How Much Money Should You Keep in Checking?

Ever look at your checking account and wonder if you are keeping too much money there – or not enough? You want  to have enough to cover your bills and everyday expenses, but you also do not want money sitting in checking when it could be helping you reach your savings goals.

The good news is that you do not need to guess. Your ideal checking balance comes down to what bills you have coming up, how you spend your money, when you get paid, and how much of a cushion gives you peace of mind.

In this guide, we will walk through a simple way to find the right checking balance for your budget, avoid unnecessary overdrafts, and know when it may make sense to move extra money into savings.

How Much Money Should You Keep in Your Checking Account?

A checking account (sometimes called a debit account) is designed for everyday money management. It is typically where you keep money for regular expenses, pay bills, make purchases, and access funds when you need them. Because your checking account is meant for frequent spending, the goal is to keep enough available to cover your upcoming while maintaining a comfortable buffer in case something extra hits your account unexpectedly.

A good checking account balance generally covers two things: your upcoming expenses and personal cushion.

Upcoming expenses include bills and everyday spending you know you will need to pay, such as:

• Rent or mortgage
• Utilities
• Groceries/food
• Car payments
• Insurance
• Loan payments
• Subscriptions and memberships

Your cushion is extra money you keep in checking in case a bill is higher than expected or an unexpected expense comes up before your next paycheck. For most people, this is a small buffer between 10% and 20% of your regular expenses.

A simple way to calculate your target balance is:

Upcoming bills and regular spending + personal cushion = checking account target

For example, if your upcoming bills and regular spending add up to $2,000, a 15% cushion would add $300. That gives you a checking account target of $2,300, helping you cover expected expenses while keeping a little extra breathing room between paychecks.

Your ideal balance may look different from someone else's. If you receive a steady paycheck every week or every two weeks, you may be comfortable with a smaller cushion. If your income varies or you get paid less frequently, keeping more in checking may give you extra breathing room.

What Is a Checking Account Buffer?

A checking account buffer is the extra money you keep beyond what you expect to spend. It gives you some flexibility when your actual expenses do not go exactly according to plan.

For example, your electric bill might be higher than usual, you might need to fill up your gas tank more often, or an unexpected expense could come up before payday. A buffer can help cover these costs without putting your account at risk of overdrawing.

There is no required amount for a checking buffer. Some people may feel comfortable with $100 or $200, while others may prefer $500 or more.

Consider these questions when deciding how much to keep in your checking account:

• How often do you get paid?
• Is your income predictable?
• Do your monthly bills stay about the same?
• How closely do you track your spending?
• Have you come close to overdrawing your account in the past?

The goal is to keep enough in checking to give yourself some flexibility without leaving extra money there that could be supporting your other financial goals.

If you want a clear picture of your spending, the First Alliance Credit Union My Money tool, built into Online & Mobile Banking, can help you view your accounts, categorize transactions, and see your typical spending patters. This can make it easier to choose a checking buffer that fits your budget.

Plus, Checking Accounts from First Alliance Credit Union also offer overdraft protection options, including Courtesy Pay and the ability to link a savings account for automatic transfers when checking funds are low. These options are not a substitute for maintaining a checking buffer, but they can provide an extra layer of protection when an unexpected expense comes up.

How Do You Calculate How Much to Keep in Checking for Monthly Bills

If you are trying to figure out how much you need in checking each month, start by looking at what typically comes out of your account. The goal is to keep enough money available to cover your regular bills and everyday expenses without leaving more cash in checking than you need.

Make a list of your regular expenses, including:

• Rent or mortgage
• Electricity, water, gas, and internet
• Insurance premiums
• Car payments and fuel
• Groceries and household essentials
• Loan payments
• Credit card payments
• Subscriptions and memberships
• Other recurring payments

Add these expenses together to get your baseline monthly spending. Then add the checking buffer you are comfortable with, most people plan for 10-20% over their regular spending.

For example, at 15% buffer could look like this:

$2,000 in monthly expenses + $300 buffer = $2,300 checking target

It can also help to look at when your bills are due. You may have enough money to cover all your expenses for the month but still run short temporarily if several large payments come out at the same time. Mapping out your bill due dates can help you make sure the money is in your account when you need it.

Want a clearer picture of where your money goes each month? Use our Cash Flow Budget Worksheet to organize your income, expenses, and bill due dates so you can set a checking balance that works for you.