How Much Money to Keep in Checking and Savings
Most of us have both a checking and a savings account, but what are they actually intended for and how much money should be in each? Continue reading to find the answer to both of these common questions.
What Is a Checking Account Used for?
People commonly use a checking account for day-to-day transactions. These include direct deposits, paying bills, making purchases with a debit card, transferring money to people, and accessing funds through an ATM.
How Much Money Should Be in a Checking Account?
Financial experts recommend keeping at least one to two months’ worth of living expenses in your checking account. You may also want to include a buffer on top of this amount, in case you experience unexpected expenses.
What Is a Savings Account Used for?
You can grow your wealth and save for the future with a savings account. You should put any money that you don’t need into this account. The more you have in your savings account, the more interest you’ll earn. This account is great for large expenses you’re saving up for, such as a vacation, a down payment for a home, or a car. You may even be able to find savings accounts dedicated to one of those expenses. For example, we offer a Vacation Club, Car Fund, and Home Fund savings program. View all our savings rates.
To save for an emergency, you can keep money in an emergency fund. It is different from a savings account but a great way to have money for when you’ll really need it. Read our blog to learn about the importance of having an emergency fund.
How Much Money Should Be in a Savings Account?
Because everyone has a different financial life, no one can dictate an exact amount you should keep in your savings account. However, a good baseline would be to have three to six months of expenses in your savings account. You should try to put 20% of your monthly income into your savings account each month to help reach your goals.
If you are looking to earn more from your savings account, consider opening a CD. This is another option to earn interest from your money. CDs offer a higher interest rate than a typical savings account and you can’t take money out of them until they hit their maturity date. Read our blog to learn about what happens after a CD matures.