How much money should you keep in your checking account?

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Your checking account is the hub of your financial life. It's where your paycheck lands, bills get paid, and everyday transactions happen. It’s also your financial front line — holding money available for immediate expenses.

Having the right amount in your account helps you cover essential expenses and provides a buffer for unexpected costs. If you don't have enough money in your account, you may face overdraft fees or returned payment fees. At the same time, you may not want to let your checking account balance build up too much — otherwise, you might miss out on higher returns. 

How much money should you keep in your checking account? 

There's no one-size-fits-all answer to this question. The amount you should keep in your checking account depends on your income, expenses, and financial goals.

One recommendation is to keep at least 1-2 months' expenses in your checking account. This provides a buffer for unexpected costs and helps ensure you can cover regular bills.

"The money in your checking account should be for what you plan to spend — whether it's a need or a want. People should find the average of their expenses and keep about twice that number in their checking account to ensure a buffer for any unexpected expenses," says Tiffany Aliche, a personal financial educator and author of “Get Good With Money.”

Review your budget and spending to determine how much you need in your account to cover monthly bills and purchases. If your checking account requires a minimum balance to avoid monthly fees, try to keep at least that much. Ask yourself: 

• How much money do you earn monthly, and how predictable is your income?
• What are your regular monthly expenses, and how much do they fluctuate?
• When are your bills due each month?

"Look at your last 12 bank and credit card statements and calculate a simple average of your expenses. Then, make sure to account for any expected irregular or one-time expenses and add them to the average," says Liran Eliner, founder and CEO of Cache, an automated savings tool.

Here's an example of how these guidelines might look in practice. Let's say your monthly expenses are $3,000, and your checking account requires a minimum balance of $1,500 to avoid fees. Following the above guidelines, you might aim to keep a checking account balance of $4,500 to $7,500:

• One to two months' worth of expenses: $3,000 to $6,000
• Minimum balance to avoid fees: $1,500
• Buffer for unexpected costs: $500

Remember, these are just general guidelines. Some people feel more secure with a larger checking account cushion, while others are comfortable with a leaner balance. By considering your preferences, you zero in on the balance amount that makes sense.

Factors that can affect your checking account balance  

Income and employment status 

Your income and employment status can majorly impact your checking account balance. If you have a low or unstable income, it may be challenging to maintain a substantial balance.

Job loss can also strain your checking account, as you may have to dip into your savings to cover living expenses. In these situations, having an emergency fund to fall back on is especially important.

Personal spending habits

Your spending habits also significantly affect your checking account balance. If you tend to overspend or make impulsive purchases, you may find it difficult to keep a healthy balance.

To avoid this, it is crucial to develop a budget and track your expenses. This can help you identify areas where you may be overspending and can cut back. Tools like budgeting apps or spreadsheets can help keep you accountable and on track.

Debt payments and bills

If you have debt, such as credit card bills, student loans, or a mortgage, your checking account may be strained by the debt payments you need to make. High debt levels can limit your financial flexibility and make it more challenging to maintain a healthy checking account balance.

It's important to create a debt repayment plan and allocate your funds strategically. You may need to temporarily keep a larger checking account balance to ensure you can make your debt payments on time while still covering your essential expenses.

How much does the average American have in their checking account? 

According to the Federal Reserve, the median transaction account balance in 2022 was $8,000, while the average balance was $62,500. Transaction accounts include checking accounts, savings accounts, money market accounts, call accounts, and prepaid debit cards. 

It's important to note that the median balance — the middle value when all balances are ordered from lowest to highest — is often considered a more accurate representation of the "typical" American's checking account, as the average can be skewed by a small number of very high balances.

Average checking account balance by age 

As you might expect, checking account balances vary by age group. Here's a breakdown of the median balances for different age ranges:

Differences can be attributed to income levels, financial responsibilities, and saving habits. Younger adults may have lower balances due to lower salaries and student loan debt. In comparison, older adults may have higher balances due to higher earnings and less debt.

Checking account balance by income 

Another factor that affects checking account balances is income level. The more money you make, the more you typically can afford to keep in your checking account. Plus, you may spend more, which warrants keeping more in your account as a buffer.

Here's a breakdown of the median balances for different income ranges:

Example: A 20-something marketer in Colorado 

Rachel Desmond, a customer service and marketing specialist at Vive Más Tours, is in her mid-20s and lives in Colorado. Her average checking account balance is $4,000.

Her checking account balance covers her monthly expenses, including rent ($1,200), her Roth IRA contribution ($300), and her credit card bill, which typically range from $500 to $1,000. Desmond automates her bills while making sure her checking account balance is enough to cover her expenses. 

Maintaining a checking account balance of $4,000 “is almost double what I need in a month so that all these bills can get paid in the background without me having to check and do any math on a monthly basis," Desmond says.

Keeping your money in a checking account may not always be the best financial move. If you know your monthly expenses and can maintain a buffer, consider allocating your extra funds to accounts that offer more interest. 

Desmond realized that the extra money in her checking account was not earning any interest. So, to boost her earnings, she opened a money market account. 

"Even earning $10-$50 extra through interest is worth the extra hoop of having another bank account, in my opinion. I'll gladly take those extra couple of Starbucks drinks," she says.

Tips for managing your checking account 

If you want to boost your checking account balance, you’re not alone. 

“My first tip for people is always to give themselves grace. Finance isn’t easy if you’ve never been given the tools to manage your money," says Aliche.

The good news is that there are relatively simple strategies to help you get there.

• Stick to a budget: Create a budget that aligns your income with your expenses and savings goals. This will help you avoid overspending and keep enough in your checking account. 
• Choose the right checking account: Aliche suggests finding a free checking account that doesn't charge maintenance or overdraft fees. That way, you won’t have to worry about maintaining a specific balance or losing some of your money to fees.  
• Set up automatic transfers: Automate your savings by setting up regular transfers from your checking account to your savings accounts. This helps you build savings while keeping your checking balance at a solid level. 
• Monitor your balance: Monitor your checking account balance throughout the month. Many banks offer mobile apps and online banking tools that make it easy to check your balance on the go.
• Avoid overdrafts: Track your pending transactions and make sure you have enough money to cover them. If you accidentally overdraft, contact your bank as soon as possible to minimize fees.

When to adjust your checking account balance 

Your financial situation isn't static, and your optimal checking account balance may change. Here are some signs that it may be time to adjust your balance:

• Changes in income: If your income increases or decreases, you may need to adjust your checking account balance accordingly.
• New expenses or bills: If you’re taking on new regular expenses, like a higher rent payment or a new car loan, you may need to increase your checking account balance to ensure you can cover these costs.
• Shifts in savings goals: As your savings goals evolve, you may need to redirect more or less money from your checking account to your savings accounts.
• Overdrafts or low balances: "If you're struggling to reach the desired checking account balance, that usually means that you are overspending relative to your income,” says Eliner. “The number one tip would be to manage a tight budget and keep track of your spending, trimming unnecessary expenses when possible.” 
• Excess funds: If you consistently have a large checking account balance that exceeds your needs, it may be a sign that you could be better off using that money in a savings account.

The bottom line 

Maintaining a healthy checking account balance is essential to smart financial management. The amount you should keep in your checking account ultimately depends on your unique financial situation and goals.

Remember, your checking account is just one piece of your financial puzzle. By taking a holistic approach to your finances, you can build a strong foundation for long-term financial success.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.