Most people who have money in a bank have at least a portion of their money in a checking account. However, how much money you should keep in your checking account can be a difficult question and depends on several factors.
Checking accounts allow for easy access to your finances, but if you keep too much of your money in this location, you could be missing out on significant financial gains from sources like investments.
We want to help you understand the pros and cons of keeping your money in a checking account. Below, we’ve laid out some advice about alternatives and how to decide how much you should keep in your checking account.
Why You Need A Checking Account
A checking account is an excellent place to keep money for quick access. For example, with just your routing number and account number, you can pay bills, pay rent, or cover other expenses and even configure these to automatically withdraw.
In addition, most banks and credit unions provide debit cards, allowing you to withdraw funds from an ATM, or directly make purchases out of your checking account. This enables a better tracking and budgeting system, as opposed to paying with cash, which is harder and more tedious to monitor.
Finally, when your money is in a checking account and your financial institution is FDIC insured, your money is safe and sound. FDIC insurance keeps funds up to $250,000 per account insured in case something happens.
How Much, On Average, People Keep In Their Checking Account
According to the Federal Reserve, as of 2019, the median amount of money that consumers have in a checking account is $5,300. This account is variable over the years, dropping steeply during the 2008 financial crisis and rebounding between 2008 and 2019.
How much money you keep in your checking account, however, is greatly dependent on your income and your expenses. It’s a good idea to have easy access to cover 1–2 months of expenses, and this amount seems to be reflected in the U.S. data.
Protecting The Money In Your Checking Account
Checking accounts offer you excellent benefits. However, to protect the money in your checking account, you want to be mindful of your financial habits and take care of how you manage your money. Click below to learn more about what you can do to keep the money in your checking account safe.