Here’s how much cash Americans have in their checking and savings accounts

Choosing the right bank account is an important decision. This is because it can affect how easily you can manage your day-to-day finances. You may be wondering how many bank accounts you should actually have and how much money you should keep in each one.

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What bank account and for what?

Derek Ripp, CFP and partner at Austin Wealth Management, suggests dividing your cash into three groups.

1.Regular, recurring expenses

These are predictable invoices that occur monthly. Since you will need to access this money frequently, it is a good idea to keep it in your checking account. A new GOBankingRates survey found that 90% of Americans have a current checking account. There is no limit on the number of withdrawals for this type of account. Some offer higher interest rates, but you don’t (and shouldn’t) store enough money in your deposit to get a big return.

Start by figuring out the minimum amount you need to cover your monthly expenses, and try to keep at least that balance in your checking account at the beginning of each month. “It’s up to you how much money you keep here,” Rip said. “Some people stick to the bare minimum, while others prefer more cushion.” A survey by GOBankingRates found that 37% of Americans have $100 or less in their checking accounts, and 19% have $100. Researchers found that he had $500 in his account to cover his expenses. Keep in mind that not keeping enough money in your account can result in overdraft fees averaging $29.50 according to Statista.

Therefore, monitor your balance regularly. Luckily, most banks let you set up email and text alerts to notify you when your balance falls below a certain threshold.

2. Bigger Planned Expenses

Aside from your day-to-day spending, you may have big purchases planned for the next year or two. For example, you may be saving for a new car, major home repairs, or a big vacation.

These types of expenses can benefit from the depreciation fund. It is a special savings account that allows you to know and prepare for irregular expenses. For example, if you plan to buy a car within a year, you can divide the down payment cost by 12 and put that amount into savings each month. This allows you to spread the cost of large purchases over time, making them easier to manage.

A savings account is a great place to store depreciation. However, you can increase your savings by choosing a high interest rate account such as a money market savings account or a certificate of deposit (CD). This will allow you to increase the balance in your savings account. A GBR survey found that 32% of Americans said they had $100 or less in their savings account, and these types of accounts maximize savings and help you stay on track. . Please note that these types of accounts limit the number of times you can withdraw and may even impose penalties for early withdrawals. That’s why it’s important to deposit money that you know you won’t need for a while. Online banking is also a good option. Low overhead costs often result in higher interest rates and lower fees for customers.

However, don’t be tempted to invest this cash as it is best not to risk with money you know you will need. “The amount of cash we secure here can vary from year to year, but these expenses are just as important as our immediate monthly expenses,” Lipp said.

3. Emergency fund

Finally, it’s important to set aside money for unplanned expenses, such as medical emergencies or bills you’ll need to cover if you lose your job. “This is money that is designed not to be used except in the event of a true emergency,” Lipp explained. Even if it can save you from financial catastrophe.”

You are not supposed to touch this money unless absolutely necessary, but easy access to the funds is important. This means that it should be kept in a regular savings account. Choosing a high-yield savings account that can help you grow your money over time is a good idea, but be wary of online options that can take days to transfer the funds you need right away. .

If you’re young, you can aim to save three months, Ripp said. However, if you have a family or have a lot of expenses, you should have at least six months of emergency funds to spare. If you’re a business owner, freelancer, or have unpredictable income, 9 months to 12 months is ideal.

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Amen Oyiboke-Osifo contributed to this article.

This article originally appeared on GOBankingRates.com: Here’s how much cash Americans have in their checking and savings accounts.