How much money should keep in my checking account?
Nowadays, everyone has a checking account in their chosen bank. Many open to receive their income and expend it but many of them have only for more than one checking account due to compulsion or fun. But anyone should learn how much money should keep in my checking account?
Leaving money in a checking account varies for everyone. It depends on the age, income, number of accounts, and financial knowledge of the holder. But in this article, you will learn some common and best techniques, that are beneficial for everyone:
Consider Your Circumstances
Before calculating how much money should keep in my checking account is necessary to consider my circumstances instead of copying other’s strategies or before taking someone’s advice. Calculate how much is your regular income and expenses. If both are equal then struggle to enhance income along with reducing expenses, or choose one of them to maintain your savings, and emergency fund.
Consider your emergency fund, how much money is necessary for this, and how much money is available in the emergency fund. If the emergency fund requires money then you can keep more than $1000 in a checking account but if your emergency fund doesn’t require money or you didn’t keep any money for an emergency then you shouldn’t keep enough money in a checking account.
Also consider your saving account, and how much money you saved for your future and your retirement. If you already saved a lot of money then you can keep more than $1000 in your checking account but if you have not saved or saved very little then prefer to save rather than keep it in the checking account.
Understanding the Role of Checking Accounts
Checking accounts don’t pay interest as much as you can earn in many other ways, therefore don’t keep so much money in your checking account. Keep money only that you have required for your day-to-day expenses. Calculate all of your expenses and create a budget to understand how much money should keep in your checking account.
Leave more than your monthly expenses in the checking account if you are receiving monthly income otherwise decide any other period but the point is that, to keep money in the checking account more than expenses are necessary. If you don’t receive your income at a specific time you can manage your expenses.
What’s the Typical Checking Account Balance?
There is no exact figure that could be measured for a typical checking account balance. But if we calculate the average checking account balance it would be around $9000 that might be right but the numbers of accounts are more keeping this average balance and less in numbers above the same average.
For example, you calculate the average of 10 checking accounts balance, 9 of them have $1000 each but the 10th has $50,000, so the average will be $ 5900. The average increased due to more balance only in one checking account but the 9 have the same.
What’s the Ideal Checking Account Balance?
The ideal checking account balance depends on your income and expenses but it should be double of your circle. For example, if you are receiving a monthly income of $1000 and your expenses are $800, the ideal checking account will be for you is $1600.
If the expenses of any person are $800 but the income is $50,000 then the checking account balance will remain the same i.e. $1600. The extra amount should be invested in any other beneficial and suitable plans to enhance rapidly.
Minimum and Maximum Balance Requirements
To calculate how much money should keep in my checking account is also consider the minimum and maximum balance requirements. Your calculation of keeping money in a checking account is $2000 but the minimum balance requirement of your checking account is more than $2000, your calculation and decision can be wrong.
The same formula is for maximum balance. Whenever you start calculating and considering leaving money in your checking account, you should keep in mind the minimum and maximum balance requirements.
The 50/30/20 Rule
Elizabeth Warren introduced the 50/30/20 rule for laymen to leave money in checking accounts and to manage day-to-day expenses. This rule is necessary to learn to know how much money should keep in my checking account. The detail of the rule is under:
50 is the need
It is a need, you can’t live without these expenses, it may be your utility bills, food items, rent, children’s education fees, health charges, etc calculate all your necessary expenses to manage your savings, economic situations, income, and expenses.
Leave this money in your checking account, but it should be double your income and expenses cycle.
30 wants rather than need
It is the expenses that are not necessary for living but everyone has. These might be TV, internet charges, cable network, vehicle and fuel charges, etc. expend 30% of your income on these expenses. Experts also include emergency fund and learning charges in this category that are necessary but is a type of saving. Continuing learning and managing emergency funds is not for living but don’t should be ignored to improve life.
20 is saving and investing for the future
You should invest this 20% money in any better plan rather than a checking account. This investment is not expendable for you but it should be increased regularly along with your income and expenses. Don’t ignore this investment if you have less income, the little investment will also make you better than now.
Conclusion
How much money should keep in my checking account varies from individual to individual due to many reasons. But to keep a minimum or maximum balance in your checking account consider your circumstances, income and expenses, income and expenses cycle, emergency fund, savings, and typical and ideal balance for a checking account.
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