Are Americans Keeping Too Little Cash in Their Checking and Savings Accounts?

Casey Bond   Monday, February 27, 2023

Choosing the right bank account is an important decision, as it can impact how easily you’re able to manage your daily finances. But you’ll also have to decide how much to keep in each account. Let’s explore some popular banking strategies to make sure you’re doing it correctly.

Which Bank Account, and for What?

Derek Ripp, a CFP and partner at Austin Wealth Management, suggests structuring your cash into three groups:

1. Routine, Recurring Expenses

These are the predictable bills that come in every month. Since you’ll need to access this money often, it’s a good idea to keep it in a checking account. A new GOBankingRates survey found that 90% of Americans have a checking account that they currently use. This type of account allows an unlimited number of withdrawals. Some offer higher interest rates, though you won’t (and shouldn’t) keep enough money on deposit to earn any significant returns.

Start by figuring out the lowest amount of money you need to cover your monthly expenses, then make sure you maintain at least that balance in your checking account at the start of each month. “The amount you hold here is up to you,” Ripp said. “Some people keep the bare minimum and others prefer more of a cushion.”

In the GOBankingRates survey, researchers discovered 37% of Americans have $100 or less in their checking account and 19% have $100 to $500 in their account to cover expenses. It’s likely many people spend more than $500 a month, so they should really be trying to up that account a little in order to always be able to cover their monthly expenses without needing to rely on a credit card or some other form of payment.

It’s also good to keep in mind that if you don’t keep enough money in your account, you could get hit with overdraft fees, which average a hefty $29.50, according to Statista.

So, be sure to monitor the balance regularly. Fortunately, most banks allow you to set up email and text alerts that notify you when the balance drops below a certain threshold.

2. Larger, Planned Expenses

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