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Checking accounts are the foundation of personal finance in the United States. According to a recent GOBankingRates survey of 1,000 adults nationwide, more than 91% of her in America have a checking account, the highest percentage of all account types. But more than a third of those surveyed said they rarely keep money in checks.
Explore: GOBankingRates’ Best Checking Accounts of 2023
See also: Here’s how much Americans will have in their savings accounts in 2023
Learn: Why 1 in 5 Americans Are Considering Switching Banks
GOBankingRates spoke to experts who were either stunned by the findings or thought they were mostly right. Here’s what money experts think is the right amount of cash to keep liquid and ready in your checking account:
Hundred dollars? that’s it?
The survey found that 37% of nations (more than 1 in 3 Americans) keep their checking account balance under $100 at all times. Twenty percent of respondents have balances between $101 and $500 in their checking accounts, and 14% have balances between $501 and $1,000. Only 10% of people maintain balances of $1,001-$1,500, and an even smaller percentage (5%) maintain balances of $1,501-$2,000. The final 14% maintain a healthy balance of $2,001 or more in her checking account.
Good companions if you think double-digit account balances in a third of the country are not enough. “I’m frankly surprised that the number is so low,” said DealNews.com consumer analyst Julie Rumhold. think.”
So if $100 or less is cheap, where is the sweet spot?
“The short answer is that most experts recommend keeping a month or two of living expenses in a checking account,” says Ramhold. “As an extra cushion, it’s also good for him to add 25% to 30% of his monthly living expenses to fill that figure.”
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On the other hand, some people think less is better
Not all experts were shocked by the findings.
“I keep less than $100 in my checking account for a number of reasons,” said CPA’s Wendy Barlin.
The first argument in favor of ultra-low balances is that interest on checking accounts is zero, or near zero, at best, but Berlin made another equally compelling point.
“Checking accounts are linked to debit cards, and that’s the biggest problem with fraud,” says Barlin. “I don’t want anyone withdrawing money from my checking account. I keep all my money in savings or money market accounts.”
After all, it’s much easier to get your credit card company to reverse a fraudulent charge than it is to get your bank to refund your cash.
The Right Amount is… There is More Than One Right Amount
As you can see, the range is quite wide, ranging from $100 to two months’ living expenses plus an additional 30%. Some even said you should have up to six months on hand.
Of course, everyone’s life and financial footprint is different, so consensus is elusive.
Laura Adams, MBA and personal finance expert at Finder.com, said:
Another reason the “right amount” is so difficult to identify has to do with the temporary nature of money held in checking accounts. A checking account is a temporary transit point for money that is redirected to pay credit card bills, fund investment accounts and IRAs, and settle payments with your mortgage lender for the month.
“Most people put their income into a checking account and then spend from that central account for daily expenses and savings,” says Adams.
One way of thinking is that the right amount is what you need to cover your expenses, and not much else. After all, what’s left can be put to better use elsewhere.
“Bank accounts typically earn less than 1% interest, so keeping large amounts of money in a checking account is not a wise option,” says Adams. “By moving surplus funds into higher-yielding savings, you can earn more interest and keep a separate fund for emergencies.”
There is even some discussion about putting that money in an index fund because savings yields aren’t much better than seeing yields, but if you’re a minimalist in your checking account, you should have enough money. Remember, it’s better to have a little too much than you have.
Fee traps await those who get too close
If you don’t want a lot of money idle in your checking account when you could be making money elsewhere, but want to avoid the serious penalties that come with maintaining an underfunded checking account. , you absolutely need a healthy cash cushion.
“As a general rule of thumb, your goal should be to avoid the risk of overborrowing or incurring bank charges,” said Maxim Manturov, head of investment research at Freedom Finance Europe, a division of Nasdaq. It’s about maintaining a balance that helps us.” Traded Freedom Holding Corp. “With this in mind, you should ensure that your account does not fall below the required minimum balance. Therefore, it is important to consider your expenses accordingly, as well as your typical monthly outflow.”
Regulation D: Use savings as a failsafe — but sparingly
One reason people keep so little money in their checking accounts today is likely that low balances aren’t as dangerous as they used to be. Most banks will allow you to instantly transfer money from your savings to your checking account when the going gets tough. You can also set up overdraft protection that automatically moves from your savings to your checking account to cover ongoing debt. All of these are incredibly useful tools, and a generation ago they seemed like magic to anyone who’d written a check, but they didn’t realize they couldn’t cover themselves.
But unlike a checking account, money put into savings is not temporary. That money has to stay where it is, and if you overuse your savings account as a backstop for your checking account, you start getting penalties. This is because it prohibits making more than 6 withdrawals per month.
The nature of banking is changing
Technology is forcing a generational divide in banking habits and attitudes. In the world of crypto wallets and Venmo, paper checks (and the accounts they are linked to) take on exactly his 20th century flair. Many young people have never written a check, and certainly have never used handwritten arithmetic to balance their checkbooks. In fact, the same survey above found that 45% of Americans of all ages hadn’t written a physical check in the last year.
Older people tend to prefer the security of having enough cash “on hand” in their checking accounts, while younger generations tend to see all their money as always on hand.24 hours to PayPal With 24/7 access, p2p payments, buy now, pay later purchase options, and near instant transfers from your brokerage to your bank, you never have to worry about your checking account balance again.
“At the height of the information age, people are getting smarter about their personal financial health,” says MBA James Dunavant. “Naturally, their preferences are also shifting to more transparent platforms that offer faster, simpler, more personalized service. Rather than store it, we are exploring other options that offer greater benefits, such as increased convenience, faster processing, increased rewards, and reduced hidden fees, especially for the next generation of people. We have a deeper understanding of the wide range of financial tools available and are willing to do additional research to move our money to the best money management services, platforms and apps.Understanding their individual needs and goals. please.”
Learn more about GOBankingRates
Methodology: GOBankingRates surveyed 1,000 Americans ages 18 and older nationwide from December 7-12, 2022, asking 19 different questions. (1) Which category does your current financial institution fall into? (2) Have you considered changing banks within the past year?; (3) Have you considered changing banks within the past year? (4) What features, benefits or other factors were most important to you when opening an account with a new financial institution? Which services?; (5) Are you currently satisfied with all banking products and services offered by your bank/credit union?; (6) Do you ever have different types of accounts with more than one bank? (i.e. checking with Chase, savings with TD Bank); (7) What is your preferred method of banking?; (8) Which of the following is the biggest reason to stay with your current bank? (9) Which of the following bank accounts do you currently use/open? (Select all that apply); (10) What is the minimum checking account balance?; 11) How much do you currently have in your savings account?; (12) How much sign-up bonus would you consider changing banks?; Have you considered using a banking platform (aka neobank) (e.g. Current, Upgrade, Chime, Dave, etc.); (14) How important is it to you for your bank to partner with a cryptocurrency exchange/platform? (15) How often during the past year have you written a physical check?; (16) When was the last time you went to the bank in person?; (17) Visiting the bank in person (select all that apply); (18) When you think about banking, do you think it is necessary or not necessary?; What services/products are you looking for? (Select all that apply). GOBankingRates conducted the research using PureSpectrum’s research platform.
This article was originally published on GOBankingRates.com: Experts: How Much Should You Have in Your Checking Account?
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