above the bare minimum can help you avoid monthly maintenance fees. But having a bloated checking account means you're missing out on higher returns in a savings or retirement account.

In your checking account, it’s ideal to keep one to two months’ worth of living expenses plus a 30% buffer. Why the buffer? Banks earn billions of dollars from fees charged to customers who overdraw on their account or bounce a check. And running afoul of minimum balance requirements could mean being charged a monthly fee by your bank — so it’s best to have a cushion.

For savings, three to six months’ worth of living expenses in your emergency savings fund is a good goal to aim for. The right number for you might be higher or lower than for someone else. It's all about finding out what works for your budget. Here’s a quick look at how much cash to keep in your checking and savings accounts.

» Tend to overdraw your account? Check out the

Track your monthly spending

To figure out what your monthly expenses are, keep a daily spending log for one month. Include credit card purchases and payments that are automatically deducted from your checking account, like gym membership fees or loan payments. Use this base number to calculate how much you’ll need to keep in your checking account and how much savings you’ll need for your emergency fund.

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» Looking for guidance? Learn what a rainy day fund is and why you need one

SoFi Bank, N.A. logo
Learn More

Member FDIC

SoFi Checking and Savings

SoFi Bank, N.A. logo
APY

4.60%

Min. balance for APY

$0

EverBank logo
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Member FDIC

EverBank Performance℠ Savings

EverBank logo
APY

5.15%

Min. balance for APY

$0

Put additional cash in a high-yield account

Once you’ve arrived at how much you’ll keep in your checking account, direct anything extra someplace where it can earn interest. Online-only banks tend to offer the best rates on savings, including annual percentage yields of 5% or more. That is significantly higher than the national average of 0.45% — which means it'll put more money in your account, no matter how much you contribute. You can read more about some of NerdWallet's favorite high-yield savings accounts.

Once your savings account holds about three to six months' worth of living expenses, consider opening an additional retirement account or increasing your contributions to existing retirement funds. Those include 401(k)s and individual retirement accounts.

Keeping the right amount of cash in your checking and savings accounts ensures that you’re able to cover your daily needs and emergencies, avoid unnecessary bank fees and grow your long-term savings. Again, it's about finding what's right for you, not having the average checking account balance.

» Is inflation impacting your finances? Learn how to save more when inflation makes your money count less

Frequently asked questions

It’s advisable to have both types of bank accounts. You can:

  • Use a checking account for spending and paying off expenses, and

  • Use a savings account to build and hold your emergency fund while earning interest.

An amount exceeding $250,000 could be considered too much cash to have in a savings account. That’s because $250,000 is the limit for standard deposit insurance coverage per depositor, per FDIC-insured bank, per ownership category. If you keep more than $250,000 in your savings account, any money over that amount won’t be covered in the event that the bank fails. The amount in excess of $250,000 could be lost.

The recommended amount of cash to keep in savings for emergencies is three to six months’ worth of living expenses. If you have funds you won’t need within the next five years, you may want to consider moving it out of savings and investing it.

It’s a good idea to keep one to two months’ worth of living expenses plus a 30% buffer in your checking account.

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