How Much Money Should You Have in the Bank? A Realistic Guide

Ideally, you should have a full month's worth of expenses plus some extra cash in your checking account and three to six months' worth of expenses in a savings account for emergencies. The amount you'd need depends on your income, expenses and financial goals.

Key Takeaways

• Aim for one month's expenses plus a buffer in checking and three to six months' expenses in savings when you're deciding how much money you should have in the bank.

• Build in a checking buffer: Add 20% to 30% on top of one month's expenses so an unexpected bill doesn't overdraw your account.

• Size your emergency fund to your risk: Three months' worth of expenses may be a good starting goal for stable, dual-income households. Six months' worth of expenses is safer for a sole earner or a household with unpredictable income.

• Put idle cash to work: Money beyond your buffer and emergency fund can earn more in a high-yield savings account, money market account or CD instead of a low-yield checking or standard savings account.

• Match the account to the timeline: Keep near-term cash liquid and consider investing only money you won't need for five years or more.

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How Much To Keep in Checking vs. Savings

For checking, try to have at least one month’s worth of living expenses, plus an extra buffer if you have unexpected expenses. The buffer can help prevent overdrawing your account.

For savings, aim for three to six months' worth of expenses in case you experience a financial setback, such as a medical emergency or job loss.

While these guidelines provide a general rule of thumb, you'll also want to know how to calculate the specific amount you might need in your bank accounts.

How To Calculate Your Checking and Savings Needs

Calculate your checking and savings needs based on your actual spending.

Calculating Your Checking Account

Your checking account should have one month's worth of expenses, plus a buffer of 20% to 30% of your monthly spending. 

• Add up your fixed monthly bills, such as rent or mortgage, insurance, subscriptions, memberships and minimum debt payments.

• Calculate your average monthly spending on variable expenses like groceries, utilities, personal care, healthcare, transportation, household items and entertainment. 

• Add the two totals.

• Multiply the new total by 1.20 or 1.30, depending on your preferred buffer size, to get your ideal checking account goal.

How To Find Your Ideal Checking Account Balance

Imagine you have $2,500 in monthly expenses and want a 30% buffer. You'd use this formula: 2,500 x 1.30 = $3,250. This tells you that you should start the month with $3,250 in your checking account.

Calculating Your Emergency Fund

The savings account calculation is easier because you've already done most of the math, but you'll have to decide on a savings goal before you start.

Three months' worth of living expenses is a good initial goal if your household has stable income and more than one earner. Six months' worth of expenses is safer if you're the sole earner in your household or your income is unpredictable. 

Now, calculate your emergency savings goal. Using the previous example, it would look like this: 

• 2,500 x 3 = $7,500, or

• 2,500 x 6 = $15,000

What Different Monthly Expense Levels Look Like

Where Should You Keep Your Money? How To Choose the Right Bank Account

Which account is right for your money depends on when you'll need to access the fund and how risk-tolerant you are.

Why Choose a Checking Account?

Checking accounts are meant for transactions, so most pay little, if any, interest, but they make it very easy to access your cash.

Some banks won't charge monthly maintenance fees as long as you maintain the required minimum balance in the account. There isn't a set ideal checking account balance, but it could range between $500 and $1,000, or an average monthly balance of around $1,000 to $5,000, though this ultimately depends on each bank's terms and conditions.

Why Choose a Savings Account?

Standard savings accounts have low yields. Your money almost appears to sit idly until you need it. That's why it makes sense to keep extra money in a high-yield savings account, money market account or CD, where stronger returns keep your money working so you hit your goals faster.

Consider investing money you won't need for five years or more. Investments have better long-term growth potential, but volatility makes them risky in the short term.

What To Know About MoneyLion Save

MoneyLion Save is one option to consider if you're looking for a new high-yield savings account. You can receive up to 3.88%* APY with a MoneyLion One membership and 2%* APY if you're not a member. There isn't a minimum deposit requirement and there are no fees. You can use the MoneyLion app to move funds between Save and MoneyLion Spend. Save can be a way to increase your savings and earn interest at the same time.

How Do You Know if You Have Too Much or Too Little in the Bank?

Holding too much money in the bank is a missed opportunity for stronger growth, but holding too little is also risky.

You might be holding too much money if:

• You have more in your checking account than you need for next month's bills, plus a buffer.

• You have money sitting in a standard savings account that could be earning higher interest in a high-yield savings account, money market account or CD.

• You're routinely hitting your checking account target and have surpassed your emergency-savings target, but have no goal for the extra money.

• Your deposit account balances exceed $250,000.

You might be holding too little money if:

• You're regularly using credit cards to pay day-to-day expenses.

• You're worried about your minimum balance because you want to avoid checking account fees.

• An unexpected $500 to $1,000 expense would create a financial hardship or cause you to take on additional debt.

• You've overdrawn your checking account in the past year because you ran out of money before your bills were paid.

FAQ

Is it bad to keep more than $250,000 in one bank?

It can be risky if your accounts are individual accounts in the same category, such as checking, savings, money market accounts and CDs. FDIC insurance doesn't cover any amount exceeding $250,000 in that case. 

Should I keep my emergency fund in the same bank as my checking account?

Maybe, if both accounts suit your goals. Having both accounts in the same bank makes for quick transfers and might earn relationship perks. However, those perks may not be worth the lower annual percentage yield (APY). You may earn more by keeping your savings elsewhere, such as a high-yield savings account. Compare rates, fees and account features from a few banks before deciding where to keep your money.

How often should I recheck how much I’m keeping in each account?

The exact frequency depends on your overall financial situation. If your income is stable and your goals haven’t changed, you might choose a date to review your finances annually. However, you may want to do more frequent check-ins after major life events such as marriage, the birth of a child or changes in income or expenses.

Does a joint account change how much FDIC insurance covers?

Yes, a joint account can change how much FDIC insurance covers. Each joint account holder's share is insured for up to $250,000 across all joint accounts at the same insured bank. So together, you're covered for up to $500,000. That's in addition to each account holder’s $250,000 in coverage across their single accounts.

Key Terms

• Emergency fund: Money set aside — typically three to six months' worth of living expenses — to cover unexpected costs or a loss of income.

• Checking buffer: Extra cash — often 20% to 30% of monthly spending — kept above your bills to avoid overdrafts.

• FDIC insurance: Federal coverage that protects deposits at insured banks up to $250,000 per depositor, per bank, per ownership category.

• NCUA share insurance: The credit union equivalent of FDIC coverage, insuring member deposits up to $250,000 per member, per credit union, per ownership category.

• High-yield savings account: A savings account paying an above-average interest rate while keeping your money liquid.

• Money market account: A deposit account that typically pays higher interest than standard savings and may offer limited check-writing or debit access.

• Certificate of deposit (CD): A time deposit that locks in a fixed rate for a set term, usually with a penalty for early withdrawal.

• Risk tolerance: Your comfort with the possibility of losing principal, which helps determine how much of your money belongs in savings versus investments.

Sources

• FDIC. Are My Deposit Accounts Insured by the FDIC?

• NCUA. Share Insurance Coverage.

• Investor.gov. Gauge Your Risk Tolerance.

Summary generated by AI, verified by MoneyLion editors